Which type of transaction involves the card not being physically present for verification?

A Card Not Present transaction refers to situations where the cardholder's physical card is not utilized at the point of sale for verification, leading to a higher risk of fraud. This type of transaction often occurs in scenarios such as online purchases, phone orders, or mail orders, where the card information is entered manually or provided over non-secure channels.

Understanding the dynamics of Card Not Present transactions is crucial, especially considering their prevalence in e-commerce. Since the transaction does not involve physical verification—such as a card swipe, chip insertion, or contactless tap—it requires additional security measures like CVV codes, address verification systems, and fraud detection tools to mitigate risk.

In contrast, other options like Card Present transactions involve the physical card being swiped or inserted in a terminal, and Chip card transactions rely on the presence of a chip-enabled card for secure processing. Contactless payments also typically involve a physical card or a mobile device being used within proximity to a reader. Therefore, the characteristics that define Card Not Present transactions set them apart due to their unique challenges and the necessity for enhanced security practices.