Data protection and security are crucial—not just for safeguarding customer information, but for protecting business owners as well. Having and maintaining secure payment processing is integral for protecting yourself and your customers.
Because more credit card-oriented purchases take place online, security and fraud protection are top priorities. Making sure there are secure payment technology policies and procedures within your company will guarantee the integrity of present and future transactions.
Businesses are converting to digital and online platforms to stabilize their profitability at this time. The need for security is at an all-time high, and business owners need to enhance protection for their customers and secure their sites to maintain trust.
Sure, you might know about ensuring to have an SSL certificate for your site URL, and you may have other fundamental factors in place, but secure payment policies require more coordination, effort, and awareness.
If you currently run an online business or you’re interested in adding an online shopping cart to your business, protecting your customers is priority number one.
Security threats can come from anywhere, and that is why you must institute checks and specific credit card processing policies that secure sensitive client details.
Enter secure payment systems (SPS).
TL;DR
- Secure payment systems are crucial for ecommerce stores and companies to utilize because they protect both consumers and businesses from theft and fraud.
- Secure payment systems are easy to implement, as you integrate your online store with a secure payment gateway provided by your payment processor.
- By combining a secure payment system with secure payment habits (like not collecting excess data from customers), you’ll go a long way in safeguarding your business against fraud.
Related content: What is a payment gateway?
What are secure payment systems?
While not a formal industry acronym, the concept of a secure payment system (SPS) refers to a fully compliant payment ecosystem where all components—from the gateway to the processor—work together to protect financial and personal data from fraud.Secure payment systems are essentially the digital guardians of online shopping, keeping the customer’s money safe throughout the transaction.
Secure payment systems comply with strict security standards and regulations set forth by governing bodies and industry organizations. Compliance with these standards ensures that merchants and payment processors implement robust security measures to safeguard financial data.
The primary security standards that payment systems typically adhere to include:
- Payment Card Industry Data Security Standard (PCI DSS): PCI DSS sets forth requirements for securing payment card data, including encryption, access control, network monitoring, and regular security testing. Compliance with PCI DSS is mandatory for businesses that handle credit card transactions.
- EMV standards: EMV (Europay, Mastercard, and Visa) standards govern the technology used in chip-enabled payment credit and debit cards and terminals. These standards help prevent card-present fraud by authenticating transactions through dynamic data authentication and cryptographic processes.
- PCI Software Security Framework (SSF): This framework is the modern standard (replacing the older PA-DSS) that applies to software vendors and developers of payment applications. It outlines security requirements for ensuring the secure storage and transmission of cardholder data.
- ISO/IEC 27001: This international standard provides a framework for establishing, implementing, maintaining, and continually improving an information security management system (ISMS). Adherence to ISO/IEC 27001 helps ensure the confidentiality, integrity, and availability of sensitive data, including payment information.
- Regulatory compliance: Payment systems may also need to comply with specific regulations and laws related to financial transactions and data protection, depending on the region and industry. Examples include the General Data Protection Regulation (GDPR) in the European Union and the Gramm-Leach-Bliley Act (GLBA) in the United States.
How do secure payment systems work?
Secure payment systems employ various technologies to protect sensitive information and prevent unauthorized access or fraudulent activities.
1. Encryption
The fundamental component of secure payment systems is encryption. Credit card encryption is a process where sensitive information, such as a credit card number, is encoded into a secure format to prevent unauthorized access or interception during transmission over the internet.
Encryption works by scrambling plain, readable data (plaintext) into an unreadable format (ciphertext) using an algorithm and a key. The algorithm is a set of mathematical instructions that dictate how the encryption and decryption processes occur, while the key is a unique piece of information that controls the encryption and decryption operations.
When encrypting data, the algorithm takes the plaintext and combines it with the key to produce ciphertext. This ciphertext appears as a random sequence of characters and is meaningless without the corresponding key.
To decrypt the ciphertext and retrieve the original plaintext, the recipient uses the same algorithm but with the decryption key. The algorithm applies the key to the ciphertext, reversing the encryption process and transforming the ciphertext back into plaintext.
Encryption ensures that even if intercepted, the encrypted data remains unintelligible to unauthorized parties, providing confidentiality and security for sensitive information transmitted over networks.
2. Authentication methods
Secure payment systems also implement a variety of authentication methods to verify the identities of both parties involved in the transaction. These include:
- Passwords. Users create unique passwords that they must enter to access their accounts or complete transactions. This method is widely used but can be vulnerable to password guessing or theft if not properly managed.
- Two-factor authentication (2FA). 2FA requires users to provide two different forms of verification before accessing their accounts or making transactions.
- Digital certificates. Digital certificates are electronic documents that verify the identity of a user or website. They are issued by trusted certificate authorities and are used to establish secure connections between parties in online transactions.
- 3D secure (3DS2): This protocol (often branded by Visa/Mastercard) requires the customer to perform an extra authentication step during checkout. It is essential for CNP transactions, as successful authentication shifts the liability for potential fraud from the merchant to the card issuer.
3. Tokenization
Tokenization is a modern security practice that is an alternative to end-to-end encryption for storage. Tokenization immediately replaces the full credit card number with a unique, non-sensitive token.
This token cannot be mathematically reverse-engineered back to the original card data. Crucially, the token, not the card number, is then securely transmitted and stored, meaning the most sensitive data is never handled by the merchant, thus reducing their security liability.
A payment processor that implements SPS can protect your business and customer data in the following ways.
Protect your customers and your business from chargebacks
When a fraudulent purchase occurs at your online store, it could lead to a credit card chargeback. A chargeback is when a credit card transaction is reversed by the card issuer, usually initiated by the cardholder, due to a dispute with the merchant over the quality of goods or services received, unauthorized use of the card, or other reasons, including “friendly fraud” (when a legitimate customer disputes a charge, often forgetting the purchase). Securing your payment systems is the best way to prevent criminal fraud, which leads to the costliest chargebacks. These chargebacks mean directly issuing a refund to the customer whose credit card was used in the fraudulent transaction.
If your business is subject to a chargeback, you and your company can end up paying extra fees to your credit card processor as well.
There are steps businesses can take to respond to a credit card chargeback if the business owner would like to dispute it. But in the case of fraud, securing your payment systems (SPS) is the best protection, as it’s the best way to prevent fraud from happening in the first place. When you secure your payment systems, your customers can shop and use credit card payments at your online store with confidence.
Aspects such as chargebacks are a part of payment processing that many businesses may not spend as much time thinking about when observing and instituting secure payment processing (SPS) habits.
But these are the details that matter when processing payments online.
How to secure your online store with a payment gateway
A secure payment gateway is the best tool for protecting your payment systems. A secure payment gateway is a technology platform that facilitates the secure transmission of payment information between a merchant’s website or point-of-sale system and the payment processor or acquiring bank. It acts as a bridge between the customer, the merchant, and the financial institutions involved in processing a transaction.
A secure payment gateway plays a crucial role in ensuring the safety and integrity of online transactions because it does the encryption and tokenization of cardholder information. This means that the cardholder information is far less vulnerable to data thieves, protecting you and your customers from fraud.
The best payment gateway acts as a secure “checkpoint” for transactions from customers to you. Most merchant services providers will offer ecommerce solutions, including shopping cart integrations and secure payment (SPS) gateways, meaning you can easily set up a secure payment system by working with your payment processor or merchant services provider
Implement security measures
A secure site will reassure your customers that their information is safe and stays private. Using SSL is a common and necessary step to protect that information. A Secure Sockets Layer, or “SSL,” ensures that sensitive information, such as login credentials, payment details, and personal data, remains confidential and secure during transmission.
SSL encrypts all that info, which helps prevent unauthorized access and interception by malicious third parties, safeguarding users’ privacy and protecting against potential cyberattacks, such as man-in-the-middle attacks.
An SSL certificate will reassure your website’s visitors that their data is secure if they enter in their payment information. Browsers will even show if a website has an SSL certificate or not.
However, be aware that SSL is technically deprecated. The industry standard today is Transport Layer Security (TLS), specifically TLS 1.2 or higher. This cryptographic protocol encrypts and secures data sent over the web. Ensure your payment processor and website support the latest TLS versions to maintain full security and browser compatibility.
Eighty-one percent of internet users reported that they would stop interacting with a brand online after a data breach. So a TLS or an SSL certificate offers peace of mind and tightens your online store’s security.
Prioritize PAN avoidance
Another way to boost your site’s security is to collect only the information you need.
The single most effective way to boost security is to ensure your systems never touch or store the primary account number (PAN). This is achieved by utilizing tokenization and secure hosted payment fields provided by your PSP, which immediately redirect and encrypt the sensitive data before it reaches your servers. Additionally, collecting only necessary PII cuts down on personal data liability.
At the same time, you’re improving the customer experience by streamlining your entire checkout process.
Research shows that many customers abandon their shopping carts if they have to create an account, while others abandon their carts if checking out is too confusing. As such, a streamlined and secure checkout is the best way to protect your customers’ data and keep them happy.
The data points most merchants can cut down to are:
- Payment information such as credit card numbers, expiration dates, and security codes (CVV/CVC) for processing the payment. In some cases, alternative payment methods such as bank account information or digital wallet details may also be collected.
- Billing address is required for verification purposes and to ensure that the payment card information matches the address associated with the cardholder’s account.
- Contact information, including the customer’s email address and/or phone number, is necessary for sending order confirmations, updates on the status of the order, and resolving any issues related to the purchase.
- Shipping address is also required for any physical deliveries.
- Finally, depending on applicable privacy regulations such as the General Data Protection Regulation (GDPR) in the European Union, merchants may need to obtain explicit consent from customers for collecting and processing their personal data.
Finding the right payment processor
Ultimately, ensuring that you have a secure payment system starts with choosing the right credit card processor, since that’s who you’ll be running your secure payment gateway through. That’s why when shopping around for merchant services providers, you must choose a payment platform that makes security a top priority. Ask vendors questions on:
- How they keep card transactions secure
- The steps and tools they use to protect credit card information
- How they ensure compliance with Payment Card Industry Data Security Standards
- The financial institutions they work with
- Who has access to payment data
Remember that when it comes to protecting your business, securing sensitive data can be as simple as using the right tools. And a merchant services provider will have the resources you need to protect your business from fraud and data breaches. With the necessary precautions, you can avoid penalties, and your customers can shop with confidence at your online store.
Related content: Beyond PCI Compliance: Why Data Security is Key to Growth and Success [Webinar Recap]
Final words
At Stax, we’re committed to securing sensitive cardholder data. As a Level 1 PCI service provider, we take the utmost care in protecting this data. We use a host of security measures to prevent fraud and ensure PCI compliance across all of our products.
Our team will always be available to assist you in staying within PCI standards. In the new digital age of payments and shopping, security is top of mind for businesses. With Stax, you can rest easy knowing your data is protected and secure.
To learn more about our online payment solutions and services or to have a free consultation, don’t hesitate to reach out to Stax today.
FAQs about secure payment systems
Q: What are secure payment systems (SPS)?
Secure payment systems (SPS) refer to payment processing solutions and information technology that help safeguard people’s personal and financial data from unauthorized activities and fraud.
Q: How do secure payment systems protect businesses and their customers?
Secure payment systems can protect businesses and their customers in various ways. They can prevent fraudulent purchases that may lead to credit chargebacks. By incorporating SPS, customers can confidently shop and use credit card payments on your online store, knowing their sensitive information is protected.
Q: What is a secure payment gateway?
A secure payment gateway is a PCI-compliant tool that encrypts and tokenizes cardholder information to protect against data thieves. This tool can serve as a secure “checkpoint” for transactions from customers, further protecting the integrity of your payment systems.
Q: What are some security measures for secure sites?
Common security measures include Secure Sockets Layer (SSL) certification, which encrypts the customer’s data as it moves between the website and the server. Other tools include Transport Layer Security (TLS), which implements a cryptographic protocol that encrypts and secures data sent over the internet.
Q: Why is limiting data collection important for security?
Collecting only the essential information reduces the risk of data leaks or security breaches. By streamlining your checkout process and not making account creation mandatory, you can further enhance your site’s security and improve the customer experience.
Q: What aspects should be considered in choosing the right payment processor?
When selecting a payment processor, ensure it prioritizes security and complies with Payment Card Industry Data Security Standards. Look into how they secure card transactions, protect credit card information, their associated financial institutions, and who has access to payment data.
Q: What role does a merchant services provider play in secure payment systems?
A merchant services provider can offer the necessary resources and tools to protect your business from fraud and data breaches. They can implement security measures to prevent fraud and ensure PCI compliance across all products, safeguarding the data and giving customers confidence to shop at your online store.
