What Is a MOTO Transaction and How Does It Work?

A Mail Order/Telephone Order (MOTO) transaction is a type of card-not-present (CNP) payment. This method allows businesses to process credit or debit card payments when the physical card is not present. Customers provide their payment details remotely, typically over the phone or through mail. The merchant then manually enters these details into a payment system.

Understanding MOTO Transactions

MOTO transactions are defined by the absence of the physical payment card. The acronym MOTO stands for Mail Order/Telephone Order, signifying the primary channels for these payments. Unlike in-person or e-commerce transactions, MOTO payments require the merchant or an authorized agent to manually input the cardholder’s information. This manual entry includes the card number, expiration date, and security code (CVV). This reliance on indirect communication for payment details makes MOTO a distinct category within card-not-present transactions.

How MOTO Transactions Are Processed

A MOTO transaction begins when a customer provides payment information, such as the card number, expiration date, and CVV, over the phone or through mail. The merchant logs into a virtual terminal, which is a secure, web-based application, or uses a physical payment terminal. The customer’s card details are manually entered into this system.

After the details are submitted, the virtual terminal or payment gateway securely transmits the transaction data to the payment processor. The processor communicates with the card network and the customer’s issuing bank to request authorization. The issuing bank verifies the card’s validity and checks for sufficient funds. An approval or decline message is sent back to the merchant, and the customer typically receives a confirmation. Funds usually settle into the merchant’s account within a few business days.

Security and Compliance for MOTO

MOTO transactions carry a higher risk of fraud compared to card-present transactions because the cardholder and the physical card are not present. This increased risk means merchants bear more liability for potential chargebacks. To mitigate these risks, businesses must adhere to the Payment Card Industry Data Security Standard (PCI DSS), which establishes security controls for handling cardholder data. PCI DSS compliance requires secure storage and handling of sensitive information, prohibiting the retention of authentication data like CVV codes after authorization.

Merchants commonly employ fraud prevention tools such as the Address Verification Service (AVS) and Card Verification Value (CVV) checks. AVS verifies if the billing address provided by the customer matches the address on file with the card issuer, adding a layer of security. CVV is the three or four-digit security code on the card, which helps confirm the customer has physical possession of the card. Merchants must implement internal protocols, such as staff training and access controls, to manage the heightened fraud exposure associated with MOTO payments.

Common Applications of MOTO Transactions

MOTO transactions are widely used across various industries where customers cannot or prefer not to complete transactions in person or through a traditional e-commerce website. Call centers frequently utilize MOTO, allowing agents to take payments over the phone for services or orders. Small businesses, especially those without a physical storefront, find MOTO valuable for processing sales when customers call in.

Businesses offering subscription services or requiring pre-payments also commonly rely on MOTO. Examples include travel agencies booking flights or hotels over the phone, takeaway food services, and repair services that need to secure payment before dispatching staff. MOTO provides a flexible solution for any business needing to process payments remotely.