The security of a credit or debit card transaction depends on the type of payment. Card present transactions are more secure than card not present transactions. In a card present transaction, the card is physically present and the cardholder verifies the amount to be charged. 

The merchant swipes the card through a terminal, which reads the magnetic stripe on the back of the card. The payment network then verifies that the card is valid and that there are sufficient funds to complete the transaction. In a card not present transaction, the card is not physically present at time of purchase, which makes it easier for fraudsters to conduct transactions.

When accepting payments, merchants should understand the difference between these two types of transactions and the fraud risk associated with each. Card present transactions are more secure because the card is physically present, which makes it difficult for fraudsters to tamper with the transaction. 

In a card not present transaction, the merchant does not have an opportunity to verify the card or the customer, so it is easier for fraudsters to use stolen credit or debit cards. The fraud risk in card present transactions is very low, while the fraud risk in card not present transactions is much higher.

Card Not Present Transactions

According to the U.S. Department of Justice Bureau of Justice Statistics, there were 481 fraud related fraud complaints per 100,000 residents in 2006. A 2006 study by Javelin Strategy & Research found that card not present transactions accounted for 73 percent of all credit and debit card fraud. 

This is because it is much easier for fraudsters to use stolen credit or debit cards in a card not present transaction. The fraudster does not have to worry about being caught with the card, and they can complete the transaction without the cardholder present.

Merchants should take precautions to protect themselves against card not present fraud. One way to reduce the risk of fraud is to require customers to provide additional information, such as a security code or mother’s maiden name. This helps to verify that the customer is who they say they are. 

The merchant can also take steps to verify the transaction. For example, they can require customers to provide their billing address and telephone number to match against the information on file with the payment processor. Finally, merchants should have a clear return policy in order to reduce instances of chargebacks that are associated with fraudulent transactions.

Restricting card not present transactions may cause some customers to go elsewhere. Before deciding to restrict card not present transactions, merchants should consider the potential loss of revenue and compare it to other security measures that may be implemented.

Card Present Transactions

In a card present transaction, the chances of fraud are very low because the customer is physically present to verify the charge. However, there are still steps that merchants can take to reduce fraud. Merchants should still follow the tips outlined above, including verifying billing address and requiring additional customer information. 

When possible, merchants should use card readers that print a receipt that includes the verification code or symbol on the back of the credit card. This further verifies the authenticity of the transaction in case there is an issue with the authorization.

In a card present transaction, the person presenting the card is in direct contact with the merchant. This reduces the chance that a fraudster will complete a purchase because they would have to impersonate someone at a specific location and time. For this reason, merchants should be extremely cautious when accepting orders over the phone from customers who are not present.

Merchants should understand the difference between card present and card not present transactions in order to reduce the risk of fraud. In a card present transaction, the card is physically present which makes it more secure. In a card not present transaction, the merchant does not have an opportunity to verify the card or customer, so it is easier for fraudsters to successfully complete a transaction.