Fintech Terminology / Glossary / Dictionary - C

 Card on File transactions

Card on File transactions refer to a payment method where a customer's credit or debit card information is securely stored by a merchant or service provider for future use. When the customer agrees to use the "Card on File," they allow (A customer’s explicit consent is needed to store the card details) the merchant to save their card details except its CVV, usually during the initial transaction or purchase.

With Card on File, the customer doesn't need to provide their card information every time they make a purchase or payment with that particular merchant and the merchant uses the stored card details to charge the customer for subsequent transactions without requiring the card information again. This payment method is commonly used for subscription-based services, recurring bills, or online platforms where users have regular payments. It simplifies the checkout process and enhances convenience for both the customer and the merchant, as the card details only need to be provided and verified once during the initial transaction.

It's important to note that reputable merchants and service providers use secure methods to store and handle card data, adhering to industry standards (like PCI DSS) to protect the customers' sensitive information. Customers can always review and update their stored card information or choose to remove their card from the merchant's system if needed.

Card Not Present (CNP) Transactions

Card Not Present (CNP) transactions refer to payment card transactions where the physical presence of the card is not required for the purchase to be completed. In other words, during CNP transactions, the cardholder does not need to present the payment card physically, such as swiping or inserting it into a card reader.

These types of transactions are commonly used in various online and remote payment scenarios, where the cardholder provides their card information to the merchant without being physically present at the point of sale. CNP transactions can occur in several ways:

1. Online purchases: When a customer buys goods or services from an online store, they typically enter their card details (card number, expiration date, and CVV code) on the website's payment page to complete the transaction.

2. Phone orders: Customers may provide their card details over the phone to a merchant's representative to place an order and make a payment.

3. Mail-order purchases: In this case, customers write down their card information on a form and mail it to the merchant, who then processes the payment without seeing the physical card.

4. Recurring billing / Card on File transactions : For subscriptions or regular services, customers authorize merchants to charge their card on a predetermined schedule without the need for card presence each time.

CNP transactions come with higher fraud risk compared to Card Present (CP) transactions, where the card is physically present and can be verified through methods like chip and PIN or signature verification. To mitigate fraud, merchants and payment processors often use various security measures, such as CVV verification, address verification systems (AVS), OTP and 3D Secure (like Verified by Visa or Mastercard SecureCode), to authenticate the cardholder's identity and reduce the likelihood of unauthorized use.

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