With the evolution of digital ordering, there has been a visible shift away from the traditional in-store and in-person payment method and edging towards a more faceless digital payment experience. Food brands who have adopted digital ordering have already begun to observe a change in credit card processing fees for orders placed online. This type of purchasing method is referred to as a Card Not Present (CNP) transaction. CNP essentially means that a customer can still make purchases without being physically present at the time the purchase is made.
What is a Card Not Present Transaction?
When neither the credit card nor the cardholder is physically present at the time of purchase, a card-not-present transaction occurs. This is typical for restaurant orders that are placed digitally online.
What about Card Present (CP) Transactions?
This article would not be complete, if we did not briefly touch upon a “card present” transaction. In this scenario, customer payment details are collected in person at the time of the transaction.
The distinction here requires the customer to be bodily present while their credit card is being physically swiped through a magnetic card reader or by EMV (i.e., Europay, MasterCard, and Visa), an alternative method of payment that supports smart payment cards, payment terminals, and other automated teller machines.
Is CNP Free?
As stated by the late Irish-born American author and New Thought minister, Joseph Denis Murphy, “You Cannot Have Something For Nothing,” unfortunately, CNP transactions are not free and come at a cost that can also impair restaurant digital ordering sales.
Transactions that require the use of CNP payment will typically incur a fee made up of one of three types of credit card processing fees:
- Interchange Fees
- Assessment Fees
- Payment provider’s padded markup (A.K.A. Cut of their piece of the pie)
Are CNP fees higher, or lower for digital ordering?
Higher. Restaurants may experience higher than expected CNP transaction costs as it relates to digital ordering.
Why are CNP costs higher?
CNP costs are higher due to many contributing influencers, mainly: Fraud.
Fraud typically has been associated with chargebacks in the world of digital ordering and electronic commerce. Unfortunately, it is a matter of perception that does not always weigh in favor of the restaurant establishment. When a customer (i.e., cardholder) and their payment card is not physically present, the interchange fee of CNP tends to be higher because transaction fees are passed onto the merchant.