A guide to payment optimization
Best practices for secure online payment processing
Today’s consumer wants the flexibility to pay in a way that suits them. To meet these customer needs, it’s become essential for businesses to offer a variety of payment methods. However, online payments come with an element of risk.
That’s why it’s vital your business follows the best practices when it comes to secure online payments, helping you avoid security breaches and damaging your brand trust.
To help bolster your online security, this page will show you the most secure online payment methods, plus seven best practices for secure payment processing.
Why is secure payment processing important for online transactions?
Protect sensitive data
Online transactions are very susceptible to data breaches, where hackers attempt to access and steal customer information from vulnerable systems. It’s vital to protect this sensitive data, which fraudsters could use to commit crimes against businesses and individuals.
From money laundering to identity theft, online merchants are exposed to a range of fraud risks on a daily basis. Secure payment processing incorporates fraud detection mechanisms that analyze transaction patterns, monitor for suspicious activity, and apply machine learning algorithms to identify and prevent fraudulent transactions in real-time.
Meet your compliance requirements
Payment industry requirements, such as PCI DSS, require you to meet rigorous security standards, which keep customer card data safe from fraud during online transactions. Likewise, if you operate in the EU, you have to comply with PSD2 Strong Customer Authentication (SCA), which enhances the security of online payments by requiring the implementation of multi-factor authentication. Failure to comply with these requirements could put you at risk of hefty fines and legal repercussions
Chargebacks occur when customers dispute a transaction and request a refund from their bank or credit card company, and are a particular risk of online transactions. Secure payment processing can help reduce fraudulent chargebacks by verifying the identity of the cardholder, saving you from financial losses and chargeback fees.
Confident global growth
Ecommerce payment processing allows you to reach a global customer base, but different regions may have varying security standards and regulations. Implementing secure payment processing ensures that businesses can cater to customers worldwide without compromising on security.
Protect your reputation
Data breaches can severely damage your businesses’ reputation and discourage consumers from shopping with you. News of a security breach can spread quickly, leading to customer distrust and negative publicity. Secure payment processing helps you to protect your brand image and maintains trust with consumers.
What are the most secure online payment methods?
There have never been more ways for businesses to accept payments online, but security standards and associated risks can vary significantly from method to method.
The most secure online payment methods incorporate multiple layers of authentication to verify customers, and protect sensitive data by utilizing encryption and other advanced measures.
While not always the case, established payment methods tend to be more secure than emerging technologies, which haven’t always developed such robust standards of security and are more likely to have vulnerabilities that can be exploited by fraudsters.
Here are three of the most secure online payment methods:
Card payments are one of the most widely used payment methods worldwide. As such, the card payment ecosystem has developed a range of protocols, technologies and standards that protect both merchants and their customers from malicious actors.
All businesses involved in the storage and transmission of card details have to comply with PCI DSS. This requires them to maintain secure systems, encrypt data during transmission, implement access control measures and regularly test their systems, which reduces the risk that sensitive cardholder information is exposed to fraudsters.
Card payments are also secure for merchants as they can incorporate multi-factor authentication, which verifies cardholder identities through a combination of biometrics, One Time Passwords (OTPs), and security tokens.
Digital wallets, which allow you to store card details and make payments using smart devices, are increasingly popular with consumers, offering both convenience and, because they require multiple levels of access and tokenization, enhanced payment security.
Firstly, let’s look at access. Digital wallets are typically linked to specific devices, which require PINs, passwords, or biometrics to unlock. They then also employ multi-factor authentication, requiring an additional verification step, such as a one-time password (OTP) sent to the user's phone, before completing a transaction, as well as advanced measures like fingerprint scanning or facial recognition. This device and user-specific security helps prevent unauthorized access, even if the device is lost or stolen.
Secondly, card details stored in digital wallets are protected through tokenization. Network tokens replace sensitive card information during the transaction process, so that no exploitable information is exposed to fraudsters.
Online bank transfers conducted between reputable financial institutions are generally very secure. Most banks now require their customers to complete multi-factor authentication when making payments from their account and use advanced fraud detection measures to prevent criminals gaining unauthorized access.
That said, bank transfers come with various risks for businesses and consumers. Payers risk getting scammed or having funds misdirected due to human error, while your business risks delays in the payment process, or incomplete payments because the payer needs to contact the bank to complete the transfer.
10 best practices for secure online payment processing
Here are the best ways for your business to process secure payments online.
1. Understand your PCI compliance requirements
If your business processes, transmits or stores card data, you must comply with the Payment Card Industry Data Security Standards (PCI DSS). The simplest way to remain PCI compliant is to never see or access your customers’ card data.
To remain compliant, you can use one of our integration methods, such as Frames or Mobile SDKs (software development kits), to help secure your card transactions without handling the card data within your systems. You can remain PCI compliant using our Full Card API, but you’ll need more procedures in place to secure the data, and you’ll need to fill out longer and more complex forms when your PCI DSS assessment comes around each year.
Checkout.com is certified for PCI DSS as a Level 1 Service Provider – the highest standard set by the payment card industry to ensure that credit card data is processed, stored and transmitted securely.
PCI Level 1 merchants process more than six million transactions per year and are required to undergo quarterly network scans by an Approved Scan Vendor, and on-site assessments by an approved Security Assessor or a qualified Internal Security Assessor.
2. Encrypt data with TLS
TLS data encryption is a key component in secure online payments. When someone buys something online, sensitive information such as credit card numbers, expiration dates, and CVV codes are transmitted over the internet. Without proper encryption, this information could be intercepted by malicious actors and used for fraudulent activity.
TLS encryption secures the communication between the customer’s browser and your company’s website server, ensuring the sensitive information is transmitted securely and can’t be intercepted – or read – by anyone other than the intended recipient (your business).
TLS also authenticates the server, which helps prevent man-in-the-middle (MITM) attacks. This is important to ensure that the customer is communicating with your legitimate business and not an attacker trying to intercept their data.
Your website should also have a valid SSL certificate to establish a secure connection using TLS. Meanwhile, the protocol version should be at least TLS 1.2 – as earlier versions have known vulnerabilities. We support the TLS 1.2 protocol on all of Checkout.com’s hosted payment pages.
3. Implement 3D Secure 2
3D Secure 2 (3DS2) is the latest version of the 3D Secure protocol, which is used to authenticate online credit and debit card transactions. It’s an additional layer of security that helps protect businesses and consumers from fraud and unauthorized transactions.
The 3DS2 protocol provides an additional step in the online checkout process, where the cardholder is prompted to provide additional authentication information, such as a one-time password sent to their mobile phone, or biometric data like fingerprint or facial recognition. This helps to ensure that the person making the purchase is the legitimate cardholder, and not someone who’s stolen their card information.
While 3DS2 adds more protection, it creates extra steps during the checkout process and becomes a less user-friendly experience. That’s why you should balance your risk of fraud with customer convenience, using this protocol only if you need to significantly reduce your fraud rates.
One of the key benefits of 3DS2 is that it provides a frictionless user experience for subsequent transactions at the same merchant. The user can authenticate themselves for future transactions with the card issuer, so that they don't have to go through the same process when returning to the checkout.
3DS2 also provides more detailed data about the transaction, which allows your business to make more informed decisions about whether to accept or decline a transaction. This can help reduce the number of false declines, which can be costly and frustrating for businesses and customers alike.
You should also know that the SCA (Strong Customer Authentication) mandates 3DSA in the UK and EEA, but if you’re a low-risk merchant, you can benefit from SCA exemptions for low-value transactions or transaction risk assessments if your fraud rates are below a certain threshold.
Learn more: 3DS 2.3 - what's new?
4. Multi- or Two-Factor Authentication
Multi-factor authentication (MFA) and two-factor authentication (2FA) are both security protocols used to verify the identity of users during logins or transactions. They add an extra layer of security beyond traditional username and password combinations.
2FA requires users to provide two different types of authentication factors before they can login or make a payment. The first factor is typically something the user knows, like a password or PIN, and the second factor is something the user possesses or has access to, such as a one-time password (OTP) sent to their mobile device, or a fingerprint/facial scan (biometric authentication). These two distinct factors make it much harder for unauthorized individuals to access an account, even if they have somehow obtained the user's password.
MFA is similar to 2FA but requires three or more different authentication factors in order to authorize a payment. The additional factor could be something the user knows, something they possess, and something they are (biometric data). For example, an MFA combination could include a password, a fingerprint scan, and a one-time code generated by an app.
The more factors used, the higher the security level, as it becomes increasingly challenging for fraudsters to compromise all the required elements.
5. Require Card Verification Value (CVV)
For online transactions, Card Verification Value (CVV) is a security feature that merchant’s can use to help verify the identity of a cardholder when they, and their card, are not physically present during the transaction. A CVV is usually a three-digit code on the back of most Visa, Mastercard, and Discover credit cards or a four-digit code on the front of American Express cards.
During an online transaction, the merchant or payment processor requests the CVV from the cardholder when they input their card details at checkout. The merchant will then receive a CVV response code that indicates whether the person making the purchase is in possession of the physical card or not.
Since the CVV is not embossed or stored on the magnetic stripe or chip of the card, it’s unlikely to be stolen in a data breach.
6. Use payment tokenization
Payment tokenization is a process that replaces sensitive payment information, such as credit card numbers, with a unique token. This token can then be used to process transactions without having to transmit or store the sensitive payment information.
Network Tokens are another way to reduce fraud rates. Like payment tokenization, it replaces sensitive card data with tokens, but it’s the card scheme that issues the token, not the acquirer or payment service provider and the token is used across the payment pathway. This makes network tokenization suitable for a broader range of uses across the entire payment ecosystem.
Payment tokenization can help businesses in several ways:
Tokenization prevents fraud by helping to protect sensitive payment information from being intercepted or stolen during a data breach. Since the sensitive information is replaced with a token, it becomes much more difficult for bad actors to use the stolen information for fraudulent activities.
Cut compliance costs
Tokenization can help your business comply with various regulaions and standards, such as the Payment Card Industry Data Security Standard (PCI DSS) and the General Data Protection Regulation (GDPR). These regulations require businesses to protect sensitive data, and tokenization can help to reduce the cost of compliance.
Improve customer experience
By eliminating the need for customers to repeatedly enter their payment information for recurring payments or subscriptions, tokenization can also help to improve the customer experience. This can also reduce the chances of an abandoned cart, when the customer leaves your site with a full, unpaid-for shopping basket.
This secure online payment method also allows you to store tokens rather than sensitive payment information, which can provide more flexibility in terms of where the data can be stored and how it can be used.
Another way to ensure secure payment processing is to reduce the players in your company’s payment lifecycle. That’s why it’s a good idea to use a payment processor that owns as many steps of the payment process themselves, such as Checkout.com, because they don’t need to hand over any information to a third-party.
7. Ensure your website platform is secure
There are several steps that you can take to keep your website, content management system (CMS), and online payments secure:
- Keep software and plugins up-to-date: Regularly update your website and CMS software, as well as any plugins or extensions, to ensure that any security vulnerabilities are patched.
- Require customers to use strong passwords: Requiring your customers to use a complex and unique password to access their accounts should help ensure that only legitimate customers are using your website.
- Use a firewall: Use a firewall to protect your website and CMS from unauthorized access and to block any suspicious traffic.
- Implement TLS: Use Transport Layer Security (TLS) to encrypt any data that is transmitted between your website and visitors. This will protect sensitive information such as personal and financial data from being intercepted.
- Use a Content Delivery Network (CDN): A CDN can help to protect your website from Distributed Denial of Service (DDoS) attacks by distributing traffic across multiple servers.
- Monitor for suspicious fraudulent activity: Use monitoring tools to detect and respond to any suspicious activity on your website, such as unusual traffic patterns or login attempts. We’ll explain this in greater detail below.
8. Implement a fraud detection tool
Fraud detection tools are software or systems designed to identify and prevent fraudulent activity. Businesses use them to detect and prevent fraudulent transactions, protect against financial losses, and comply with industry regulations. Below, we’ll explain the types of fraud detection tools and their benefits.
There are several types of fraud detection tools, including:
These systems use pre-defined rules and algorithms to identify and flag potentially fraudulent transactions.
They analyze the behavior of users and transactions to identify patterns that may indicate fraud.
Using AI, these tools use advanced algorithms and statistical models to learn from historical data and identify patterns that may indicate fraud
To authenticate users, these tools use biometric data such as facial recognition, fingerprints, or voice recognition.
By using the tools listed above, fraud detection tools can also help you to comply with anti-money laundering (AML) transaction monitoring regulations. Businesses that fall under the scope of AML are required to monitor and flag any transactions that pass particular value thresholds to their regulator.
Using a machine learning and rules-based system, you can automate these monitoring procedures by training your fraud detection system to route suspicious transactions for review.
9. Train your employees
There are several steps you can take to train their employees to ensure secure online payments:
- Provide regular training: Regularly train employees on best practices for online payment security, including how to identify and prevent fraud, and how to handle sensitive customer information.
- Implement policies and procedures: Develop policies and procedures for secure online payments, and ensure that all employees understand and follow them.
- Emphasize the importance of security: Make sure your employees understand the importance of online payment security, along with the potential consequences of not following proper security protocols.
- Make sure employees understand the risks: Educate employees on the different types of fraud and scams they may encounter, and how to identify and respond to them. For example, providing educational workshops and questionnaires can help spread awareness.
- Encourage reporting: Actively encourage employees to report any suspicious activity or potential security breaches to management immediately. You could send occasional emails around the team, or put up posters around the office.
- Perform regular security audits: To ensure your employees are following the right protocols, you can perform security audits to identify any vulnerabilities. Always carry out these tasks in a non-threatening way, reassuring your team that it’s more about keeping online payments secure, rather than catching anyone out.
- Keep employees informed of new threats: Whether it’s via email or direct message, keep employees informed of any new threats or security vulnerabilities that may arise, and provide them with the necessary training to respond to them.
- Use technology for security: Use some of the security technologies that we’ve mentioned above, such as encryption, firewalls, and antivirus software to protect online payment transactions.
By training employees to understand the importance of online payment security, you can help to reduce the risk of fraud and unauthorized transactions and ensure the protection of sensitive customer information.
10. Choose the right secure online payment provider
Another way to ensure secure online payment processing is to reduce the number of parties involved in your company’s payment lifecycle. The best way to do that is to choose an end-to-end payment solution.
An end-to-end payment platform unites acquirer, gateway and processor functions in one place. This streamlines the payment process, allowing data to flow seamlessly from one stage to the next while minimizing its exposure to third-parties. These solutions can also integrate advanced fraud detection, 3DS authentication, and tokenization, giving you all the tools you need to protect customer data and fight fraud all in one place.
Implement secure payment processing with Checkout.com
The easiest way to provide secure online payments is by integrating with a PCI-Level 1 merchant like Checkout.com. We process over 6 million transactions per year and our unified payment processing solution comes with powerful fraud detection capabilities – keeping your business compliant, your payments secure and your customers happy.
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September 29, 2023
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