Explaining card-not-present transactions: Paying without your card

With more than two-thirds of UK adults (68%) using credit cards on a regular basis, card-based payments continue to grow as a popular payment choice.¹ Yet, it’s estimated that around a third of all credit card payments are made without a physical card being present.²

This article includes tips, suggestions, and general information. We recommend that you always do your own research and consider getting independent tax, financial, and legal advice before making any important decision.

Card-not-present transactions (CNP) are credit card payments made without the customer or card present at the time of the transaction. These transactions rely on customers supplying payment information — the card number, expiry date, and CVV code — through an online form, mail order, or over the phone.

This article looks at some examples of card-not-present transactions, their rise in popularity in today’s digital marketplace, and their benefits and limitations.

Convenience at your fingertips: What are card-not-present transactions?

While a card present transaction typically involves a customer making a transaction by swiping or inserting a physical card or mobile device or inputting a PIN at a physical point-of-sale system, CNPs take place intangibly. Anytime a consumer pays for a product, sets up a subscription, or creates a recurring payment online, over the phone, or via mail, they’re making a card-not-present payment.

Some of the advantages of CNPs can include:

• Access. CNPs can open vendors up to broader audiences and income streams, while giving customers greater access to goods and services without having to be physically present.
• Convenience. Customers can make a contactless payment from where they are at almost any time they choose, offering convenience.
• Affordability. CNPs can reduce excessive point-of-sale (POS) costs, allowing vendors to focus on products and services while avoiding some tangible operational fees (e.g., brick-and-mortar locations, in-store equipment, etc.).

It’s also possible to pay with PayPal for safe and secure CNP transactions and all the benefits of online payments.

Common examples of CNP transactions

CNP transactions occur regularly across a range of different day-to-day scenarios. Some examples of card-not-present transactions can include:

• Online shopping. Purchasing goods and services through e-commerce websites and online stores
• Phone orders. Ordering products or services or paying bills with the help of an operator on the phone
• Mail orders. Sending card details via post in a mail form to buy products or services
• Subscriptions. Signing up for regular subscription payments — Netflix, for example — or the gym or leisure centre memberships
• Mobile wallets and in-apps. Saving credit card details within an app or digital wallet to make speedy transactions online
• Regular payments. Setting up credit card details for recurring payments, including bills, utilities, or membership fees
• Invoices. Giving card information to finalise outstanding balances, typically online or over the phone

Swiped vs. clicked: Card present vs. card-not-present transactions

Because CNPs take place without a card and, typically, without the payer being physically present, fraudulent transactions can be more prevalent. CNP fraud made up 81% of all reported card fraud losses in 2022.³ This can lead to a range of problems, including costly refunds to the cardholder and diminished trust.

In-store, customers and card identity can be verified further, adding a layer of security to the transaction. CNPs must rely on other security measures to protect against fraud and risk. This may include an Address Verification Service (AVS), a fraud prevention protocol that matches the shopper’s billing address with the address registered to the account of the cardholder. If there is a discrepancy, a transaction may require additional information or be declined.

Differences between card-present vs. card-not-present (CNP) transactions

CNP:

• Type/quality: Intangible.
• Physical card: Not required.
• Verification method: CVV code/address.
• Security Risk: Potentially higher.
• Convenience: Potentially higher.
• Access: Broader.

Card present:

• Type/quality: Tangible.
• Physical card: Required.
• Verification method: PIN/signature.
• Security risk: Potentially lower.
• Convenience: Potentially lower.
• Access: Specific/limited.

Learn more about CNP verification with PayPal secure technology.

Potential risks of card-not-present transactions

CNPs are a convenient and instantaneous way to make transactions, but they do come with some risks. The lack of a physical card being present can increase the possibility of card-not-present transaction fraud if card details are compromised.

While there are specific risks of card-not-present transactions, there are also safety measures and protocols to help keep CNPs as safe and secure as possible.

For example, 3D Secure (3DS), is a commonly used security protocol that helps to authenticate credit card transactions by verifying customer identity with the card issuer.⁴