Understanding Card-Not-Present Transactions: Benefits, Challenges, and Best Practices

Jun 27, 2023

Card-not-present transactions are a type of payment made when the physical credit card isn’t present at the time of the payment. The ability to make remote purchases allows consumers to make purchases online, over the phone, or by using a digital wallet. There are challenges of card-not-present transactions, but they can be managed so you can scale your payments with ease.

What is a Card-Not-Present Transaction?

A card-not-present transaction is one where the credit card doesn’t make contact with the payment terminal.

Card present transactions, by comparison, occur when the customer swipes, dips, or taps their credit card with a card reader to complete a transaction.

Card-not-present transactions commonly happen online or over the phone, but also include instances where the merchant keys in the credit card information to manually complete the transaction.

Examples of card-not-present transactions

If you’ve ever used your credit card to purchase something online, you made a card-not-present transaction. While you may have had your card physically present with you, since it didn’t make contact with a credit card reader, it was qualified as a card-not-present transaction.

A few examples of card-not-present transactions include:

  • online payments, when consumers make a purchase or pay a bill online or through an app
  • buy online, pick up in store, purchases where a consumer purchases through the app or website, then picks up their order via the store or curbside
  • phone orders, when consumers call in to make a phone payment with a customer service rep or through an automated system
  • card on file transactions, when consumer credit card information has already been stored for future payments
  • recurring payments, payments made on a repeat schedule using stored payment information
  • mail orders, when a consumer writes their credit card information on a payment form for manual processing
  • manual payment entry, for instance during a power outage when the payment terminal can’t be used

Processing Card-Not-Present Transactions

There are several ways to remotely accept credit card payments. You’ll need a secure way to accept or store their credit card information and present it to your payment processor to complete transactions.


A checkout page or billing portal allows customers to enter their credit card information to complete a payment. HealPay’s Portal allows merchants to accept payments online, provide required disclosures, and allow customers to set up recurring payments.

Automated phone payments

With IVR, or Interactive Voice Response, payment systems, customers can make a card-not-present payment without speaking to a customer service representative. Automated prompts guide the consumer through the transaction process allowing customers to enter their payment information using their phone’s keypad.

Over the phone with agent-entry

You can also accept payments over the phone, as long as you have a way to submit payment information to your card processor. Our V-TERM, or virtual terminal, provides online payment forms that allow agents to login and enter payments when customers call in.

What You’ll Need

Regardless of the payment method you choose—and maybe your business would benefit from having multiple options—there are a few things you’ll need to have in place to accept card-not-present payments.

  • Payment gateway and merchant account to facilitate online payment processing.
  • Secure and reliable internet connection to ensure the safe transmission of transaction data.
  • Credit card information, including card number, expiration date, and CVV/CVC code, provided by the customer.
  • Encryption and tokenization systems to protect sensitive customer data during transmission and storage.

Challenges of Card-Not-Present Transactions

While card-not-present transactions offer several advantages, they also come with certain challenges to plan for.

  • Increased risk of fraud. Cybercriminals use a variety of tactics to get access to sensitive consumer information including phishing and hacking. Prioritizing security is important to protect consumer information and minimize the risk of fraud.
  • Chargebacks and disputes: Card-not-present transactions are susceptible to chargebacks, which happen when consumers dispute transactions for things like unauthorized charges, damaged goods, or not receiving products. Chargebacks can lead to financial losses, lost ability to accept credit cards, and potential damage to their reputation. Resolving disputes efficiently and providing excellent customer service is crucial.
  • Authentication concerns: Verifying the identity of the cardholder and ensuring the legitimacy of the transaction is important for card-not-present transactions. You’ll need need robust authentication systems to prevent fraudulent transactions.

Preventing Fraud With Card-Not-Present Transactions

There are several way businesses can navigate the risk of fraudulent card-not-present transactions.

  • Follow data security standards. Put data security first by using secure payment gateways, implementing encryption techniques, and ensuring compliance. Following regulations and industry standards like the FTC’s Safeguard Rules and PCI Compliance Standards will help you protect consumer information.
  • Use address verification services, or AVS, verify the identity of the cardholder. Your payment processor may provide this service with a small fee for each transaction. AVS reduces chargebacks by helping you detect potential unauthorized transactions.
  • Use fraud detection tools.  Leverage advanced fraud detection and prevention tools, such as artificial intelligence and machine learning algorithms, to identify suspicious patterns and behavior. These tools can detect potential fraudulent transactions in real-time, reducing the risk of financial losses.
  • Educating employees and customers about security practices. Keep everyone informed about the latest security threats and best practices. Train your employees to identify respond to potential fraud attempts. Provide consumers with education on safe online practices, such as regularly updating passwords, avoiding suspicious emails, and monitoring financial statements for any unauthorized activity.

Consumers may accidentally dispute transactions they don’t remember or don’t recognize. Errors in processing, like duplicate transactions, can also trigger consumer disputes. Because chargebacks affect your reputation with your payment processor, it’s important to minimize them as much as possible.

  • Monitor transactions for suspicious activity and anomalies. If you can catch and fix errors proactively, you can avoid having the consumer dispute a transaction.
  • Use an accurate billing descriptor. This is the description that appears on the cardholder’s billing statement. Make sure it matches your business name so the consumer recognizes the transaction.
  • Send payment confirmation immediately. Capture the consumer’s email address or phone number to provide the consumer with a copy of the payment confirmation for their records.
  • Provide clear refund and dispute resolution policies to address customer concerns promptly. Consumers don’t have to use their bank if they know how to contact you to resolve their issues.

Accepting Card-Not-Present Transactions Securely

Accepting card-not-present payments doesn’t have to be stressful. HealPay’s payment suite allows you to securely accept card-not-present payments both online and by phone. We handle the details of accepting payments, freeing you up to focus on your business.

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