Card not present is when a transaction is completed when the card or the cardholder is not physically present. Whereas in brick and mortar stores where both the card and the cardholder will be present at the time of the transaction when shopping online neither of the above will be physically present.
When paying for goods online without the physical presence of a card or a signature from the holder, secure methods of payment are used to ensure that the person making the transaction is indeed authorized to do so. One such method is by asking for the billing address of the card; when the wrong details are entered the transaction will be denied.
Just like when credit cards are physically processed with the card present, there are fees that need to be paid when you process a card not present transaction. In fact, the interchange fees are higher for card not present transactions because of the increased risk of fraud when the card isn’t present. The costs are passed along to the merchant, which is why increased fees are seen for card not present transactions.
In 2017 it’s estimated that 72% of all fraudulent credit card transactions in the U.K. were card not present transactions. And the trend is increasing as more and more online transactions occur. This makes it critical for ecommerce merchants to take steps to protect from fraud when processing card not present transactions. It is also estimated that every $100 in fraudulent charges costs the merchant $310. That’s a very good incentive for merchants to use all the tools at their disposal to protect against fraudulent card not present transactions.