Payment fraud is increasing, and U.S. consumers experience more fraudulent transactions than shoppers in other countries. Secure payment systems safeguard customer information, which is essential to mitigating the risk of credit card fraud and protecting your business’s reputation.
Implementing trusted payment processing software improves financial transaction integrity. Moreover, it proves to customers that your small business can handle data protection and security just as well or better than that of your competitors. In this article, we define the components of a secure payment system, provide examples, and discuss how to choose trusted payment services.
What are secure payment systems?
A secure payment system (SPS) refers to the technologies, infrastructure, and policies that protect sensitive information. It keeps personal data and credit card details confidential and prevents unauthorized access during checkout, ensuring safe processing, transmission, and data storage.
Payment processors like Helcim and all-in-one point-of-sale (POS) solutions like Clover are examples of secure payment systems. Indeed, many services provide SPS technologies to facilitate financial transactions.
Before we delve into the details of each component of an SPS, here are the basic terms to know when assessing these systems:
- Payment Card Industry Data Security Standard (PCI DSS): These protocols define how vendors and merchants can maintain safe environments when processing, transmitting, and storing payment information.
- Secure sockets layer (SSL): This technology determines the identity of the server sending data and encrypts sensitive information during transmission between two networks.
- Transport layer security (TLS): This protocol improves on SSL, offering more robust encryption, perfect forward secrecy, and support for more authentication methods.
- Secure payment system certificates: Processors validate systems and processes. They may obtain security certificates showing compliance with PCI DSS, 3D Secure (3DS), SOC 2 (System and Organizational Controls 2), and ISO/IEC (the International Organization for Standardization and the International Electrotechnical Commission) 27001 (an international standard for information security management systems).
[Read more: A Guide to Understanding Credit Card Processing]
Examples of secure payment systems
Payment security is often associated with e-commerce platforms and digital payments. However, an SPS should extend to all of your company's methods to process transactions. Restaurants take payments over the phone, therapists auto-charge bills after visits, and employees swipe cards curbside.
But business owners and staff must understand their roles in protecting customer data and preventing fraud. When considering any solution that accepts payments, from help desk or e-commerce platforms to invoicing or POS software, it's imperative to learn what actions the provider is taking to ensure security and which elements you're responsible for.
Secure payment system examples include the following:
- In-person card payments: EMV (Europay, MasterCard, and Visa) terminals ensure secure transactions using dynamic and two-factor authentication (2FA), chip technology, and encryption.
- Digital wallet transactions: Electronic transactions using Skrill or Venmo protect businesses and consumers through encryption and authentication.
- Online purchases: Credit card processors like Helcim, Merchant One, and Stax provide payment gateways that use SSL/TLS encryption.
- Mobile payments: Smartphone payments through services like Apple Pay and Google Pay ensure payment security through biometric authentication and tokenization.
- Bank and wire transfers: Financial institutions leverage secure banking protocols, multifactor authentication, and encryption to prevent fraud and unauthorized access.
- Cryptocurrency: Blockchain technology relies on a decentralized method of recording transactions to ensure payment integrity.
Payment security is often associated with e-commerce platforms and digital payments. However, an SPS should extend to all of your company's methods to process transactions.
What makes a payment system secure?
An SPS works by applying encryption, tokenization, and authentication. The infrastructure consists of many components. While some elements are mandatory across all platforms and systems, others are specific to certain industries or apps.
How do SPSs protect businesses and their customers? For starters, encryption is a fundamental component of payment security. Electronic processing — whether through an Automated Clearing House (ACH) transfer, in-person credit card payment, or e-commerce purchase — scrambles information into unreadable text. Even if hackers access the data, it's unintelligible.
Tokenization increases security and occurs before encryption when using payment gateways, EMV chip cards, contactless payments, and digital wallets. It replaces sensitive information like credit card numbers with a token, a unique identifier without any exploitable value, meaning it's worthless to malicious actors.
Authentication methods prevent unauthorized purchases by verifying the user's identity. These vary by payment method. For instance, in-person sales require a signature or four-digit PIN. Credit card networks use 3D Secure for online transactions, which may ask for a PIN, password, or 2FA verification.
Mobile payment systems like Google Pay and some digital wallets use biometrics (touch ID or face ID) and device authentication. These methods confirm the payer's identity by scanning facial or fingerprints and reviewing the hardware's profile.
Fraud detection services monitor financial transactions for suspicious activity. Payment processors often have built-in fraud protection systems and may offer add-on tools for high-risk industries or locations. The systems analyze data and patterns to flag or halt unusual transactions.
Lastly, bank or processor-specific systems may take additional steps to confirm the payer's identity before processing a financial transaction. These may include a one-time password or fingerprint scan.
[Read more: How Advances in Digital Payments Help Brands Enhance the Customer Experience and Reduce the Dreaded Wait in Line]
How to choose a payment system
Credit card processors play a significant role in payment system security. The best services partner with your business to fight fraud while delivering excellent checkout experiences. When choosing a payment provider, consider your company's sales channels, accepted payment methods, and risk posture.
See if the processor offers resources or assistance with small business PCI compliance. Also, review their dispute resolution process, fraud detection systems, and customer support options.
SPS providers
Reputable credit card companies provide payment security and peace of mind. Consider partnering with providers who offer tools to detect fraud and technologies to process payments securely.
Explore how the following vendors mitigate risks through an SPS:
- Stax: As a level 1 PCI service provider, Stax offers small business and enterprise tools to ensure payment security. The subscription-based model works best for high-volume sellers wanting 0% markup on direct-cost interchange rates.
- ProMerchant: With secure solutions for online and in-person sales, ProMerchant offers free payment terminals and works with high-risk accounts. It has interchange plus a fixed percentage rate and transaction fee or zero-cost processing plans.
- Merchant One: Businesses can maintain data security with the Merchant One payment gateway and virtual terminal. Features include fraud detection tools and a customer vault. It charges a monthly fee and interchange plus rates.
- Clover: Clover hardware is validated to support the latest point-to-point encryption, and the virtual terminal encrypts data end to end. It requires a monthly subscription for flat-rate pricing and is better for brick-and-mortar businesses.
- Payment Depot: Offering e-commerce, virtual, smart, and standard payment solutions, Payment Depot is a low-cost, secure processing service suitable for many industries. It offers custom interchange-plus pricing and in-house customer service.
- Helcim: Interchange-plus rates and free business tools help small businesses protect customer data across multiple channels. Helcim provides payment gateways, a virtual terminal, online checkout, a subscription manager, invoicing tools, and more.
[Read more: E-Commerce Credit Card Processing: The Ultimate Guide to Accepting Payments]
What is the most secure payment method?
As you've read, SPSs have many components. Yet Mastercard reported that "the U.S. is the most fraud-prone country, with 34% of consumers saying they were most likely to have been victims of fraud." The 2024 Association for Financial Professionals (AFP) Payments Fraud and Control Survey Report also noted that "80% of organizations were victims of payments fraud attacks or attempts in 2023."
Conversely, paper checks remain the least secure payment method, with 65% of AFP respondents reporting check fraud attacks or attempts. Even more concerning is that 20% of those surveyed (a 10-point increase from the previous year) experienced check fraud due to U.S. Postal Service interference, like mail theft.
Why businesses should prioritize financial transaction security
Fighting fraud isn't easy. But can you afford to lose money and your customers' trust?
The AFP survey found that 30% of organizations couldn't recover funds lost due to payment fraud, whereas 41% retrieved at least 75%. Data breaches, chargebacks, and negative reviews impact your company in countless ways, from the time it takes to respond to clients or follow data protection regulations to operational costs and losses.
Using an SPS and implementing strategies reduces these risks. With the right payment processing partner and a multilayered approach, you can deliver excellent customer experiences while fighting fraud. Best-in-class tools give you a competitive edge and protect your reputation. Instead of putting out fires, your team builds stronger customer relationships.
[Read more: AI and E-commerce: Simplifying the Sales Process]
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