9 Steps to Processing Card-not-Present Transactions All regular visitors to this blog should know by now that accepting payments online.
It’s true that most of our readers are involved in credit card 9 Steps to Processing Card-not-Present Transactions:
payment processing in one way or another and knew this from experience before we first wrote about the topic 9 Steps to Processing Card-not-Present Transactions.
Still, it’s worth reiterating exactly what the risks are before suggesting ways to mitigate them. The two biggest, often interrelated, problems associated with card-not-present payment processing are fraud and chargebacks.
The reason fraud is more rampant online than in brick-and-mortar stores is that it is much more difficult to determine the legitimacy of the cardholder and the validity of the card when neither can be seen. Chargeback levels are higher for the same reason, but also because accepting card payments online or over the phone allows for more processing errors 9 Steps to Processing Card-not-Present Transactions.
Still, while at a clear disadvantage, e-commerce and MO/TO merchants aren’t exactly at the mercy of criminals.
There are plenty of tools available to help you fight fraud, and following card acceptance best practices will further minimize fraud and chargeback levels. In this post, I’ll offer nine simple steps to process card-not-present payments. If you follow them in every sales transaction you make, your fraud and chargeback rates will be greatly reduced.
When a customer makes a payment at your online store checkout or over the phone to complete a transaction, your system must perform the following actions:
Collect payment information. At a minimum, the following information must be submitted for each sales transaction:
Cardholder name, card account number and expiration date.
Cardholder’s full billing address and shipping address (if applicable) 9 Steps to Processing Card-not-Present Transactions.
The total amount of the payment, including all applicable taxes and gratuities purchased on the card.
A mutually acceptable description of the products or services purchased by the cardholder.
If you participate in the Verified by Visa (VbV) or MasterCard SecureCode program (you should), complete the appropriate verification process and provide authentication information in the authorization request. These services add another layer of security to help protect merchants who accept cards over the Internet.
Conduct internal fraud screening. You must develop a fraud screening system or obtain one from a third-party vendor. This mechanism suspends the processing of the transaction in question if certain pre-defined high-risk characteristics are found. These services help you verify the validity of both the cardholder and the card.
In addition, transactions should be compared against speed parameters, high-risk locations, and internal negative files. Suspicious transactions should be subject to further scrutiny.
For transactions that pass your internal review, obtain authorization from the card issuer. Authorization is the process of obtaining permission from the issuing bank to accept the card for payment and should be obtained for all card-present transactions (see chart below) 9 Steps to Processing Card-not-Present Transactions.
9 steps to process cardless transactions
You should also make the following verifications with your authorization request:
Address verification. The Address Verification Service (AVS) is a risk management tool that allows merchants accepting card payments in an in-person environment to verify the validity of the billing address provided by their customers against the address on file with the card issuer.
Card security code verification. Card security codes are the 3-digit numbers on the back of Visa, MasterCard, and Discover cards and the 4-digit codes on the front of American Express cards 9 Steps to Processing Card-not-Present Transactions.
They were introduced to help e-commerce merchants and MO/TOs verify that their customers have physical possession of their cards at the time of the transaction. It’s a feature supported by all major payment gateways and should be made available to you by your payment processing provider. You should never save card security codes.
Use the correct electronic descriptor. The electronic descriptor identifies the type of transaction and helps processing banks differentiate merchants based on how they accept payments. In the appropriate box on the Authorization and Billing messages, indicate “Mail Order”, “Telephone Order”, “Internet Order” or “Signature on file”, as appropriate.
Tell the customer the expected delivery date. Tell the customer what the delivery method will be and the expected delivery date. If the delivery is delayed, immediately inform your customer of the new expected delivery.
Do not enter transactions before the shipping date 9 Steps to Processing Card-not-Present Transactions.
For card-not-present transactions, the transaction date is the ship date, not the order date (see chart above). Transactions cannot be saved until products or services are shipped. You should also not be late with your deposits. Transactions deposited more than 30 days after the transaction date may be charged back to you.
Make your organization’s return and credit policies available to consumers through clearly visible links on your website. By placing these links in the footer or header of your website, they will usually appear on all pages so customers can easily check them out 9 Steps to Processing Card-not-Present Transactions.
Put your customer service number on all your websites. This is a crucial, if often overlooked, requirement. Most customer questions can be answered and concerns alleviated with a simple phone call before they escalate into disputes and chargebacks. You should also make other methods of communication available to your customers, such as email and chat, but not on-site but in addition to phone support 9 Steps to Processing Card-not-Present Transactions 9 Steps to Processing Card-not-Present Transactions.
That’s it, nine simple steps to follow for each of your transactions. In fact, the last two are only applicable to e-commerce businesses, so MO/TO marketers only have seven to come up with. Unfortunately, some causes of fraud and chargebacks will be out of your control, but by applying the suggestions above, you’ll fix most of them and be in pretty good shape.
In today’s digital world, if a customer doesn’t have a payment method in hand, they can still make a purchase. How? Making a purchase without physical presence is called a card-not-present (CNP) transaction 9 Steps to Processing Card-not-Present Transactions.
What is a transaction without the presence of a card?
A Card Not Present (CNP) transaction occurs when neither the cardholder nor the credit card is physically present at the time of the transaction. Most often, these are orders that take place at a distance – by phone or fax, internet or mail.
A transaction is considered “card present” only if payment information is captured in person at the time of sale. This occurs when cards are physically swiped, tapped or dipped by a reader or when an EMV chip is processed.
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Examples of cards that do not represent transactions
There are a number of CNP transactions that you probably come across every day. They contain 9 Steps to Processing Card-not-Present Transactions:
Online purchases, where a customer buys goods on the Internet or through an e-commerce transaction.
Telephone orders, where a customer provides credit card information over the phone to your business.
Recurring payments that are set up to be invoiced automatically.
Invoices that are paid online.
How much does remote credit card processing cost?
As with personal credit card processing, your business will need to pay for CNP payment processing. As a reminder, the types of credit card processing fees that make up your rate are interchange fees, assessment fees (charged by card brands like Visa and Mastercard), Risk and PCI Compliance, as well as your payment provider’s markup 9 Steps to Processing Card-not-Present Transactions 9 Steps to Processing Card-not-Present Transactions.
In general, interchange fees for CNP transactions are higher because without the card being present, fraud and chargebacks are more likely. These higher processing costs are then passed on to the merchant, which is why card-present transactions are usually more expensive than card-not-present transactions.
Video about Square’s processing fees
Learn how card-not-present processing fees work with Square.
In 2018, CNP transactions accounted for 54% of all fraud losses worldwide. Payments experts expect this number to gradually increase with the growth and adoption of e-commerce 9 Steps to Processing Card-not-Present Transactions.
Understanding card-not-present fraud and how to prevent it 9 Steps to Processing Card-not-Present Transactions.
Card-not-present fraud is a type of credit card fraud in which a fraudster uses someone else’s compromised card information to make a purchase remotely. Because neither the card nor its holder are physically present (and fraudsters often steal additional information such as CVV and billing address), it can be difficult for merchants to verify the identity of the buyer.
According to the 2020 Lexus Nexus True Cost of Fraud Study, every $1 in fraud costs US retailers and e-commerce merchants $3.36 per transaction. It is important to take proactive steps to stop credit card fraud – especially for CNP transactions.
According to the 2015 Merchant Risk Council (MRC) Global Fraud Survey, the two best and most commonly used methods for verifying online transactions are the Card Verification Number (CVN) – the three or four digits on the back of the card – and negative lists, also known as blacklists .
The Address Verification System (AVS) is also an effective way to verify the address of a person claiming to own a credit card. The system checks the credit card billing address provided by the customer with the address on file with the credit card issuer. This is why most payment processors, including Square, will ask you to verify your customer’s billing address before authorizing a CNP charge 9 Steps to Processing Card-not-Present Transactions.
The MRC report states that the 3DS and device fingerprints (such as your iPhone’s home button or Face ID) will be the upcoming payment authentication tools 9 Steps to Processing Card-not-Present Transactions.
Four easy ways to accept and process CNP cards with Square
With Square, you don’t need to register a separate cardless merchant account to process online payments. Here are some of the available ways to process CNP transactions with Square 9 Steps to Processing Card-not-Present Transactions.
Use invoices Invoices are a powerful option for customers who don’t feel comfortable disclosing their payment information over the phone.
Implement Square’s e-commerce API to allow you to process payments with Square on your own website.
Use Square Online Checkout, which generates a simple online checkout link or button. Just create a link with the item name and price and share the link on your existing website, social media channels or via email. Learn how to get started with Square Online Checkout.
Manually enter card information using the Square Virtual Terminal. This is ideal for orders taken remotely or over the phone. You can enter your card information manually in the Square app or use the Square virtual terminal on your computer.
Process a card-less transaction using the Square Virtual Terminal 9 Steps to Processing Card-not-Present Transactions
Square Virtual Terminal is a free product offered by Square that allows you to securely process credit cards by phone, fax or mail. Simply open your Dashboard and turn any computer into a virtual POS system – no card reader or software required. There is a 3.5% + 15¢ transaction fee for Square card not present when manually entered.
Here are the steps to process a CNP transaction on a virtual terminal:
Sign in to your free Square account.
On the Dashboard screen on the left sidebar, click Virtual Terminal.
Click Accept Payment.
Enter your credit card details for the transaction. You will need to enter the final order amount along with the customer’s credit card number, expiration date, CVV and billing postcode. The optional note field is great for leaving a personal thank you or for detailed items 9 Steps to Processing Card-not-Present Transactions.
Process a card-not-present transaction using manual entry
Here are the steps to process a CNP transaction in the Square app 9 Steps to Processing Card-not-Present Transactions:
Open the Square app and follow the steps below. The fee for manual card insertion is 3.5% + 15¢.
Open the Square app and add items to the sale
Tap Manual card entry.
Enter the customer’s card number, expiration date, security, and billing zip code 9 Steps to Processing Card-not-Present Transactions.
Process your card absent with Square Online Checkout, Square Online, eCommerce API or Invoices
When a customer makes a purchase through other card-not-present transaction methods such as Square Online, Square Online Checkout, eCommerce API, or pays an invoice online, the fee is 2.9% + 30¢.
Card payments without presence (CNP) are remote payments. They are made without swiping, inserting or tapping a card that has not been in contact with a payment terminal.
Remote purchases grew by 23% and now account for one-third of debit transactions according to the 2021 PULSE study. An active card performs an average of 7.5 card-not-present transactions per month.
CNP payments allow customers to shop online or over the phone at a time and place that suits them best. This also presents opportunities for retailers to expand the way they sell and the channels they sell their business on.
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There are benefits and risks associated with card-not-present payments. This guide shares everything you need to know to get the most out of CNP payments in your store 9 Steps to Processing Card-not-Present Transactions.
What is a Card Not Present (CNP) transaction?
Examples of transactions without the presence of a card
Processing transactions without the presence of a card
Card fraud with no presence
What is a Card Not Present (CNP) transaction?
A Card Not Present (CNP) transaction occurs when a credit card is not physically presented to the merchant at the checkout 9 Steps to Processing Card-not-Present Transactions.
More precisely, a CNP transaction means that the card was not in contact with the payment terminal. The magnetic strip was not removed, the chip card was not inserted into the card reader and the card was not included for contactless payments with NFC or RFID technology.
Transactions that involved this contact are called card present transactions 9 Steps to Processing Card-not-Present Transactions.
Card-not-present transactions are payments made at a distance, such as online shopping, phone orders, and payments by mail. They also include a scenario where the merchant manually enters the card details into someone who has not been in contact with the payment terminal, rather than downloading, inserting or tapping the card.
Examples of transactions without the presence of a card
Here are some scenarios that involve a CNP transaction 9 Steps to Processing Card-not-Present Transactions:
Online orders. The customer adds the products to the online shopping cart and makes the payment using their card details.
Buy online, collect in store (BOPIS). Similar to online ordering, but the customer picks up their order instead of having it delivered.
Telephone orders. The customer places an order over the phone, calls in their credit card information to a sales representative, who then processes the payment.
Orders by mail. Payments sent by post; for example, when ordering from a physical product catalog.
Recurring payments. When customers are signed up for a recurring delivery, such as a subscription or a product they wish to replenish regularly, their payment will be made automatically based on the payment card details stored in the merchant’s system 9 Steps to Processing Card-not-Present Transactions.
Invoice payments. The customer pays the invoice that you issued and sent using the online payment system.
Card payments on file. Customers can allow merchants to retain their credit card information for later payments, which the merchant can then use when the customer wants to make a purchase remotely 9 Steps to Processing Card-not-Present Transactions.
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Processing transactions without the presence of a card
The correct processing of card-not-present transactions is essential for the protection and peace of mind of your business and your customers 9 Steps to Processing Card-not-Present Transactions.
Necessary customer information
At checkout, you must collect some basic customer and credit card information when processing a CNP transaction. They contain:
Cardholder name (as shown on the card)
Credit card number
Card expiration date (month and year)
Card Security Code (CSC), the three- or four-digit code on the back of the card
Your payment processing system should make this process seamless and smooth. Ideally, payment processing is integrated with your point-of-sale (POS) system for faster payments and automatic inventory reconciliation.
Business rates for CNP transactions
You already know that you pay a fee for every card payment your customers make.
For card-not-present transactions, this fee is slightly higher. This is because the risk of fraud in CNP transactions is higher because you cannot verify the physical card or the cardholder in person. The total card transaction fee you pay consists of assessment, exchange and processing fees, as well as your payment provider’s rate 9 Steps to Processing Card-not-Present Transactions.
Transaction fees are typically structured as follows:
[transaction percentage] + [fixed price per transaction]
For example: 2.9% + 30¢. They can vary significantly between different credit card companies and payment processors.
You can pay a higher percentage, a fixed price, or both for card-not-present transactions. This includes systems and protocols that prevent fraudulent transactions and keep your e-commerce operations secure.PRO TIP: Shopify Payments is included in all Shopify POS plans, no signup or setup fees required. Take better control of your cash flow and pay the same pre-negotiated rate on all credit cards, starting at 2.4% + $0.00 9 Steps to Processing Card-not-Present Transactions.
Card fraud with no presence
Without physically seeing or checking the card, business owners are vulnerable to credit card fraud. Card-not-present fraud is a costly problem for merchants – LexisNexis reported that every $1 in fraud cost US merchants $3.60 in 2021, up 15% from 2019.
Here’s what you need to know about CNP scams 9 Steps to Processing Card-not-Present Transactions.
What is card-not-present fraud 9 Steps to Processing Card-not-Present Transactions?
Card-not-present fraud occurs when a fraudster uses another person’s compromised card information to make a purchase remotely.
Without fraud prevention processes in place, a fraudster only needs a few details from the card, such as the card number, expiry date and card type.
Fraudulent settlement with the absence of a card
A chargeback occurs when a customer disputes a transaction with their credit card company or issuing bank.
Chargeback scam is also known as friendly scam. This is a type of fraud where a customer claims to have received a faulty product – or no product at all – and goes through the chargeback process instead of asking the merchant for a refund or exchange.
Prevention of card-not-present fraud and chargeback fraud
Ensure PCI compliance
Implement Address Verification Service (AVS)
Verify your card’s security codes
Set up a customer billing statement
Outline a clear return and exchange policy
It is your responsibility to do everything you can to protect your cardless transactions. Here are the systems you can implement 9 Steps to Processing Card-not-Present Transactions.
Ensure PCI compliance. PCI compliance is a security standard for organizations that process credit and debit card information. It covers areas such as monitoring a secure network, protecting cardholder data and maintaining information security policies. The e-commerce software and hosting you use for your store must be PCI compliant.
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