What Is a Card-Not-Present Transaction and Why Does It Cost More?

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Learn what card-not-present transactions are, why the associated processing fees are more expensive, and what you can do to prevent CNP transaction fraud for your restaurant.

Amidst the COVID-19 health crisis, consumer behavior is shifting rapidly towards digital channels due to local mandates that have temporarily eliminated on-premise dining. In light of this new legislation, restaurants are adapting quickly to meet changing demand and serve their communities. Some restaurants are even starting to use online ordering and delivery for the very first time.

This pivot away from in-person dining and towards digital-only ordering and payment comes with many changes. One such change that restaurant owners and operators will begin to see is a shift in credit card processing fees for orders placed online to card-not-present (CNP) transactions.

This article will cover what card-not-present transactions are, why the associated processing fees are more expensive than swipe transactions, and what you can do to prevent CNP transaction fraud for your restaurant.

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What is a card-not-present transaction?

A card-not-present transaction (also referred to as a keyed transaction) is a transaction in which a credit card reader isn’t physically available. Therefore, the transaction must be “keyed in,” meaning the card number is manually entered either by an employee or a guest.

A card is only considered to be “present” when payment details are captured in person at the time of the sale, and the card is swiped, dipped, or tapped.

When a guest calls in an order to a restaurant, it qualifies as a CNP transaction because they have to recite their card number over the phone while an employee punches it into the POS. But today, with the boom of online ordering, online orders make up the majority of CNP transactions. When a guest places an order with your restaurant through an online ordering system, it qualifies as a CNP transaction because they have to manually enter their card information.

Because CNP transactions are most common for purchases and transactions that happen remotely, they’re at a higher risk for fraud, which is why they have a higher cost to process than swiped transactions.

Why are card-not-present transactions more expensive than swipe transactions?

Fraud associated with CNP transactions is on the rise. According to a recent report by Juniper Research, merchants are expected to lose around $130 billion in digital card-not-present fraud between 2018 and 2023.

This is why the processing costs for CNP transactions are higher than those for swipe transactions: a higher risk of fraud and chargebacks. These higher processing costs are set by the card brand networks — like Visa, Mastercard, and American Express — and the payment processors must account for these increased costs with the rates they charge.

Card-not-present transaction fraud and what you can do to prevent it 

CNP transaction fraud can occur when a criminal obtains a cardholder’s name, billing address, account number, security code, and card expiration date. These details can be stolen electronically, without obtaining the physical card. Once this information is obtained, the criminal may attempt to make a fraudulent credit card transaction — all while not possessing the physical card.

Prior to the COVID-19 health crisis, online ordering was already growing at a rapid pace for restaurants; according to Technomic, revenue generated by off-premise dining (including orders placed online) makes up 44% of all restaurant sales. As a result, online-based fraudulent activity was also increasing.

Now, with new legislation forcing restaurants to shift to delivery and takeout only, online ordering is becoming the predominant means of business for restaurants — and there’s greater risk for CNP transaction fraud than ever before. When it comes to CNP transaction fraud, the merchant often bears the loss, not the customer.

Because of this, validating cardholder information has never been more important, and restaurants and other businesses must have fraud prevention tactics and systems in place.

One simple way to combat this type of fraud is to require the CVV number for online or over-the-phone transactions. This is the number on the reverse side of a physical card and is a good indicator that the card is genuine. But these days, there are also sophisticated technologies out there that can detect many instances of attempted CNP transaction fraud.

At Toast, our systems utilize real-time machine learning-based fraud protection and employ encryption and tokenization technologies to protect guest data and help avoid card-not-present chargebacks. Using our fraud protection platform, Toast can proactively monitor online CNP transactions, which helps detect fraudulent activity and stop it in real time. For e-commerce transactions, Toast leverages Address Verification System (AVS), a solution that merchants use to mitigate the risk associated with keying in orders.

Talk to a Member of Our Team

The processing costs of CNP transactions are inherently more expensive than those of swiped transactions given their riskier nature. At the same time, card brands and processors alike have put increased measures in place to help protect restaurants and businesses from CNP transaction fraud, helping them to avoid any losses.

If you have any additional questions about CNP transactions and what they mean for your restaurant, please reach out to our dedicated Payments Team at

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DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Toast does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Toast does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.