Card-Not-Present Payments: Why They Are Costing Your Business

For businesses, online payments often come with hidden costs—fraud, chargebacks, and card processing fees. That’s because online card transactions count as card-not-present (CNP) payments.

When a card isn’t physically used—like during online shopping or mailing orders—it opens the door to more fraud and extra costs for merchants. In fact, CNP fraud makes up over 70% of global card fraud.

In this article, we’ll break down what card-not-present transactions are, why they’re riskier than in-person transactions, and why open banking is a smarter, safer alternative.

What Is Card-not-Present (CNP) Payments?

A Card Not Present (CNP) payment happens when the buyer and their card aren't physically at the checkout. You’ll see this a lot with online shopping, phone orders, or subscriptions.

Instead of swiping or tapping a card, the customer types or says their details out loud — on a website or over the phone. There’s no card reader involved as it’s a remote payment. That’s why it’s called card not present.

Examples of Card-not-Present Transactions

• Online purchases: Customers enter their card details on a website or within an app to buy products or services—this is the most common CNP transaction.
• Phone orders: Card details are shared verbally over the phone to complete a purchase.
• Mail Orders: Customers send their card information by post or fax, often using a paper form—less common today but still used in some industries.
• Recurring payments: Subscriptions or memberships that automatically charge the customer’s saved card details on a regular schedule.
• Online invoicing: Customers receive a digital invoice and pay using their card via an online link or portal.

CNP Transactions Are More Susceptible to Fraud

Card-not-present (CNP) payments are much riskier when it comes to fraud compared to in-person transactions. The numbers tell the story:

• In 2022, over 70% of all credit card fraud worldwide came from CNP transactions.
• In the UK, CNP fraud has grown by 26% since 2020, citing sophisticated social engineering techniques and triangulation fraud as the key scenarios.
• By 2026, Mastercard predicts global CNP fraud losses are expected to hit $28 billion—a 40% jump from 2023.

Card-not-present payment process is more vulnerable to fraud because there’s no way for merchants to physically check the card or confirm the buyer’s identity. That makes it much easier for fraudsters to use stolen card details.

Social Engineering Fraud

This can happen even when multi-factor authentication (like one-time passwords) is in place. Fraudsters use sophisticated social engineering—manipulative tactics to gain the victim’s trust.

They may pose as bank staff, delivery agents, or even the merchant itself, using urgency or fear to pressure the customer into sharing their one-time password or login details. Once they have that information, they can authorise the payment themselves.

Triangulation Fraud

Another common scenario is triangulation fraud happens when criminals set up a fake online store or social media profile pretending to be a real brand.

They take payment from the customer, then use stolen card details to buy the product from the real store, and have it shipped to the buyer. The fraudster keeps the customer's money, and the merchant is left to deal with the chargeback when the stolen card is reported.

CNP Transactions Are More Expensive

Card-not-present processing fees tend to be higher, especially for inter-regional payments. That’s because there’s more risk involved and more chances for fraud, as discussed earlier. Card networks and providers charge more to mitigate these risks.

CNP Processing Fees

Below are the interchange debit and credit card fees for business owners charged for customer transactions as per EEA regulation.

Souce: MerchantSavvy, April 2025.

You can check up-to-date regional interchange Visa debit and credit processing fees here, and Mastercard processing fees here.

Read: How to Reduce Card Processing Fees as a Merchant

Therefore, payment processors often charge more for card-not-present online transactions.

For example, payment giant Stripe charges 2.5% + 20p for EEA cards online (card-not-present), but only 1.4%+10p per successful charge for EEA cards via its in-person terminal. This data is as of April 2025, for more up-to-date Stripe pricing visit the provider’s website.

CNP Chargeback Costs

CNP transactions see more fraud, which means more chargebacks—and that gets expensive fast. When a chargeback hits, merchants don’t just lose the sale. They also pay extra fees, often between £15 and £100 per dispute, depending on the provider.

Better Alternative to CNP: Open Banking

If you're dealing with the pain of CNP payments—fraud, chargebacks, high fees—there’s a better way. It's called open banking.

Open banking, also known as pay-by-bank, lets your customers pay directly from their bank accounts. No card networks are involved. At checkout, they're redirected to their own bank’s app or website, where they log in and approve the payment securely. That’s it.

These payments are processed through regulated APIs, which banks are required to provide to licensed providers like Noda. Because there are no card networks in the mix, merchants avoid interchange fees, reduce fraud risk, and eliminate chargebacks entirely.

It’s faster, safer, and cheaper than card payments—and it fixes everything CNP gets wrong.

Open Banking Is More Secure Than CNP

Bank-Level Security & Biometrics

The Strong Customer Authentication (SCA) is a legal requirement for both open banking and CNP transactions as they are both regulated under the European PSD2. Yet open banking uses the customer bank’s security checks—usually biometric authentication such as fingerprint, face ID, which require physical presence of the customer.

No Sharing of Sensitive Details

With open banking, customers don’t have to enter or share their card details. Everything is processed through secure, encrypted APIs between their bank and the merchant. That means there’s no need for storing or transmitting sensitive info—cutting the risk of data leaks.

Pre-Filled Payment Details Prevent Mistakes

Open banking fills in the payment information for customers, straight from their bank. No typing in account numbers. No risk of sending money to the wrong place. This helps stop scams like authorised push payment (APP) fraud and makes the whole process smoother and safer.

Open Banking Is More Cost-Efficient than CNP

Open banking payments are cheaper than card payments, including card-not-present (CNP) transactions, for several reasons.

No Card Network Fees

With open banking, merchants pay a simple, fixed transaction cost—no interchange or scheme fees from card networks. That alone can make open banking up to 80% cheaper for businesses than traditional card payments.

Reduced Fraud and Chargeback Costs

As mentioned earlier, every open banking payment uses biometrics and bank-level security, which keeps fraud to a minimum. That means fewer chargebacks, fewer disputes, and less money lost to fraud-related admin.

Open Banking Offers Better UX

Apart from being more secure and cost-effective, open banking also makes checkout faster and easier. It removes common pain points—like typing in long card details—and gives a smoother experience that helps reduce shopping cart abandonment. Here's how it helps:

• Faster, smoother checkout: No need to enter long card numbers, expiry dates, or billing details. Customers simply choose their bank, approve the payment in their app, and it’s done.
• Fewer clicks, less friction: The whole process takes fewer steps than traditional card payments, which means fewer chances for drop-offs.
• Instant settlement: Payments go through in real time, giving immediate confirmation to both the customer and the business.
• Mobile-friendly by design: Perfect for mobile shoppers—open banking’s app-based flow is quick, seamless, and built to reduce cart abandonment on small screens.

The UX is extremely important, especially as younger, digitally-native consumers, Millennials and GenZ are reshaping the payments world. They prefer mobile payments and the friendly UX of open banking over traditional methods. Mastercard’s Rise of Open Banking study confirms it–Gen Z is the most eager to embrace new fintech solutions.

Switch to Open Banking with Noda

Ready for a better way to get paid? Try Noda’s Open Banking solution. Connect to over 2,000 banks in 28 countries, accept multiple currencies, and process payments instantly—with no card fees or chargebacks.

You can plug in with our Open Banking API or get started fast with no-code plugins for e-commerce platforms and instant payment links and QR codes. Whether it’s pay-ins, payouts, or both, Noda makes it easy to add secure, high-converting payments to your checkout.