In the payments industry, Card Present (CP) refers to transactions where the payment card and the cardholder are physically present at the point of sale (POS). It commonly occurs in face-to-face transactions at physical retail stores, restaurants, or any other location where the card can be physically swiped, dipped, or tapped for payment.
Here’s how Card Present transactions typically work:
- Card Reading: The cardholder presents their payment card to the merchant or cashier. The card can be swiped through a magnetic stripe reader, inserted into a chip reader (EMV), or tapped on a contactless-enabled terminal, depending on the card’s capabilities and the merchant’s infrastructure.
- Transaction Data: The payment terminal reads the card data, including the card number, cardholder name, expiration date, and other relevant information embedded in the card’s magnetic stripe or chip.
- Authorization Request: The merchant’s payment terminal sends an authorization request to the acquiring bank or payment processor. The transaction details, including the purchase amount, are included in the request.
- Authorization Process: The acquiring bank or payment processor verifies the transaction details and forwards the authorization request to the card network. The card network routes the request to the cardholder’s issuing bank for approval.
- Authorization Response: The issuing bank evaluates the transaction and sends an authorization response back through the payment network, indicating whether the transaction is approved or declined. This response is relayed to the payment terminal.
- Transaction Completion: If the transaction is approved, the merchant can proceed with completing the sale. The payment terminal generates a receipt for the cardholder, and the funds are settled through the regular clearing and settlement processes.
Now, let’s discuss the pros and cons of Card Present transactions:
- Reduced Fraud Risk: Card Present transactions offer lower fraud risk compared to Card Not Present transactions. The physical presence of the card provides an additional layer of authentication, making it harder for fraudsters to use stolen card details.
- Faster Transactions: CP transactions tend to be quicker and more efficient compared to CNP transactions. Cardholders can simply swipe, dip, or tap their cards, reducing the time spent in the payment process, which is beneficial in high-volume environments.
- Lower Processing Costs: Card Present transactions often have lower processing fees compared to Card Not Present transactions. Acquiring banks and payment processors generally consider them less risky, leading to lower interchange fees and transaction costs for merchants.
- Limited Accessibility: Card Present transactions require physical presence, limiting their applicability to in-person transactions. This can pose challenges for businesses operating in e-commerce, remote sales, or mobile services where face-to-face interactions are not possible.
- Point of Sale Infrastructure: Merchants need to invest in appropriate payment terminals and POS systems to accept Card Present payments. This includes hardware and software that support card reading, EMV chip technology, and contactless payments. Upgrading or maintaining such infrastructure can involve costs for businesses.
- Chargebacks and Disputes: While Card Present transactions are generally less prone to chargebacks compared to CNP transactions, disputes and chargebacks can still occur due to issues like counterfeit cards, processing errors, or cardholder disputes. Merchants must be prepared to handle such situations and address customer concerns promptly.
It’s important for businesses to follow security best practices, such as ensuring PCI DSS compliance, maintaining secure point-of-sale environments, and implementing additional security measures like encryption and tokenization to safeguard Card Present transactions and protect customer card data.