Fraud Blocker
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  • Writer's pictureMaya

What About Card-Only Transactions?

Restaurants used to be a cash-only industry, but now there are a wide variety of payment methods that customers can choose from when they order in or dine out. While EMV-enabled card payments have been the norm for awhile and mobile transactions enjoyed popularity since their invention too, there’s a new contender rising amongst consumers: Card-not-present transactions.

What is a card-not-present transaction? This refers to a form of contactless payment where the customer doesn’t have their credit or debit card physically in the store. Sounds straightforward, right? It encompasses all transactions where the customer recites their card number from memory, gives it over the phone or makes an online order.

Why Restaurants Are Getting on Board

As technology evolves, customer preferences do too. Simply put, card-not-present transactions are getting more and more commonplace. It owes a lot of its favor to the COVID-19 pandemic, which has forced diners to stay home and order in more often. It’s convenient for guests, for one; it’s also safer to do contact-free pickup or delivery rather than actually dining in at a restaurant right now, no matter how many physical safety precautions have been put in place.

Opening takeout and delivery streams has gotten a lot of restaurants through this past year, and that’s not likely to change anytime soon. Consequently, card-not-present transactions will stay relevant too. You can encourage online ordering by posting links on your website and social media to quickly redirect guests to that platform to drive sales.

The costs of card-not-present transactions

Despite the benefits, there are associated costs to accepting card-not-present transactions—and yes, we mean money. It’s more expensive than tap-to-pay or traditional credit card processing fees because there’s a higher risk of fraud when it comes to this type of payment. For that reason, processors charge a higher fee for this method than they do for tap-to-pay or EMV card readers.

Regardless of the method used, businesses do have to pay fees: To the bank, the credit card company and the processing company too. For card-not-present transactions, however, the card network (think Visa, Mastercard, etc.) charges more because of the increased risk of fraud.

Restaurants are finding ways to sublimate those charges. Some states or cities let you add a surcharge to customers’ bills to cover some of the charges, although be wary as this can drive certain guests away who don’t appreciate paying for your costs of doing business. Alternatively, compare fees between vendors before you sign on the dotted line. See if your preferred vendor will price match or negotiate for a lower fee, or make the call to change your processor completely.

Best Practices

Adhere to safety standards that protect your restaurant from fraudulent charges—because yes, you’re going to experience new and confusing issues with fraud anytime you adopt a new payment method. That’s unavoidable; as technology advances, so do criminal practices. Rather than avoiding new experiences completely, take the time to safeguard your restaurant instead.

Is fraud really a problem?

Credit card fraud, in particular chargeback fraud, is a huge issue for a lot of businesses but particularly restaurants. Though fraud can happen with any payment method, card-not-present fraud affected 3% of Americans in 2018, and this transaction method has only grown in popularity since then so it follows that fraud has too. It costs the industry billions upon billions of dollars each year.

There are two kinds of fraud to consider: One, someone steals a credit card to order food online or over the phone. With the other, the actual owner of the card orders and eats from a restaurant, but then calls their bank and demands a chargeback anyway. This is negatively impactful for restaurants who then get held liable for the chargeback fee. It’s best to avoid fraudulent charges however possible by making sure all transactions are done by the book and that all their information checks out, especially when the person doesn’t physically hand you a card to swipe.

Keeping your restaurant safe

Protecting your business will and should always be your paramount concern—along with providing superior customer service, of course. Follow best practice standards to significantly lower your risk of becoming a fraud victim.

  1. Make sure you’re PCI compliant.

  2. Always ask customers for a CVV code.

  3. Invest in an address verification system, or AVS, that checks the billing information is accurate and keeps it on file in case of a chargeback.

  4. Read over third party contracts.

  5. Allow multiple transaction methods such as mobile payments.

To further reduce risk, make sure never to write down credit card information or ask for it via email. When in doubt, refuse a payment. It’s better to go through a little hassle than risk setting your restaurant up for fraudulent behavior.

All forms of contactless payment are worth exploring, especially now, so mobile and card-not-present transactions can work together with traditional payment methods to help your business grow. Consider implementing card-not-present transactions in your restaurant today, and encourage contactless payment options to support the health and happiness of your staff, customers and restaurant too.


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