In the realm of ecommerce, every purchase is more than just a transaction—it's an exchange of trust. When consumers give up their credit card information to vendors, they expect (and deserve) for it to be handled responsibly and securely. That’s the power of payment security.
But as online sales rise, so does ecommerce fraud. Juniper Research estimated $48 billion in global ecommerce losses due to fraud in 2023, up from over $41 billion in 2022. This surge not only threatens the financial well-being of businesses but also erodes the trust that the ecommerce industry is built on.
Below, you’ll learn what payment security looks like in ecommerce, how to fortify your defenses, and how Shopify supports sellers in protecting customer data throughout the payment process.
What is payment security?
Payment security is the set of measures taken to protect financial transactions from fraud and unauthorized access. Enhancing payment security involves using encryption technologies, implementing multi-factor authentication, and complying with PCI-DSS standards to ensure that customer data is safely processed and stored.
Types of payment security
There are multiple defense mechanisms your business can use to secure financial transactions and protect customer information. Common methods include:
- Encryption
- Tokenization
- Authentication
- PCI DSS
- Secure payment gateways
- Fraud prevention
- Firewall and network security
- Security patches
Encryption
Encryption converts data (such as credit card numbers and bank account information) into a coded or scrambled format. Like storing your data in a locked safe, encryption means no one can access the contents inside without the correct combination or key.
From classified government documents to online payments, encryption protects sensitive data across the internet. The two main types of encryption are symmetric (a single key for locking and unlocking the data) and asymmetric (a public key for encryption and a private key for decryption). Asymmetric encryption is generally considered more secure since the 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 internet. Actually, TLS has replaced the older SSL protocol. However, 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 extra layer of security to your payments by replacing sensitive payment information with a unique (yet meaningless) set of characters known as a token. The token serves as a reference to the original data, which is securely stored in a third-party “token vault.”
During the transaction, only the token passes between parties like your ecommerce platform, payment gateway, and the bank. So, even if information gets stolen or falls into the wrong hands, it’s useless. Think of it as having a placeholder concert ticket instead of the actual ticket or listing an alias on your credit card.
Authentication
Much like the bouncer who checks your ID before letting you into a club, payment authentication verifies the identity of users before authorizing a transaction. The additional layers of security are designed to prevent fraud or unauthorized transactions.
You’re probably already familiar with at least one of the main authentication types, which include:
- Single-factor authentication (SFA): A user logs in with a username and one form of authentication, such as a password or PIN.
- Two-factor authentication (2FA): Also referred to as Strong Customer Authentication (SCA), users must provide two forms of verification, such as a password and a one-time code sent to another known device.
- Multifactor authentication (MFA): MFA adds even more security by requiring two or more forms of identification, such as 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 at improving payment security and consistency worldwide. Established in 2004 by five major credit card companies, 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 credit card information. Shopify is certified Level 1 PCI DSS compliant, which by default extends to all stores using the platform. Level 1 is the highest level of compliance, meaning that Shopify uses the strictest compliance standards to protect businesses.
Secure payment gateways
A secure payment gateway acts as an intermediary between the customer, 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 as it’s being sent.
Fraud prevention
As a Shopify seller, you have information and tools available to help prevent fraudulent activity:
- Fraud analysis: When you enable fraud analysis, you’ll receive a risk assessment of high, medium, or low on every order. Shopify will flag potentially fraudulent orders for your review, and will also list the indicators behind the assessment, so you can decide which orders are safe to fulfill.
- Shopify Protect: Eligible Shop Pay orders in the US are protected from fraudulent chargebacks. If you experience a fraudulent chargeback on an eligible Shop Pay order, Shopify will automatically reimburse the disputed funds and chargeback fee.
- Dispute management: If you're using Shopify Payments, you can streamline the dispute process for chargebacks because the platform automatically submits evidence on your behalf. Shopify also shares transaction details and shipping information with the cardholder's bank by the due date. If you have additional information to include, you can add evidence to the chargeback response.
- Dynamic 3D Secure (3DS): All payments through Shopify Payments are automatically 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 help you detect and flag when customers use a proxy service or IP address.
- Payment capture control: Set up the payment capture settings that make sense for your business. Automatically or manually charge customers for their order – and choose if the payment is captured at the time of sale or after.
- Card testing protection: Integrated card testing protection helps to prevent credit card fraud at checkout.
- Fraud reports: Analyze the fraud trends across your business with detailed reports on your acceptance rate, high-risk orders, fraudulent chargebacks, and more.
Firewall and network security
Network security is an orchestrated, strategic approach to defending an organization's data and resources across its network. It involves a number of technologies, devices, and processes, with firewalls being one of the most important.
Firewalls act as a shield between your internal network (including your payment systems) and external threats coming from hackers, malware, or other types of cyberattacks. Think of the firewall as a digital burglar alarm, ready to sound at the first hint of a break-in. You can configure a firewall to scan for viruses, filter information and traffic based on certain rules, and prevent unauthorized access or additions to the network.
Other network security measures may include:
- Access control
- Network segmentation
- Intrusion prevention systems (IPSs)
- Internet gateway protection
- Ongoing security assessments and audits
- Employee 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 an easy target. So, you should proactively apply security patches and updates to protect your payment systems and customer data against potential threats. Doing so will also improve your systems’ performance and ensure compliance.
Should you be concerned about payment security?
Sensitive customer information such as home addresses, credit card numbers, or bank details are a goldmine for hackers and other bad actors. As gatekeeper of this type of information, you have an obligation to provide a safe experience, whether that’s online, in-person, or both.
What’s more, without a secure payment process, customers may not feel safe buying from your business. Research found that 75% of consumers felt ready 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 never hurts to take a proactive approach. Your customers, and your bottom line, will thank you.
How to ensure payment security
Fighting the threat of payment fraud requires a multi-layered approach. A recent Ekata survey found that 70% of ecommerce companies 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
- Regularly 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 can improve. Start by determining what types of sensitive data your business handles and where it’s stored, processed, and transmitted. Then examine your current payment infrastructure, processes, and systems for weaknesses.
Implement security policies
Based on your risk assessment, set up payment security policies to cover how you will handle sensitive data, access controls, and incident response. Teach employees about account security and employ best practices. Your policy may 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 automatically PCI-compliant by default. That being said, it’s a good idea to familiarize yourself with the basic 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 example, is a PCI-compliant gateway that manages and stores payment data securely. In markets where 3D Secure is required, Shopify automatically prompts customers to provide an additional layer of authentication.
Monitor for fraudulent activity
Fraudulent transactions can result in chargebacks and lost merchandise, which means lost money for your business. Shopify's fraud analysis uses machine learning algorithms to help you identify orders that may be fraudulent. You can also use Shopify Flow to set up rules that automatically block, fulfill, and hold orders for your review.
Get familiar with potential fraud indicators, so you can investigate suspicious orders before they become a problem. You can also download third-party fraud apps in the Shopify App Store.
Regularly update and patch systems
Make sure you keep your security patches and software up to date. This helps fix any weaknesses that hackers might use to get into your system and grab important information such as credit card details.
Back up your data
If a scammer gets into your system and makes unauthorized transactions, having a backup of the data makes it easier to restore the system and stop more unauthorized transactions. Also, having a backup helps you pinpoint where the problem started and investigate the fraud.
Have a response plan
Make sure everyone knows what to do in the event of a security breach or other incident, including roles and responsibilities, communication strategy, and specific response procedures. Employee training can make it easier for your team to respond quickly and efficiently. Plus, a detailed response plan will help you rebound quickly, minimizing damage and loss to your business.
Manage payment security with Shopify Payments
It’s easy to build a robust payment security strategy with Shopify. When you use Shopify Payments to process transactions on your store, you get automatic access to a secure environment with the following features:
- Account security via two-factor authentication: Using Shopify Payments to accept payments and receive payouts requires you to activate two-step authentication on your Shopify account. That means every time you log in, you’ll need to enter your password as well as another form of verification using your mobile device or a security key.
- Fraud protection: When you use Shopify Payments, you’ll get access to tools designed to help you automatically detect and curb fraud. All orders processed through Shopify Payments are screened by fraud analysis which uses machine-learning algorithms to identify suspicious activity. and assess the risk level of the transaction. You can view the indicators used to determine the risk level to help you decide whether to cancel or fulfill the order.
- 3D Secure checkout: If you're using Shopify Payments, then you have access to a 3D Secure checkout flow. This feature provides an additional layer of security by automatically adding an authentication step for online credit and debit card transactions in 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 when they’re shopping on your site by establishing a clear return policy. You can set up return rules that automatically apply when customers place their orders, including a return window, return shipping costs, and restocking fees.
Payment Security FAQ
What is payment security on a credit card?
Payment security on a credit card involves protecting the cardholder’s personal and financial information during transactions. This includes fraud prevention measures like data encryption, tokenization, authentication processes (like PIN numbers or biometric scans), strong access controls, complying with industry standards like PCI DSS, and using technologies, such as Europay, Mastercard, and Visa (EMV) chips. The goal is to prevent unauthorized access to cardholder data and reduce the risk of fraudulent transactions.
Why is payment security important?
Given the high incidence of cyberattacks, businesses of all types, including ecommerce and brick-and-mortar stores, should prioritize payment security. A safe and secure payment process helps protect sensitive information, prevent data breaches, reduce financial fraud, ensure regulatory compliance, build trust with customers, and save your business time, money, and stress. 98 million records impacted worldwide in May 2023 alone highlight the urgency.
How do you ensure payment security?
Businesses can take several steps to ensure payment security, including:
- Conducting a risk assessment to identify holes in their payment infrastructure, processes, and systems
- Implementing security measures that align with industry standards and regulations, such as PCI DSS
- Developing security policies and procedures that address payment security, data handling, access controls, incident response, and employee training
- Implementing security measures such as encryption, tokenization, strong authentication, and robust firewall configurations
- Choosing secure payment solutions that adhere to industry standards and regulations
- Continuously monitoring payment systems, networks, and applications for threats and vulnerabilities
