What Is Payment Security? Importance and Types (2024)

Within the realm of ecommerce, every purchase is greater than only a transaction—it’s an exchange of trust. When consumers hand over their bank card information to vendors, they expect (and deserve) for it to be handled responsibly and securely. That’s the facility of payment security. 

But as online sales rise, so does ecommerce fraud. Juniper Research estimated $48 billion in global ecommerce losses as a result of fraud in 2023, up from over $41 billion in 2022. This surge not only threatens the financial well-being of companies but additionally erodes the trust that the ecommerce industry is built on.

Below, you’ll learn what payment security looks like in ecommerce, tips on how to fortify your defenses, and the way Shopify supports sellers in protecting customer data throughout the payment process.

What’s payment security?

Payment security refers to a set of protocols, technologies, and practices that protect the integrity of economic transactions inside your corporation. These measures are designed to stop fraud, theft, and unauthorized access to sensitive customer data, each during and after transactions.

Forms of payment security 

There are multiple defense mechanisms your corporation can use to secure financial transactions and protect customer information. Common methods include: 

Encryption 

Encryption converts data (comparable to bank card numbers and checking account information) right into a coded or scrambled format. Like storing your data in a locked secure, encryption means nobody can access the contents inside without the proper combination or key. 

From classified government documents to online payments, encryption protects sensitive data across the web. The 2 primary kinds of encryption are symmetric (a single key for locking and unlocking the info) and asymmetric (a public key for encryption and a non-public key for decryption). Asymmetric encryption is mostly considered safer for the reason that key to unlock information is kept private. 

Businesses use encryption protocols like Secure Sockets Layer (SSL) and Transport Layer Security (TLS) to secure communications over the web. Actually, TLS has replaced the older SSL protocol. Nevertheless, the terms TLS and SSL are still used interchangeably. Shopify uses Transport Layer Security (TLS) to secure all connections to your Shopify admin and to your store. 

Tokenization

Tokenization adds an additional layer of security to your payments by replacing sensitive payment information with a singular (yet meaningless) set of characters generally known as a token. The token serves as a reference to the unique data, which is securely stored in a third-party “token vault.”

Throughout the transaction, only the token passes between parties like your ecommerce platform, payment gateway, and the bank. So, even when information gets stolen or falls into the improper hands, it’s useless. Consider it as having a placeholder concert ticket as an alternative of the particular ticket or listing an alias in your bank card. 

Authentication

Very like the bouncer who checks your ID before letting you right into a club, payment authentication verifies the identity of users before authorizing a transaction. The extra layers of security are designed to stop fraud or unauthorized transactions.

You’re probably already accustomed to not less than one among the primary authentication types, which include:

• Single-factor authentication (SFA): A user logs in with a username and one type of authentication, comparable to a password or PIN.
• Two-factor authentication (2FA): Also known as Strong Customer Authentication (SCA), users must provide two types of verification, comparable to a password and a one-time code sent to a different known device.
• Multifactor authentication (MFA): MFA adds much more security by requiring two or more types of identification, comparable to a password, token, PIN, security questions, and/or biometric data.

PCI DSS

The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards aimed toward improving payment security and consistency worldwide. Established in 2004 by five major bank card corporations, PCI DSS compliance helps businesses and consumers avoid payment fraud and data compromise. 

PCI DSS applies contractually to any organization or business that processes, stores, or transmits bank card information. Shopify is certified Level 1 PCI DSS compliant, which by default extends to all stores using the platform. Level 1 is the very best level of compliance, meaning that Shopify uses the strictest compliance standards to guard businesses. 

Secure payment gateways

A secure payment gateway acts as an intermediary between the shopper, business, and financial institutions involved in a translation. These gateways provide a secure channel for sharing payment information between parties, which is crucial to protecting customer data against fraud or theft.

Secure payment gateways handle the authentication, encryption, and tokenization of cardholder information throughout payment processing. They adhere to PCI DSS and use protocols, like SSL and TLS, to encrypt sensitive data because it’s being sent. 

Fraud prevention

As a Shopify seller, you’ve gotten information and tools available to assist prevent fraudulent activity: 

• Fraud evaluation: Whenever you enable fraud evaluation, you’ll receive a risk assessment of high, medium, or low on every order. Shopify will flag potentially fraudulent orders to your review, and can even list the indications behind the assessment, so you may resolve which orders are secure to meet.
• Shopify Protect: Eligible Shop Pay orders within the US are shielded from fraudulent chargebacks. When you experience a fraudulent chargeback on an eligible Shop Pay order, Shopify will robotically reimburse the disputed funds and chargeback fee.
• Dispute management: When you’re using Shopify Payments, you may streamline the dispute process for chargebacks since the platform robotically submits evidence in your behalf. Shopify also shares transaction details and shipping information with the cardholder’s bank by the due date. If you’ve gotten additional information to incorporate, you may add evidence to the chargeback response.
• Dynamic 3D Secure (3DS): All payments through Shopify Payments are robotically authenticated with 3D Secure in markets where Strong Customer Authentication (SCA) is required, which helps prevent fraudulent chargebacks.
• Shopify Flow: Use Shopify Flow’s workflows to create rules, allow lists, and block lists that control which orders your store accepts.
• Proxy detection: Shopify can provide help to detect and flag when customers use a proxy service or IP address.
• Payment capture control: Arrange the payment capture settings that make sense for your corporation. Routinely or manually charge customers for his or her order – and select if the payment is captured on the time of sale or after.
• Card testing protection: Integrated card testing protection helps to stop bank card fraud at checkout.
• Fraud reports: Analyze the fraud trends across your corporation with detailed reports in your acceptance rate, high-risk orders, fraudulent chargebacks, and more. 

Firewall and network security 

Network security is an orchestrated, strategic approach to defending a company’s data and resources across its network. It involves various technologies, devices, and processes, with firewalls being probably the most vital. 

Firewalls act as a shield between your internal network (including your payment systems) and external threats coming from hackers, malware, or other kinds of cyberattacks. Consider the firewall as a digital burglar alarm, able to sound at the primary hint of a break-in. You may configure a firewall to scan for viruses, filter information and traffic based on certain rules, and stop unauthorized access or additions to the network.

Other network security measures may include: 

• Access control
• Network segmentation
• Intrusion prevention systems (IPSs)
• Web gateway protection
• Ongoing security assessments and audits
• Worker training 

Security patches 

Security patches keep your software running at its best by installing updates and addressing bugs or other vulnerabilities. Cybercriminals see out-of-date or weak software as a simple goal. So, you must proactively apply security patches and updates to guard your payment systems and customer data against potential threats. Doing so can even improve your systems’ performance and ensure compliance. 

Do you have to be concerned about payment security?

Sensitive customer information comparable to home addresses, bank card numbers, or bank details are a goldmine for hackers and other bad actors. As gatekeeper of any such information, you’ve gotten an obligation to offer a secure experience, whether that’s online, in-person, or each. 

What’s more, with no secure payment process, customers may not feel secure buying from your corporation. Research found that 75% of consumers felt able to sever ties with a brand after a cybersecurity issue. Shopify includes built-in tools and resources, like encryption and PCI compliance, to make payment security easy—but it surely never hurts to take a proactive approach. Your customers, and your bottom line, will thanks. 

Learn how to ensure payment security

Fighting the specter of payment fraud requires a multi-layered approach. A recent Ekata survey found that 70% of ecommerce corporations use three or more tools to balance their fraud prevention efforts with providing a smooth consumer experience. Let’s cover some best practices for payment and ecommerce security:

• Conduct a risk assessment 
• Implement security policies 
• Adopt PCI DSS compliance 
• Use secure payment gateways
• Monitor for fraudulent activity 
• Often updates and patch systems
• Back up your data 
• Have a response plan 

Conduct a risk assessment

A risk assessment helps you understand what you’re up against and where you may improve. Start by determining what kinds of sensitive data your corporation handles and where it’s stored, processed, and transmitted. Then examine your current payment infrastructure, processes, and systems for weaknesses. 

Implement security policies

Based in your risk assessment, arrange payment security policies to cover the way you will handle sensitive data, access controls, and incident response. Teach employees about account security and employ best practices. Your policy might also include preventative protocols like firewalls, intrusion detection systems, and anti-malware solutions.

Adopt PCI DSS compliance

As mentioned before, all Shopify stores using our platform are robotically PCI-compliant by default. That being said, it’s a superb idea to familiarize yourself with the fundamental guidelines and principles for compliance.

Use secure payment gateways 

Partnering with a trusted payment processor takes much of the work off your shoulders. Shopify Payments, for instance, is a PCI-compliant gateway that manages and stores payment data securely. In markets where 3D Secure is required, Shopify robotically prompts customers to offer an extra layer of authentication.

Monitor for fraudulent activity 

Fraudulent transactions may end up in chargebacks and lost merchandise, which suggests lost money for your corporation. Shopify’s fraud evaluation uses machine learning algorithms to provide help to discover orders that could be fraudulent. You may as well use Shopify Flow to establish rules that robotically block, fulfill, and hold orders to your review. 

Get accustomed to potential fraud indicators, so you may investigate suspicious orders before they grow to be an issue. You may as well download third-party fraud apps within the Shopify App Store.

Often update and patch systems 

Make sure that you retain your security patches and software up thus far. This helps fix any weaknesses that hackers might use to get into your system and grab vital information comparable to bank card details.

Back up your data

If a scammer gets into your system and makes unauthorized transactions, having a backup of the info makes it easier to revive the system and stop more unauthorized transactions. Also, having a backup helps you pinpoint where the issue began and investigate the fraud.

Have a response plan

Make sure that everyone knows what to do within the event of a security breach or other incident, including roles and responsibilities, communication strategy, and specific response procedures. Worker training could make it easier to your team to reply quickly and efficiently. Plus, an in depth response plan will provide help to rebound quickly, minimizing damage and loss to your corporation. 

Manage payment security with Shopify Payments

It’s easy to construct a sturdy payment security strategy with Shopify. Whenever you use Shopify Payments to process transactions in your store, you get automatic access to a secure environment with the next features: 

• Account security via two-factor authentication: Using Shopify Payments to just accept payments and receive payouts requires you to activate two-step authentication in your Shopify account. Meaning each time you log in, you’ll must enter your password in addition to one other type of verification using your mobile device or a security key. 
• Fraud protection: Whenever you use Shopify Payments, you’ll get access to tools designed to provide help to robotically detect and curb fraud. All orders processed through Shopify Payments are screened by fraud evaluation which uses machine-learning algorithms to discover suspicious activity. and assess the chance level of the transaction. You may view the indicators used to find out the chance level to provide help to resolve whether to cancel or fulfill the order. 
• 3D Secure checkout: When you’re using Shopify Payments, then you’ve gotten access to a 3D Secure checkout flow. This feature provides an extra layer of security by robotically adding an authentication step for online credit and debit card transactions within the markets where it’s required. And when payment is authenticated with 3D secure, the liability for fraudulent chargebacks or disputes is shifted from businesses to card issuers. Note that some card issuers have policies that remove liability shift protection if a business has too many chargebacks.
• Written return and refund policy: Give your customers confidence once they’re shopping in your site by establishing a transparent return policy. You may arrange return rules that robotically apply when customers place their orders, including a return window, return shipping costs, and restocking fees.