Card-present transactions.

By Filippo Conforti on December 12, 2023

As the name implies, card-present transactions are those in which the cardholder uses their card in person at a physical point of sale. Online purchases, on the other hand, are considered card-not-present transactions, since the cardholder is not physically present at the time of the purchase.

There are many differences between the two types of transactions, including security, required technology, and customer experience. In terms of security, card present transactions are considered more secure because the merchant can verify the customer's identity in person. This increased security is the reason why transaction costs are lower when the card is present. Since the risk of frauds and chargebacks is much lower, banks and payment processors can charge lower fees.

Technology-wise, in person payments typically require a barcode scanner, a card reader, a cash register, a receipt printer, and a POS software. Barcode scanners read the product info, like SKU and price, and send it to POS software in digital format. Essentially, scanning a product lets you read more information about the product and add it to the shopping cart (a real one!) without having to manually add all the product data.

Card readers are used for processing payments using a physical credit card. These can be swiped or read with EMV chip readers. As proof of payment, merchants can print receipts for customers. To increase security, the cardholder may be required to insert a PIN or sign the receipt.

A typical POS system.
A typical POS system.

In person payments have been around for much longer than online payments. The Diners Club card was invented in 1950, making it the first modern credit card. E-commerce as we know it today didn't begin until 1994, when the Internet became commonplace. In a first ever encrypted transaction, Dan Kohn sold a CD of Sting's Ten Summoner's Tales album on August 11, 1994, to a friend in Philadelphia who used his credit card to make a payment of $12.48, plus shipping costs.

In the years since then, online shopping experiences have attempted to replicate in-store experiences through the use of similar analogies, like the shopping cart, but with very different technologies. Traditional ecommerce platforms were site builders that provided transactional functionality. There are some of them that have stepped into the POS market, bringing online transactions to the physical world, but without huge success. In contrast, POS vendors have attempted to integrate online transaction capabilities into their in-store systems but none of them have been able to become competitive ecommerce platforms.

Therefore, true omnichannel experiences where a customer can seamlessly interact with online and offline touchpoints are still very rare. In reality, it shouldn’t be like that. It is still core commerce that happens on different channels, so why the technology should be so different? A card present transaction is a type of payment that requires different hardware, but it's still just a payment. Maybe one day when these worlds finally converge, and brands will be able to use a unified commerce layer to make any experience shoppable, without any distinction between online and in store. Meanwhile, we need to better integrate these two worlds so retailers don't view the online channel as a competitor, but as a partner that can lead their business into the modern era.

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