Blog > Fraud Protection: Everything You Need to Know About Payment Security

Fraud Protection: Everything You Need to Know About Payment Security

By |Published On: December 13th, 2021|

Since cardholder data is a major target of breaches, payment security remains at the forefront of concerns for most businesses trying to secure their infrastructures.

Payment security typically involves specific regulations and security measures that focus on protecting cardholder data that is stored, transmitted, or being processed.

In this article, businesses will learn about the ins and outs of payment security which include:

  1. PCI compliance standards
  2. Security features to protect your infrastructure
  3. Best practices to secure payments
  4. Building the right payment security strategy

Become PCI compliant to enhance payment security and prevent threats

For a well-rounded payment security strategy, businesses that process or handle cardholder data must adhere to the Payment Card Industry Data Security Standard (PCI DSS), also known as PCI compliance standards.

PCI compliance standards refer to a set of global payment card security requirements that consist of various security guidelines, applications, and tools to protect cardholder data.

When a merchant becomes and remains PCI compliant, they’re using the necessary protocols and security applications to enhance payment security by actively addressing, preventing, and mitigating fraudulent activity and data breaches. PCI DSS requirements vary by business, as they’re determined by your PCI level — transaction volumes.

To become compliant, you can reference this comprehensive PCI Checklist.

In addition to becoming PCI compliant, it’s imperative to evaluate the many types of payment security to determine which programs and strategies are right for your business.

Payment security features to protect your business

Payment security is not a one size fits all approach, as there are a variety of businesses like online stores and brick-and-mortar merchants that have different needs.

Luckily, you can choose from many payment security options to secure your payments. Here are 6 payment security features to help you protect sensitive cardholder data:

  1. Tokenization
  2. 3D Secure
  3. Multi- or Two-Factor Authentication
  4. Data Encryption
  5. Card Verification Value
  6. Address Verification System

Before determining which method of payment security is best for your business, read on to learn about what each entails.

1. Tokenization

Tokenization provides payment security for merchants by replacing sensitive cardholder data, like card or bank account numbers, with random characters known as tokens.

Tokens are automatically generated during the payment process and can be transmitted (over the Internet or on networks) and stored without exposing the actual card information. Replacing cardholder data, rendering it useless to hackers, will help prevent fraudulent activity or breaches from occurring, and enhance payment security for both merchants and their customers.

The Tokenization Process

2. 3D Secure

Three Domain Secure, commonly referred to as 3D Secure or 3DS, is a valuable security protocol that adds an extra level of authentication for eCommerce merchants looking to improve their online payment security.

3D Secure works to prevent the unauthorized use of cards by directing customers to a secure page (hosted by their card providers) where they’re required to enter a banking password or authentication code before payments can be processed.

Once a customer enters this information, the merchant, card network, and financial institutions share it with each other and work together to process the transaction request, assess any risks, and lastly, move to authenticate or challenge the payment.

3D Secure is a useful payment security tool for high-risk transactions and can help protect eCommerce merchants from fraudulent activity and unauthorized chargebacks.

The 3D Secure Process

3. Multi- or two-factor authentication

Businesses can also apply other payment security protocols like multi-factor (MFA) or two-factor (2FA) authentication to validate their transactions.

MFA and 2FA require cardholders to verify their identities by completing multiple authentication steps before accessing their accounts. Authentication factors include verification codes (via email or SMS messages), security questions, one-time passwords, push notifications, and more.

Multi-factor and two-factor authentication will enhance your payment security by preventing hackers from accessing and stealing sensitive cardholder data.

The two factor authentication process

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4. Data encryption

Data encryption is a vital part of any payment security infrastructure, as it consists of several protocols like Secure Sockets Layer (SSL) and Transport Layer Security (TLS).

SSL is a widely used security measure that encrypts data transmitted during online transactions to prevent sensitive information (names, addresses, card numbers, etc.) from being exposed.

While newer providers offer the updated and stronger encryption known as TLS, this term is often interchanged with SSL since it’s more widely known.

Once you’ve obtained an SSL or TLS certificate from a reliable provider, a lock symbol and HTTPS (Hypertext Transfer Protocol Secure) will appear in the address bar next to your URL to show visitors your site is secure.

The data encryption process

5. Card Verification Value (CVV)

Card Verification Value (CVV) is the three- or four-digit code on the back of credit cards that’s used to verify card-not-present (CNP) transactions processed online or over the phone.

While CVV codes aren’t immune to fraudulent activity, they can add to payment security and make it more difficult for breaches to occur by allowing merchants to authenticate a transaction without storing these numbers.

In addition to verifying CVVs, merchants would be wise to add extra authentication protocols to protect sensitive cardholder data and enhance their payment security.

Card Verification Value Process

6. Address Verification System (AVS)

Similar to CVV protocol, Address Verification System (AVV) verifies a transaction by matching the provided billing address to the address on file with the customer’s card-issuing bank.

AVS provides another level of payment security by preventing the use of unauthorized cards which can reduce fraudulent transactions and chargebacks. This security measure has been widely adopted by many online merchants, payment gateways, and eCommerce platforms.

Now that you have an idea of the p