Cards are an important mode of transactions for quite a long time. Earlier card transactions were only limited to physically transacting with the cards, but today, with the growth of eCommerce, presenting the actual card is not at all necessary. Let’s compare Card-Present (CP) and Card-Not-Present (CNP) transactions today and understand which is better and safer for the users.

Card-Present Transactions – Definition And Examples

Just as the name suggests, Card-Present transactions are those payments where the payer has to swipe a card through an electronic card reader or PoS terminal. It can either be a credit card or a debit card.

Paying in any store, restaurant, hospital, etc. using the actual card is an example of a Card-Present transaction because the card is swiped in a PoS or card reading machine. A transaction is completed once the machine captures the card data.

Pros

The biggest advantages of a Card-Present transaction are:

1. Instant processing and instant transfer
2. Highly secure
3. Nominal processing charges

Cons

At the same time, the disadvantages of a Card-Present transaction are:

1. Merchants only with PoS can accept CP payments
2. PoS malfunction can cease these payments
3. Customer and the card both should be present physically
4. Exposure to card loss or stealing

Card-Not-Present Transactions – Definition And Examples

Card-Not-Present transactions are the payments where the cardholder authorizes a transaction by manually entering the card data (number, expiry date MM/YY, and CVV) and then authenticates the transaction with an OTP. After processing the payment, the acquiring bank and issuing bank transmit the funds and in the last stage, the amount is deposited into the account of the beneficiary.

In these transactions, cardholder and card data both are needed, but NOT PHYSICALLY. Card data and authentication from the cardholder are essential for both types of card transactions.

All online payments using cards are an example of Card-Not-Present transactions. Shopping from any website/app or booking a ticket/appointment online and choosing a card as the payment mode – all these fall under the category of CNP transactions. The card is not physically present in these payments – rather, the entered card data initiates and processes the transaction.

Pros

The advantages of a Card-Not-Present transaction are:

1. Customers can shop and pay from any location conveniently
2. Brands can do global business and accept payments from any location
3. Exposure to business growth with high sales potential
4. No brick-and-mortar store or PoS machine needed

Cons

On the other side, the a Card-Not-Present transaction face challenges like:

1. Online frauds
2. Higher processing fees
3. Chargeback issues
4. Reliability issues from the customers' side

That’s about the definition, examples, advantages, and disadvantages; now let’s move to a comparison:

Card-Present And Card-Not-Present Transactions: Know The Differences

The basic difference between a Card-Present and Card-Not-Present transactions is the physical presence of a card. From the names, it is an obvious difference.

If we go slightly deeper, we will encounter more differences. Apart from the presence of cards, other differences include:

1. Card-Present payments are comparatively safer than Card-Not-Present ones due to lower exposure to disputes, online fraudulent activities, and chargebacks
2. Card-Present payments come with a lower processing fee compared to Card-Not-Present ones. CNP transactions charge interchange fees, assessment fees, risk and PCI compliance fees, and payment provider’s markup – all these make the processing fees higher.
3. Accepting Card-Present payments is costlier for merchants because the merchant will need an electronic card reader or PoS to swipe the cards
4. For customers, Card-Not-Present payments are somewhat more convenient

Safeguarding Card-Not-Present Transactions From Potential Frauds

Indeed, Card-Not-Present transactions come with a certain level of risk; But today, there are ways to safeguard the transactions. Now, it is important to accept CNP transactions because customers want it. Here is how merchants can stay safe from fraud during these transactions:

1. Use a secure payment gateway: Today payment gateways come with advanced fraud protection to block suspicious activities and alert the merchants. So, Card-Not-Present payments will be secure every single time.
2. Card tokenization: It is not legal to save card data without card tokenization – so ensure the payment solution tokenizes the card for additional safety.
3. PCI-DSS compliance: PCI-DSS compliance is another mandatory requirement for accepting card payments – it is applicable for both CP and CNP transactions. So, don't forget to check this feature in the payment solution provider.

PayG Payment Gateway vows to make every single transaction secure and successful. It is a PCI-DSS-compliant payment gateway and by integrating it, merchants can accept card payments along with UPI, Wallet, and Net-banking payments.

Conclusion

Card-Not-Present transactions appear somewhat easier as the payers can pay from anywhere, anytime, without being physically present. As users find eCommerce very convenient for shopping, they prefer to pay it right at the time of ordering. During such payments, card payment is a comfort; handing over a card in a store instead of arranging cash is a comfort likewise. So, card payments with or without the presence of a card are essential for merchants. During online payments using cards, the customers must not have trust issues, and merchants need to ensure that by using safe payment solutions.

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