A card-not-present transaction is any single payment in the category described under card not present (CNP), and that entry explains the category in full. It means the card was not physically shown to or read by the merchant's terminal at the time of the payment.
Examples include e-commerce transactions, in-app purchases, payments taken over the phone or by mail order, and recurring charges to a stored card. Because the merchant cannot read the chip or check a PIN, it relies on other data, such as the security code, billing address and cardholder authentication through 3-D Secure, to judge whether the buyer is genuine. CNP transactions have higher fraud rates than in-person ones and usually attract higher interchange fees. Unless the payment was authenticated, the merchant generally bears the cost of fraud-related chargebacks.
The phrase "card-not-present transaction" names the individual payment, while "card not present" is often used for the channel or the fraud category. The opposite is a card-present transaction. Mail and telephone orders form a specific subset known as MOTO.