Card-present vs Card-not-present Transactions

What should you know as a business owner about card present vs. card not present transactions? Learn more about the important differences here.

Do you operate a brick-and-mortar location where customers visit in person to make a purchase? Or is your business focused on online sales, with few or no face-to-face transactions?

Thanks to mobile apps and many other innovations, many businesses now have to manage both remote and in-person purchases. Offering both options can improve customer satisfaction and boost sales. However, it's important to understand both types of transactions when it comes to debit and credit cards.

Card-present and card-not-present transactions can have a noticeable impact on your business. The specific way in which your customers pay impacts the costs of card payment processing.

Swipesum helps businesses just like yours optimize their card payment strategy. Our independent consultants identify the providers and services that are most relevant to your business. By taking both price and functionality into account, they deliver tailored suggestions to keep costs low and streamline credit and debit card payments.

Our team can take the lead in negotiating merchant services fees, help you find the best payment gateway, and so much more. Best of all, this service comes at no additional cost to your business. Book your free consultation now!

Want to learn more before you make a change to your payment strategy? Keep reading to dive into more detail about card-present vs. card-not-present transactions.

A woman completes a card-not-present transaction using her smartphone.

Card-not-present vs. Card-present Transactions: The Basics

These two categories of card transactions can seem self-explanatory. However, there are some important details to understand about both. Let's define card-present and card-not-present transactions.

What are Card-present Transactions?

Card-present transactions always take place in person. The purchase doesn't have to happen at a specific location, however. Card-present transactions can be completed in permanent locations as well as at events like farmers' markets, expos, and craft fairs.

A card-present transaction can take place anywhere that a card reader, point-of-sale (POS) system, or payment terminal can be used. The customer must be present, along with their card.  

Crucially, the customer must swipe their card, dip it, tap it, or use contactless payment options through a smartphone or similar device for a purchase to qualify as a card-present transaction. Even if a customer has their card with them, a purchase completed through an ordering app or other means, without the physical, in-person use of a card or a payment app, is not a card-present transaction.

What are Card-not-present Transactions?

An easy way to define card-not-present transactions is their remote nature. In other words, a card is used for payment but is not presented to an employee and/or processed by a terminal, card reader, or similar tool. Instead, the purchase is made from a distance.

Card-not-present transactions cover a lot of ground. This category includes very traditional options, like purchases made over the phone or with credit card details supplied for a mail order.  

The card-not-present designation also includes many newer, more advanced methods of payment. Online purchases, subscription services, "buy now" buttons on social media, and similar options all qualify. For businesses in the B2B space, online invoicing is also a card-not present transaction.

Consider these two examples of very similar purchases for more context:

  • A coffee purchased with a card (or with a payment app linked to a card) at the counter of a large, national coffee chain. This is a card-present transaction.
  • A coffee purchased on that same coffee chain's app on a smartphone. Even if that purchase is completed within the store, this is a card-not-present transaction. The card, or a linked payment app, must be presented and interact with a payment terminal in some way to qualify as a card-present transaction.

Why Card-present vs. Card-not-present Transactions Matter for Your Business

Card-present transactions have lower interchange fees than card-not-present purchases, as Square explains.

Interchange fees help pay for the cost of securely moving funds from a customer's card to your merchant account. They make up a substantial part of overall credit card processing fees and are generally the largest single expense for merchants.

The nature of card-present transactions means more security for each and every purchase. A purchase made in person with a card offers an opportunity to confirm the identity of the cardholder and use a secure payment terminal.

In the big picture, card-not-present transactions are generally secure as well. Online ordering through a secure payment portal is not a major or excessive risk.

However, there are more opportunities to fraudulently use card information with a remote purchase. There isn't that same opportunity to verify the cardholder's identity. Additionally, chargebacks are more common with card-not-present transactions.

That's why card-present vs. card-not-present rates are different. Because there's less risk with an in-person purchase, the cost to your business is lower.

It's important to note that interchange fees for card-not-present purchases are normally manageable. They don't place an extreme financial burden on businesses, even smaller companies. There are plenty of examples of online retailers that exclusively accept card-not-present payments and maintain profitability.

However, the higher price of card-not-present transactions still represents an additional cost for merchants as compared to in-person purchases. There's clear logic behind the reasoning, but it's one more processing fee for your business to deal with.

Streamling Card Payments with Expert Assistance

At Swipesum, we believe the best approach to managing the cost of card payments is a holistic one. Reviewing the full state of your payment strategy means finding opportunities to save money and improve functionality. While card-not-present fees can't be avoided, there are plenty of more negotiable items in an average monthly statement.

Effectively leading those negotiations is a crucial part of the value we offer to your company. We'll identify opportunities to cut down on excessive or otherwise negotiable fees, which means more money for your business.

At the same time, we can find the best combination of providers, technology, and terms of service for your company. Because our team is independent of any individual provider, we're always focused on what's best for your business.

Ready to optimize your approach to card payments? Book your free consultation to get started.

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Swipesum Team

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