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.
What are the risks of different payment types?
Below, we’ve listed some of the most common types of online payments and their associated risks for businesses.
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.
Card payments are convenient for consumers but have downsides for businesses, including relatively high transaction fees that can rack up if your business handles large-sum transactions.
Meanwhile, the number of American credit card fraud victims has risen to more than 150 million – up from 127 million in 2021. This will increase the number of chargeback fees for your business caused by fraudulent transactions.
With this increase in fraud, many card issues have bolstered their identity checks for card payments. While more secure for consumers, these checks can cause more failed payments for your business due to cart abandonment.
Digital wallet payments – like Apple Pay and Google Pay – are becoming more popular than ever for consumers, especially for A2P (app-to-person) businesses like food delivery services. However, they have several drawbacks for merchants, including relatively high charges, software integration costs, and the sheer variety of different digital wallets that your business will need to consider supporting.
For in-person payments, you’ll also need an up-to-date card reader that accepts NFC (near field communication) payments. For example, some customers may want to pay with a digital wallet, or use a contactless payment that your card reader can’t process, causing you to lose sales.
Even with these secure online payment methods, it’s still important to be vigilant and to protect sensitive information by following these seven best practices.
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 (formerly SSL)
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.
4. 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 helps 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 regulations 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.
5. 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.
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 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.
6. 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.
No matter which tool you choose, the main benefits of using fraud detection for secure online payments include:
Reduce financial losses
Your businesses can identify and prevent fraudulent transactions, which can help to reduce financial losses.
Improve customer experience
By reducing the number of false declines, which can be frustrating for customers and may cause them to take their business elsewhere, you can improve the user-experience.
Fraud detection tools can help your business comply with industry regulations and standards, such as PCI DSS.
These tools can also help your business manage and mitigate risk by identifying potential threats and taking steps to prevent them.
7. 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.
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.
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.