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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
NFC-BASED “PAY” WALLET DESIGNATIONS Near-field communication (NFC)-based payment methods like Apple Pay and other “Pay” wallets may not have as obvious of a card-present vs. card-not-present designation as other payment experiences. For Visa, “Apple Pay payments made in store are considered card present transactions, while payments made using Apple Pay in-app are considered card not present.” 100 Mastercard does not explicitly offer information on the categorization of Apple Pay, but does identify in its rules that in-app transactions and transactions completed through a digital wallet would be considered card-not-present transactions. Section 3.3 – Card-Not-Present Payment Challenges As mentioned above, card-present (CP) and card-not-present (CNP) transaction environments have varying costs, customer experience considerations, and fraud liability implications for all stakeholders involved in the transaction. In this section, we will dive deeper into cost dynamics, operational complexities (including their potential impacts on cost and customer experience), and the strategic considerations surrounding tokenization technology use cases. Section 3.3.1 – Ecommerce Cost One of the most controversial aspects of card-not-present payments is that merchants typically pay higher costs and bear a greater fraud liability burden. 101 While there is an argument to be made that in-person payments are more secure because the consumer is present and providing a payment product in their possession that supposedly belongs to them, as digital purchasing has become commonplace over the past two decades, many digital merchants have evolved to develop seamless, secure shopping experiences. In many instances, merchants have also innovated to ensure that they know their customers better and make more informed decisions about online payment checkout attempts.
Section 3.2.2 – What is Card-Present and Card-Not- Present?
Network
Card Present
Card Not Present
Visa
As defined in Visa 2023 Rules, ‘card- present’ describes an environment in which both the payment card and the cardholder are present at the merchant outlet. The transaction must be completed either by a merchant representative/acquirer or directly by the cardholder at an unattended cardholder-activated terminal. 95 has presented a Card or Access Device to a Merchant or Customer representative in a face-to-face environment or uses a Card or Access Device to initiate a Transaction at an ATM Terminal or unattended POS terminal.” Card-present use cases listed in Mastercard’s Table of Contents include: 97 • Chip Transactions on Hybrid Terminals 98 • Consumer-presented QR transactions • Unattended POS terminals • Contactless transactions at POS or ATM terminals
The card-not-present (CNP) environment – or, as Visa defines it, “Card-Absent” – refers to a transaction setting in which neither the cardholder nor the card is present. 96
Mastercard Mastercard defines a card-present transaction as “when the Cardholder
Mastercard states, “The physical presentation of a card or access device is not required and must not be requested to complete a transaction conducted.” Mastercard’s Table of Contents outlines certain card-not-present transaction types, such as: 99 • Electronic commerce • Mail Order and Telephone Order (MOTO) Transactions • Credential-on-File Transactions • Recurring Transactions • Installment Billing • Merchant-initiated Transactions (MIT)
Table 3.1– Visa and Mastercard’s definitions of Card-Present and Card-Not-Present
95 Visa Core Rules and Visa Product and Service Rules. 14 October 2023. 96 Visa Core Rules and Visa Product and Service Rules. 14 October 2023. 97 Mastercard Transaction Processing Rules. 6 June 2023. https://www.mastercard.us/content/dam/public/master- cardcom/na/global-site/documents/transaction-processing-rules.pdf 98 Includes offline transactions (e.g. on planes, trains, or boats). Mastercard Transaction Processing Rules. 6 June 2023. https://www.mastercard.us/content/dam/public/mastercardcom/na/global-site/documents/transaction-pro- cessing-rules.pdf 99 Hybrid terminals support and are enabled for both EMV® contact and EMV® Mode contactless payment func- tionality.
100 https://usa.visa.com/run-your-business/small-business-tools/payment-technology/apple-pay.html 101 Sources include: CreditDebitCardInterchangeFeesVariousCountries_August2023Update.pdf (kansascityfed. org), Visa USA Interchange Reimbursement Fees, U.S. Region Interchange Bulletin (mastercard.us), Federal Reserve Board Publication
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