Card Not Present Transactions

As technology advances, more and more card not present transactions are taking place both over the phone and online.

What are Card Not Present Transactions?

A card not present transaction is a type of credit card purchase which simply means that a physical credit card has not been swiped into a card reader. Instead, only the details printed on the credit card are used which can be of greater convenience to those who don’t have time to go out to the shops but have discovered easier methods of paying for goods and services.

Also known as a mail order/telephone order transactions, credit card payments carried out in this way are still subject to transaction charges, yet in some instances this can be at a lower rate than payments where a card is physically present.

How Card Not Present Transactions Work

Merchants taking credit card payments over the phone will ask for a cardholder’s details including a security code normally found at the back of the card. They will have the opportunity to ask any supplementary security questions and can take any instructions from the buyer directly.

The rise of online shopping has resulted in a great boom in the number of people making payments with credit cards over the internet. Websites that take credit card payments online are making it increasingly easy for customers to purchase their products and services as all that is needed is for the user to register with the website and give his or her credit details once. The customer’s address and payment details will then be stored on the website to enable them to make an immediate purchase next time they chose to – an advantage for both the cardholder and the seller.

Traders who want to take credit card payments over the phone and online must usually apply for a merchant account with a bank to authorise transactions and exchange funds. They will more than likely be charged a small fee for transactions, though many lenders offer their services with no set up or monthly fees.

Advantages of Card Not Present Transactions

There are very few reasons why someone would choose not to make or receive a credit card payment where a card is not present due to the ease such services entail and the opportunities they offer. Particularly when taking credit card payments online, traders can reach a wider range of shoppers to sell their goods to by advertising their products to people all over the world.

Risks of Card Not Present Transactions

A major risk factor associated with card not present transactions, however, is the danger of fraudulent activity, meaning more cautious of cardholders are still suspicious of these transactions. Though there are protections against online fraud, it is still difficult for online merchants to properly identify a cardholder by simply their credit card details. Equally, there is always the slight chance a customer may have their credit card details stolen by offering them to crooked online traders.

Security schemes are being developed by credit card companies, in conjunction with banks and building societies, to provide a more secure approach to credit card transactions over the internet. Cardholders can register for such services and can choose private passwords for use when shopping online for protection against credit card fraud.