What does the term card –not –present mean? The card-not-present transaction is a payment card transaction that does not involve the physical presentation of a card by the cardholder for the visual clarification and examination by the merchants. In such a transaction the Cardholder and the credit card need not be present at a point of sale. It is good to note that, the absence of the card is the main consideration in the definition since the card holder may transact at a merchant store after physical view of the goods. Mostly, the CNP transactions are done through mail order, online purchase, and order or through a telephone order.
Mail order- the merchant receives the order through fax (email) from the customer. To transact, the customer sends his/ her credit card details but not the signature or the PIN to the merchant to and the goes on with the transaction. Mostly the processing occurs after the goods delivery.
Telephone order- Merchants receives an order through a telephone call and then asks for the details of the buyer’s credit card.
Internet Sales- The sales are made online and the merchant provide secure payment details that take the customers card details that are sent to the PSP (payment service provider).
The fraud in the card-not-present transaction
The CNP are among the major routes for credit card fraud in the USA. The CNP frauds pose major challenges to the merchant since it is hard for the merchants to verify whether the transactions are made by the actual holder of the credit card. The authorization of the purchase does not require the presence of the cardholder nor does it require the PIN code or signature verification. Thus, the fraudster may steal credit card, or duplicate its information and transact using the credit card. This is one reason why some people complain about wrong data in their credit report whereas their card information reflects in their transaction.
Who is reliable if the CNP fraud is reported?
When a fraudulent CNP transaction is noted and reported, the acquiring bank (issuing bank) hosting the merchant`s account takes the accountability of the of the transaction for accepting the money without keen verification of the card legitimacy. The high-risk rate for the CNP transaction is the reason why most of the card issuers in the USA charge high transaction fees to the merchant to cover the potential fraud cases.
Did the October 1st liability shift affect the CNP fraud liability?
In a short answer, I would say no. The liability shift only applies to the credit card transaction that occurs at the point of sale where the transaction requires physical presentation of the credit card.
Therefore, merchants who make sales online in place of in-store purchase don’t have to worry about the liability shift that took effect on Oct 1st, 2015. The EMV chip technology is not applicable to online sales as it needs to be physically read by a payment terminal.
Note that the CNP has its control measure to prevent the frauds.