Encryption in Payment Gateways: Significance, Types, and the Future

Nov 12, 2021
4 min read

Digitization has made its way into almost every industry the world over. No business today is complete without an online presence, particularly those who have adopted virtual payment models. Take PayPal, Stripe, and similar payment systems, for instance. How convenient is it to transfer money to and from these platforms? Businesses operating on a complete digital model would know better; it is practically impossible to make work happen without such platforms. What makes them function seamlessly however, is a payment gateway.

What is a payment gateway?

A payment gateway is basically like a middleman – it helps keep the overall payment ecosystem functioning smoothly by providing a secure connection to carry out various transactions. It helps verify payments, accepts/declines payments and transfers payments through a secure line. A payment gateway is like a technology designed to carry out tasks such as ensuring sufficient bank funds, validating customer card details, and so on. It also encrypts sensitive credit card details, thereby making sure that confidential information is passed securely to the bank from the customer, through the merchant.

Payment gateways have a come a long way since their inception. With online payments becoming more and more mainstream, companies are going the whole hog to ensure high-quality, encrypted payment gateways that can ensure secure payment transactions within integrated business environments. Recently, Century Business Solutions tied up with ECHO Technology Solutions – a managed Salesforce service provider. The deal aims to enable credit card processing within Salesforce – to accomplish the same, Century Business Solutions has built a payment integration that uses EBizCharge, its proprietary payment gateway.

Types of Payment Gateways

Redirects

An example of a redirect payment gateway might be the kind of transaction one does on PayPal, for instance. In this case, the gateway takes a user to the PayPal payment page to complete the said transaction. This is how it becomes a ‘redirect’ – when the customer is redirected to another page.

Onsite payments

A lot of ecommerce businesses have onsite payment gateways. Usually, these are large-scale businesses that can afford to use onsite payments and those that are handled on their own servers. Of course, the payment and checkout processes will work through the user’s system.

Onsite checkout, off-site payment

An example of this kind of payment gateway is Stripe. Stripe is designed in a way that the user can check-out from their site on the front-end, but the payment processing takes place via Stripe’s back end.

Why is encryption in payment gateways important?

Payment gateways have simplified a lot of trouble for the masses. That being said, one cannot deny they have brought about an increase in the number of cyber attackers and scammers too. To that end, it is vital that the encryption in payment gateways be extremely powerful and reliable. Companies relying on payment gateways with less strong security mechanisms are liable to suffer financial losses.

According to a Thales Data Security Report published in 2018, around 75% of U.S. retailers with an online presence have been the recipient of at least one cybersecurity failure. Close to 90% of login attempts to the websites of online retailers have been illegal hacking attempts.

Several abandonment survey reports state that a considerable percentage of people leave a shopping cart due to lack of payment options, requirement of an enhanced in-store experience, and more often than not, technical issues.

This is the reason why it is very important to have high-level encryption in payment gateways; they provide protection and add a level of security between the buyer and seller. High-quality encrypted payment gateways help reduce load time as well, leading to better outcomes.

Encryption in payment gateways

There are 2 major ways a payment gateway can be encrypted:

Data encryption

This is one of the fundamental encryption methodologies used to secure payments. In laymen terms, data encryption is basically the process of encoding information, that converts plaintext (original data) into cipher text – a secure version of the same text that only authorized people can view – in a nutshell, the original information cannot be viewed by third parties under any circumstances. The data encryption comprises complex that can only be deciphered by suitable personnel.

This is how the process works on the front-end – once customers enter their card information, it is public key which can only be decrypted using the private key of the payment gateway. A strong encryption algorithm ensures that there is hardly any chance for unauthorized parties to access customers’ private data.

Secure Socket Layer (SSL)

The Secure Socket Layer (SSL) is another solution that payment gateways use to protect sensitive customer information. SSL is a security protocol that is designed to establish an encrypted channel which then enables safe private data transfer across public channels. A lot of prominent payment gateways use SSL to secure data transfer between different parties.

An SSL certificate helps authenticate a website’s validity and helps establish an encrypted connection on websites hosting payment gateways, thereby ensuring safe and secure transactions. SSL makes sure that all online transactions conducted on the platform are encrypted and user data remains private. In fact, not having an SSL certificate on websites can severely damage the reputation of the firm and reduce customer acquisition. For this reason, it is vital that companies using online payment services install a good SSL certificate.

What’s Latest in the Field?

With most businesses going online, payment gateways are quickly becoming a pivotal necessity. Consequently, the demand for highly encrypted gateways is on the rise. Leading encryption leaders are on a consistent spree to come up with innovative products as clients forage for efficient solutions to protect their sensitive data.

Say for example, popular data encryption firm Virtru recently launched an external zero-trust key-management solution to be used by Google Cloud Platform (GCPs) admins. Virtru helps admins manage encryption keys separately from data that enables them to prevent unauthorized access, eliminate breaches, make sure that no third party is able to access the data. Customers will also have the options regarding the way they want to host their encryption keys – private cloud, hosted, on-premise, or as HSM integrations.