Let’s talk about the “F” word—fraud. In 2023, the cost of fraud to online businesses was $48 billion globally, according to Mastercard. To stay ahead of fraud means merchants must understand the threats, use trusted and secure providers, and keep up to date on payment security trends.
So, let’s dive into payment security, touching on the basics of what you need to know to ensure secure payments.
TL;DR
- The PCI DSS determines security protocols and sets the standards for payment security.
- Taking precautions to implement security measures such as secure firewalls and cybersecurity training helps to protect cardholder data and other sensitive information.
- A secure payment gateway is one of the main ways merchants can protect their business and customers.
Payment Security Fundamentals
Merchants hold a lot of sensitive data when processing transactions, and if not properly safeguarded, hackers could wreak havoc. Safeguarding customer payment information requires secure processes during the collection, transmission, processing and storage of payment data and working with a trusted payment processor.
Taking precautions to implement security measures like firewalls and cybersecurity training helps to protect cardholder data and other sensitive information from cybercriminals. It’s also critical to ensure card information is protected from data breaches with secure encryption and cybersecurity standards in place.
Offering multiple payment methods is just one of many ways to improve customer experience, and it is becoming more important as the market shifts towards more convenient and secure payment options.
While debit and credit card transactions remain popular, many are now contactless, using near-field communication (NFC). Outside of standard card transactions, mobile wallets are gaining popularity, with 3.4 billion digital wallet users, or 42.6% of the global population using this method of payment in 2022. NFC payments, including digital wallets, are very secure, relying on encryption to mask the card number, further protecting cardholder information.
Other trending payment methods include peer-to-peer (P2P) payment apps like PayPal or Venmo are a secure and convenient way to transfer funds between people and businesses.
Essential Payment Security Components for Merchants
Encryption and tokenization, what is the difference?
Encryption and tokenization are two distinct methods of scrambling payment information, including but not limited to credit card numbers.
Encryption converts the card information into a scrambled cipher that uses an algorithm and encryption key to decipher the data. Tokenization, on the other hand, replaces the sensitive data with a string of meaningless characters, with the original data stored in a “token vault”. The tokens are then used to substitute the card information when the payment is processed.
How do two-factor authentication and “3-D secure” protect payment information?
Multi-factor authentication (MFA) adds additional layers of security by requiring additional verification during the transaction process. Users provide two separate forms of identification to complete a purchase, such as a password or biometric authentication. Many people use MFA when making purchases through Apple Pay, for example, using Face ID or a passcode to complete a purchase.
Similarly, “3-D secure”, also known as “Verified by Visa” or “Mastercard SecureCode,” prompts users to enter a one-time password or biometric data to confirm their identity and authenticate the transaction. Using security features like MFA helps protect customer data and prevent fraudulent transactions and the resulting chargebacks.
What is SSL/TLS?
SSL/TLS is the acronym for Secure Sockets Layer and Transport Layer Security. Essentially, these are encryption protocols that create a secure internet connection for online transactions. For online transactions, a secure connection is critical, and the SSL/TLS protocol helps ensure transactions are protected from cyber attacks and data breaches.
SSL/TLS is a complex payment security practice involving two different kinds of encryption keys—for more detailed information, check out this guide.
How to Comply with Payment Security Standards
The Payment Card Industry Data Security Standards, or PCI DSS, are the North Star for payment processing security. Set by card associations like Visa, Mastercard, American Express, and Discover, the PCI DSS determines security protocols and sets the standards for payment security.
All businesses and organizations handling cardholder data must be PCI compliant, and violating the PCI DSS standards results in fines and damages your customer’s trust. Ultimately, PCI DSS compliance helps prevent fraudulent transactions, mitigates data breaches, cultivates customer trust and protects your business.
The significance of EMV cards
EMV cards use a microchip that generates a code for each transaction, which is transmitted instead of the card number as the transaction processes. This is more secure than the magnetic strip, as the card information is not stored or sent when it’s swiped at the payment terminal. The role EMV cards play in preventing counterfeit cards and reducing fraud cannot be overstated.
Secure protocols for secure transactions
Secure Electronic Transaction (SET) protocols are designed to ensure security measures for online card transactions. SET protocols use digital certificates that protect online credit card transactions.
Identifying and Mitigating Payment Security Threats
Phishing scams, social engineering, bot attacks—these are just a few of the most pressing cybersecurity threats that can be so devastating they have real-time effects. Many businesses and respected institutions have immediately been taken down for days, weeks or longer due to cyber attacks designed to exploit their vulnerabilities.
Fraud and chargebacks also cause significant losses for businesses. Innovations in social engineering scams, sometimes conducted through social media, and phishing emails are designed to get the user to divulge sensitive information. This can happen easily to customers, resulting in their account numbers being compromised, and to businesses that unwittingly accept payment for fraudulent transactions resulting in chargebacks. A recent report estimates cyber attacks will cost businesses $8 trillion worldwide, meaning cybersecurity solutions should be a top priority for businesses.
Best Security Practices for Merchants
A secure payment gateway is one of the main ways merchants can protect their business and customers. This ensures a secure ecosystem for in-person and online payments and will have the needed functionality to easily and securely process transactions.
Find the right payment processor
Choosing a reputable payment processor is your first step. Stax delivers an all-in-one payments platform that is secure, stable and customizable—and did we mention affordable?
Train your team on secure payment practices
Another critical step is ensuring cybersecurity best practices and awareness is instilled across your workforce. Whether it is a small shop or an international chain, cybersecurity training and hygiene will protect customer information.
Check and audit for payment security
Regularly do security audits and compliance checks. It’s important to look under the hood regularly to ensure vulnerabilities can be discovered and addressed. Standardize these checks to ensure consistency in evaluating your security practices.
Don’t store payment data unless you need to
Only store the minimum amount of customer data—and do so securely. Make sure account numbers and other sensitive information are treated carefully and stored in the appropriate and secured software, ideally encrypted.
Emerging Technologies in Payment Security
Because the threat landscape continues to evolve, so do payment processing security measures. Innovations in artificial intelligence (AI) and machine learning are helping develop security solutions faster than ever. AI and machine learning are both commonly used for authenticating and encrypting payments, adding additional layers of security, like biometric authentication.
Blockchain technology is another technology used to advance payment security. Information exists in a distributed ledger that records transactions in an immutable record. Blockchain will likely continue to be adopted as payment security will be an ongoing focus.
Advances in security solutions and standards continue to work against the cybersecurity and fraud threats facing businesses and consumers today. However, it’s vital for merchants and their providers to focus on the threats facing the business and the solutions available to protect it.
At Stax, we help businesses keep up with all things payment security. As a Level 1 PCI Service Provider, Stax offers the highest level of PCI compliance. We also provide the resources and insights needed to each one of our members so they can stay PCI compliant, avoiding those fines.
Quick FAQs about Payment Security
Q: What is payment security?
Payment security refers to the measures taken to ensure the protection of customer data and to prevent fraudulent transactions during online payments. It involves secure processes during the collection, transmission, processing, and storage of payment data.
Q: What is the Payment Card Industry Data Security Standards (PCI DSS)?
The PCI DSS are set by card associations like Visa, Mastercard, American Express, and Discover to determine security protocols and set the standards for payment security. Any business or organization handling cardholder data must comply with these standards to prevent fraudulent transactions and data breaches.
Q: What is the role of a secure payment gateway in payment security?
A secure payment gateway is one of the main ways merchants can protect their businesses and customers. It ensures a secure ecosystem for in-person and online payments and has the needed functionality to process transactions securely.
Q: What are encryption and tokenization in payment security?
Encryption and tokenization are methods of scrambling payment information. Encryption converts card information into a scrambled cipher, which can be deciphered using an encryption key and an algorithm. On the other hand, tokenization replaces the sensitive data with a string of meaningless characters, with the original data stored in a “token vault”.
Q: How do multi-factor authentication and “3-D secure” protect payment information?
Multi-factor authentication (MFA) adds additional layers of security by requiring multiple forms of identification to complete a purchase. “3-D secure”, such as “Verified by Visa” or “Mastercard SecureCode”, prompts users to enter a one-time password or biometric data to confirm their identity and authenticate the transaction.
Q: What is SSL/TLS in payment security?
SSL/TLS (Secure Sockets Layer and Transport Layer Security) are encryption protocols that create a secure internet connection for online transactions. They ensure that transactions are protected from cyber attacks and data breaches.
Q: What is the significance of EMV cards in payment security?
EMV cards use a microchip that generates a code for each transaction, which is transmitted instead of the card number. This method is more secure than the magnetic strip, as the card information is not stored or sent during the transaction process.
Q: What are the emerging technologies in payment security?
Innovations in artificial intelligence (AI) and machine learning are being used for authenticating and encrypting payments. Blockchain technology is also used to advance payment security by recording transactions in an immutable record.
Q: What are the best security practices for merchants?
Merchants can enhance their payment security by choosing a reputable payment processor, training their team on secure payment practices, regularly auditing for payment security, and securely storing minimum customer data.
Q: What are the major payment security threats?
Major payment security threats include phishing scams, social engineering, bot attacks, fraud, and chargebacks. These threats can compromise sensitive information, resulting in fraudulent transactions and significant losses for businesses.
