Q: What’s the difference between a CP merchant and a CNP merchant?

A Card Present (CP) merchant engages in transactions where the cardholder physically presents the card at the point of purchase. This allows the merchant to read the magnetic strip of data off the card and submit the transaction for payment authorization. This action means a much lower risk for fraud than transactions where the card is not physically present at the point of purchase.

A Card Not Present (CNP) transaction occurs when neither the cardholder nor the credit card is physically present at the time of transaction. CNP transactions are completed remotely by Internet, phone, mail, or fax. These types of transactions present more opportunity for fraud. As such, CNP transactions present a greater risk and expense for banks, cardholders, and merchants.

There are two tools CNP merchants can utilize to lessen risk of fraud.

  1. Address Verification Service (AVS) matches the address the customer entered during checkout to the card billing address the issuing bank has on file.
  2. CVV codes can also be requested by merchants and this validation also helps lessen fraud.

The use of either validation tool helps lessen the risk of fraud, but it’s not a guarantee of no risk.

Additionally, Card Associations and Acquirers may charge higher fees for CNP transactions to cover the costs of these additional steps — as well as potential losses.

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