Last Updated: 02-17-2026

The Pros and Cons of CNP Transactions

In the world of merchant services, a Card Not Present (CNP) transaction is any payment made where the merchant does not physically interact with the card's magnetic stripe, EMV chip, or NFC signal at the time of purchase.

Common Examples of CNP Transactions

CNP payments are the standard for remote and automated commerce:

E-commerce: Online shopping via websites or mobile apps.

MOTO: Mail Order/Telephone Order, where details are given over the phone or via a form.

Recurring Billing: Automatic subscription payments (e.g., streaming services).

Electronic Invoices: Digital bills paid through a secure online link.

Manual Entry: When a merchant keys in card details on a terminal, even if the customer is standing there.

Key Technical Characteristics

1. Remote Interaction

The buyer and seller are typically in different locations, requiring the digital transmission of card details rather than physical contact.

2. Data-Driven Authorization

Instead of reading a chip, the merchant relies on manually entered data: the 16-digit card number, expiration date, and security code (CVV).

Why CNP Costs More - Risk and Fees

Processors generally charge higher fees for CNP transactions compared to Card Present (CP) transactions. This is primarily due to two factors:

Higher Fraud Risk

Because the physical card cannot be verified, it is easier for fraudsters to use stolen card details. CNP transactions account for a significantly higher percentage of global credit card fraud than in-person sales.

Liability and Chargebacks

In most CNP fraud cases, the merchant is held liable for the loss, whereas in chip-verified in-person transactions, the liability often shifts to the card issuer. This higher risk leads to higher interchange rates (the fees banks charge each other).

Essential Security Measures

To mitigate the risks of remote payments, merchant services use several specialized security tools:

Address Verification Service (AVS)

A system that checks if the billing address provided by the customer matches the address on file with the card issuer.

Card Verification Value (CVV)

The 3 or 4 digit code on the card. Since this code is not stored in the magnetic stripe or chip, it helps prove the customer has physical possession of the card.

3D Secure (3DS)

An extra authentication layer (like "Verified by Visa") that often requires a one-time code sent to the cardholder's phone, which can shift fraud liability away from the merchant.

Tokenization

The process of replacing sensitive card data with a unique "token" so that actual card numbers are never stored on the merchant's servers, reducing the impact of potential data breaches.

Summary

In merchant services, a Card Not Present (CNP) transaction occurs when neither the cardholder nor the physical card is present at the point of sale. These transactions are the backbone of digital commerce but carry unique risks and higher costs due to the inability to physically verify the card.

Card Not Present (CNP) Transactions