What is a Card Not Present (CNP) Transaction? When Consumers Make Purchases Without Swiping

As part of my research for this article, I reviewed my credit card usage and found that about 75% of my spending was through CNP (card not present) transactions. In other words, I made most of my purchases without ever tapping or swiping my physical card.

A card-not-present (CNP) transaction is one where you buy something without presenting your card to a merchant.

A CNP transaction requires you to manually enter your card number, expiration date, and card verification code, typically online or by phone. Now, I’ll guide you through some of the details on how CNP transactions work, how you use them in your everyday life, and their pros and cons.

Understanding these transactions will help you make safer, smarter payment choices.

When you click “buy now” on a website, give card details over the phone, or set up automatic payments, you are initiating a CNP transaction. Since you’re not using your card at a terminal, the payment system needs to work differently to approve your purchase and safeguard your data. 

While these transactions are convenient, they do introduce special threats that must be addressed by multiple layers of protection.

Methods of CNP Transactions

The most common way individuals perform CNP transactions is through eCommerce websites. When you enter your card details for an online retailer or a specialty shop, the payment is completed without a card being physically on-site. The same is true with digital transactions such as software downloads, movie rentals, and game credits online.

Online Transactions

Online transactions capture data electronically. A merchant grabs your card number, expiration date, and CVV code without actually coming into contact with the card. Payment networks then process the data electronically, comparing it against banking records to confirm authenticity. 

Since there is no chip or magnetic stripe present, other protections are needed, such as Secure Sockets Layer (SSL) encryption, tokenization, and multiple-factor authentication (MFA).

For CNP transactions, tokenization can replace vulnerable card numbers with randomly generated codes, making it harder for scammers to steal and exploit your information. 

Encryption scrambles data transmitted during a transaction so that no unauthorized party can get to it. Merchants and payment processors also deploy artificial intelligence (AI) to identify suspicious patterns, and they may flag transactions to examine.

Many online merchants also accept digital wallets (e.g., Apple Pay, Google Pay) that add an extra layer of protection by keeping your actual card numbers hidden during a transaction.

Phone and Mail Order Transactions

Phone and mail order transactions were the first form of CNP payments before the advent of eCommerce. You provide your credit card number by phone or fill out a mail-order form, and the merchant manually enters the data into its payments system. 

While the process is still used to book trips, buy tickets, and at local shops, it’s less secure than online payments because there is no encryption.

Phone and mail order fraud prevention relies on manual verification methods involving cross-verifying billing addresses and follow-up calls or emails. Businesses managing these transactions typically require additional authorization, a signed receipt, or a government-issued ID to verify your identity.

Authentication and Security Measures

CNP transactions capture your card number, expiration date, and CVV code. Since there is no chip or magnetic stripe to confirm, other protection tools — encryption, tokenization, and anti-fraud algorithms — fill in the gaps.

When you initiate a CNP transaction, the payment processor conducts several behind-the-scenes checks to verify your identity. These can include investigating past transactions, cross-verifying addresses, or requesting additional verification, such as sending a one-time passcode (OTP) to your mobile device. These checks reduce the likelihood of fraud.

An Address Verification System (AVS) is a standard security measure where your billing address must match the one that the card issuer has on record. The transaction will be flagged or declined if the addresses don’t match.

Card security codes (CVV or CVC) offer an additional layer of protection. Even if your card number is stolen, the thief will still need the code printed on the card to complete a transaction.

Strong Customer Authentication (SCA) regulations mandate multifactor authentication (MFA). Many transactions online today require a one-time passcode (OTP) sent via SMS or email before processing the payment. Some businesses also use biometrics, such as reading fingerprints or scanning a face, to confirm your identity.

I can’t imagine life today without card-not-present (CNP) transactions. These transactions enable you to shop online, subscribe to a service, or make in-app purchases.

Shopping Online

The most prevalent use of CNP transactions is eCommerce. Every time you buy an item from websites like Walmart, eBay, or Amazon, you pay without swiping the card. Online shopping, including e-books, streaming media, and software subscriptions, are common CNP transactions.

CNP payments are employed by marketplaces and peer-to-peer websites, including Facebook Marketplace and Etsy, to complete transactions between buyers and sellers. Online merchants have increasingly embraced digital wallets, including PayPal, Apple Pay, and Google Pay, to give an added layer of protection and convenience.

Recurring Payments and Subscription Services

CNP transactions have made subscription-based products extremely popular. Streaming services like Netflix, Spotify, and Disney+ automatically charge your card regularly without needing manual payments. Software as a Service (SaaS) products, gym memberships, and even utility bills typically can use stored credit card payment data to automatically bill you.

Recurring payments give businesses a steady cash flow, and they are convenient for consumers — though their convenience also means you may easily forget about unused subscriptions. 

However, there are account management tools that allow you to change payment details, keep an eye on billing cycles, and cancel subscriptions from your account.

Mobile Payments and In-App Transactions

With smartphones playing a dominant role in our daily lives, mobile payments and in-app transactions are common. Apple Pay, Google Pay, and Samsung Pay are just a few examples of digital wallets that let you pay online or in-app without manually entering card numbers or PINs.

Mobile, productivity, and streaming applications all typically have in-app purchases, where you can buy premium content, remove advertisements, or access features with one tap. While convenient, these transactions can add up, so monitoring spending limits and transactions is a good way to keep costs in check.

CNP transactions enable you to shop, subscribe, and pay bills without a physical card. However, these advantages come with associated costs and risks that consumers and merchants must consider. 

Benefits

CNP transactions have revolutionized the shopping and payment process, offering convenience and flexibility that card-present transactions often lack:

• Convenience and Accessibility: One of the most important advantages of CNP transactions is convenience. You can transact anywhere there is an internet connection to buy a product, sign up for a service, or pay a bill. 
• Fast or Automated Payment Processing: CNP transactions streamline payments, making them quicker and simpler. Online checkouts can save your payment details to speed up future transactions, and digital wallets give you one-click or tap-to-pay. Recurring payments run automatically, and bills are paid on time without manual processing.
• Greater Opportunities for Merchants: For businesses, accepting CNP payments expands market access to consumers outside their local market. Online shopping and digital services can reach anywhere in the world. With increased ways to pay, more consumers are drawn in, and sales increase. 

While convenient, CNP transactions carry risks and issues that both consumers and merchants need to know about. Some of the most common issues associated with such transactions are:

• Fraud: Because there is no physical card, CNP transactions are more vulnerable to fraud. Stolen card data can be used for unauthorized transactions, creating additional costs for consumers and merchants. Merchants use measures like AVS, multifactor authentication, and artificial intelligence-based fraud detection to reduce risks.
• Security and Data Breach Concerns: When you conduct a CNP transaction, your card details are electronically stored and transmitted, and with that, there is a risk of data breaches. Hackers put your payment information at risk. 
• Higher Transaction Costs for Merchants: CNP transactions cost more to process compared to in-person payments. The credit card networks charge merchants more to process these transactions because they are riskier.

I was surprised to discover how much I relied on card-not-present transactions. As I live in a lovely small town, I rely heavily on eCommerce to get me the things I need. 

But with payment methods constantly evolving, it pays to be mindful of fraud risk. Simple precautions, including keeping an eye out for suspicious transactions, enabling multiple verification methods, and paying securely on sites, make a big difference. After all, no one likes to discover they have an unwanted charge from “Suspiciously Cheap Electronics, Ltd.”

With the necessary precautions, you can have the convenience of CNP transactions without your money ending up in a scammer’s pocket.