[deanly]

It's worth mentioning a specific term here, too: "card not present" That covers all ecommerce, and even some card scanning technology, too, EVEN if the card is present. As you pointed out, it's all about fraud/risk. It's easier to circumvent the credit card companies' "security" features (magnetic strip, hologram, signature on the backside of the card, the actual card itself, a chip if your card has one, etc.) when the card is not present during a transaction. A good analogy would be paying with counterfeit $100 bills. There are security features built into cash that allow merchants to verify their authenticity. It's difficult to prove that the person on the other side of the internet is who he says he is when paying with a card. Is the card stolen? So as you pointed out, card not present transactions are riskier, thus require a higher interchange fee, etc.

[abalone]

That's not really the main reason. Ecommerce interchange is higher than card present but only by maybe 15-30 basis points (0.15-0.30%).

There are online processors that offer much lower rates than 2.9% + $0.30 if you meet certain qualifications as a merchant. Amazon goes as low as 1.9%.

The main reason that certain processors have such a high rate is the lax signup requirements. It allows higher-risk and outright fraudulent merchants to use them. So yes, card-not-present has a slightly higher fraud baseline, but the key factor here in the rate is the merchant qualification.

Source: http://usa.visa.com/download/merchants/visa-usa-interchange-...