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Secure payment processing systems are designed to protect merchants and their customers from fraud and unnecessary payments. This is done through encryption, payment gateways, and authorization.
Online businesses may want to make it easy for their returning customers to complete purchases and make recurring payments.
Providing smooth checkout experiences can help increase revenue and improve customer satisfaction. At the same time, however, businesses must be sure they are securely storing customer payments to help reduce fraud and protect customer information from data breaches.
Online secure payment processing plays an important role in preventing data and financial loss. Without them, businesses risk losing customers, and customers risk losing private information.
Learn more about how to help securely store payments and improve customer experiences at checkout.
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Specialized infrastructures known as secure payment systems are designed to support the safe processing and transmission of financial transactions, especially in digital settings. Their primary goal is to reduce the risk of fraud, unauthorized access, and data breaches.
Payments are processed through gateways that facilitate communication between merchants, processors, and banks, while fraud detection systems identify suspicious activity. These systems are important for individual consumers, businesses, financial institutions, and governments, underpinning modern digital commerce and fostering trust.
Secure payments come in many different versions, with varying degrees of security. Here are some secure payment methods:
There are many different factors that make a system secure. While not every single method needs to be used, businesses employ various means of securing their payment networks. Here’s an overview of some different ways of securing payments.
Encryption is when sensitive information is converted into a coded, unreadable format. This "scrambling" makes the data incomprehensible to anyone without the correct decryption key.
With an online purchase, for example, the buyer's payment information is encrypted by their browser before it leaves their device, so it remains indecipherable to unauthorized parties if it's intercepted during transmission. This fundamental security measure protects financial data from being compromised while it travels across networks.
A payment gateway is a digital service that facilitates secure transactions between a business and its bank or payment processor after each purchase. In other words, the payment gateway plays a critical role in supporting that each customer’s payment information is securely sent out and verified, so the business can get paid.
What’s the difference between a payment vault and a payment gateway? While the payment vault securely stores the customer’s payment information, the payment gateway is responsible for accessing and transmitting that information to the payment processor to help authorize and complete the transaction.
Authentication is an important step in verifying the identity of the person or business attempting to complete a transaction. Its primary purpose is to confirm that the person making the payment is actually the legitimate cardholder or account owner, preventing unauthorized access and fraudulent activities.
This verification often involves multiple factors, commonly categorized as:
After storing payment details securely, the payment vault provides a token, which is a unique number. This token now acts as a substitute for the customer's stored payment methods. The token is used for the customer's repeat transactions. There is no need to ask for payment information again.
Merchants can use this token instead of asking the customer to re-enter a payment method. This token is only tied to the specific business and can only be used by that business. Storing the token is a benefit because it reduces the risk of a data breach and the PCI DSS compliance burden.
Fraud detection systems are used to identify and prevent fraudulent transactions in real time or near real time. Their core function is to analyze various data points within a transaction to spot any suspicious activities. This proactive approach helps protect both consumers from unauthorized charges and businesses from potential losses.
These systems typically leverage advanced technologies like artificial intelligence (AI), machine learning (ML), and predictive analytics. They examine a vast array of data, including:
PCI DSS compliance mandates a secure environment for all companies handling credit card information, encompassing processing, storage, and transmission, through a set of defined security standards.
The guidelines were established by the major credit card brands (Visa, Mastercard, American Express, Discover, and JCB) to reduce payment card fraud and data breaches.
Compliance involves adhering to 12 core requirements, which cover aspects like:
This comprehensive framework provides guidelines organizations must follow to safeguard sensitive cardholder data throughout its lifecycle.
Each financial institution has its own set of proprietary rules, formats, and communication standards for processing and exchanging payment information.
While there are overarching industry standards like PCI DSS, each bank may have its own unique internal systems and communication methods for receiving, processing, and sending payment instructions.
These protocols are designed to support the security, integrity, and accurate routing of funds within their own network and with other financial entities.
Secure payments protect both the buyer and seller, helping data to be safe, and there are no financial losses for either party. More than that, though, they’re an important part of creating a profitable and dependable business. Here are some key ways secure payment processing is important:
Robust, secure payment systems are important for a business's financial stability by reducing losses from different types of fraud and chargebacks. They protect revenue streams and prevent unexpected financial hits that can derail operations.
Secure payment methods streamline operations by automating fraud prevention and reducing manual interventions for suspicious transactions. This efficiency frees up resources, accelerates transaction approvals, and allows businesses to focus on core activities rather than continual security concerns.
Secure payment processing systems are designed to be adaptable, continuously evolving to combat new and emerging threats in digital environments. Their ability to integrate new technologies and comply with updated regulations supports long-term resilience against sophisticated fraud attempts.
It’s the merchant's responsibility to set up secure payments for their customers. Here’s an overview of some key steps and considerations.
To effectively use a secure payment gateway, experts recommend implementing a comprehensive set of industry-standard practices throughout the entire system. This includes:
A key principle of payment security is minimizing the amount of sensitive customer data that’s collected and stored. Only collect information that's necessary for processing the transaction or for legal and regulatory compliance.
Storing less sensitive data can reduce the "attack surface," meaning there's less valuable information for malicious actors to steal in the event of a breach. Whenever possible, rely on the secure payment gateway to handle and store payment card data, rather than keeping it on local servers, thereby offloading a significant portion of the PCI DSS compliance burden.
Selecting the appropriate payment processor is perhaps the most important step. Look for processors that are PCI DSS compliant, offer advanced encryption and tokenization services, and have robust fraud detection capabilities built in.
Evaluate their security features, such as 3D Secure support, and their track record for preventing breaches. A reputable processor will also provide clear documentation, strong customer support, and smooth integration options, ensuring payment processes are not only secure but also efficient and reliable for customers.
From making payments easy and more reliable to streamlining business operations, secure payment processing plays an important role in the success of any business.
PayPal helps protect businesses and customers with 24/7 fraud detection, powered by advanced machine learning and analytics. PayPal also offers Seller Protection to avoid chargebacks on eligible transactions*, handle dispute resolution to help mitigate risk, so businesses can keep running smoothly.
Learn more about accepting secure payments with PayPal.