Ensuring confidentiality in online transactions

Many people and even countries nowadays prefer the cashless approach to exchanging various goods and services. Moreover, online shopping is becoming more popular than ever due to its convenience, ease of implementation, and access to products unavailable in your area. That means the number of daily online payments is unfathomable and will likely only increase in the future.

However, this heavy reliance on online payments means we must ensure they are secured to the highest standard. After all, malicious hackers are undoubtedly looking for payment method vulnerabilities they could exploit to redirect money to their own pockets.

The first step to ensuring confidential online transactions is being informed about the best payment security practices. This is vital for online shoppers and sellers since transactions are a two-way street, and a flaw on either side will be disastrous for both parties. So, without further ado, let’s explore the details surrounding transaction security.

What is transaction security?

Transaction security, or payment security, is the set of practices that ensure the confidentiality of sensitive information and a secure exchange of customer data. This topic covers a wide range of protocols vital to keeping online transactions safe for all involved parties. For example, it includes data encryption, tokenization, multi-factor authentication, regular software updates, and more. All of these practices must be implemented to ensure the payment process is entirely safe and secure. I’ll cover these security practices in more detail later. First, let’s look at some statistics illustrating why transaction security is vital.

According to Juniper Research, e-commerce losses due to online payment fraud have steadily increased globally. The total loss was $17.5 billion in 2020 and has since expanded to $41 billion in 2022. The estimated loss for 2023 is $48 billion. A more recent study by Juniper Research estimates that losses from online payment fraud will exceed $362 billion globally between 2023 and 2028.

Common risks in online transactions

Transaction security has many essential practices because an ever-expanding number of cyberthreats are waiting to exploit even the smallest vulnerability or flaw. Let’s overview some of the most common ways of disrupting transactions.

Phishing attacks are some of the most common cyberthreats due to their versatility and effectiveness. In short, phishing is a social engineering attack used to steal user data. It comes in many forms, which we outlined in our phishing explained article.

A threat actor sends victims a message that appears legitimate and urges them to perform a specific action, such as clicking a link, downloading a file, or filling in an online form. When you do this action, the malicious actor gains access to your device and steals your data, which can be misused in various ways. Regarding online transactions, the threat actor will likely siphon your credit card details and quickly use the money for fraudulent transactions.

Successful phishing attacks can escalate to other types of fraud. The most obvious example is synthetic identity fraud (SIF), where the malicious actor uses your stolen personally identifiable information to create fake accounts in your name. These accounts are then used for various fraudulent activities, such as payment default schemes where the scammer buys a product or service on credit but isn’t planning on making any future payments.

Another potential threat is a man-in-the-middle attack. As the name suggests, it happens when a threat actor intercepts a private transaction between two parties. During this attack, the malicious hacker may try to manipulate the transferred data or simply eavesdrop and siphon any shared payment information. This attack typically occurs when a transaction hasn’t implemented proper authorization.

Data breaches are another common threat that can lead to financial fraud, although the details depend on what information was leaked. If your credit card details are exposed, then you will likely become the victim of card-not-present (CNP) fraud. This occurs when fraudsters make unauthorized purchases with your credit card simply using the leaked information. You can see whether you’re a victim of data leaks using the Cybernews personal data leaker checker.

Top strategies for ensuring online payment security

You must follow many practices to protect your online transactions from the vast array of cyberattacks. I’ll outline the general strategies, followed by a few specific examples of implementing them.

The first and most essential step is encryption. This strategy scrambles your transactions and makes them indecipherable to outsiders. Only the buyer and seller can decipher the necessary information to complete the transaction. The most prevalent way to encrypt online transactions is using TLS or SSL certificates, which secure the connection between a customer’s browser and the web server.

The second step is employing tokenization. It’s the process of replacing sensitive customer data like credit card numbers with unique tokens used to reference the original payment information. These tokens are meaningless by themselves, meaning malicious hackers can’t use them in any way, even if they were leaked in a data breach. The implementation of the tokenization process will vary by business. Just remember that the core components of this process are token generation, a secure data vault, and detokenization.

Another well-established but essential step to secure transactions is authentication. The most common authentication method is single-factor authentication (SFA), which uses a password. However, this approach is flawed since the password could be exposed in a data leak, thus leading to a stolen account and possible fraud.

As such, enabling multi-factor authentication (MFA) is crucial, as multiple authentication methods are required before the transaction can proceed. This greatly enhances your overall security because it’s improbable that multiple authentication methods will leak. Popular secondary authentication methods include biometrics and one-time codes sent to authorized devices. We have an extensive list of authentication solution recommendations that you can implement personally or on your business site.

You’ll also need to use a secure payment gateway to facilitate online transactions by mediating the information between your business and a bank or payment processor. The payment gateway will validate the customer’s credit card details, ensure enough funds are available, and authorize payment transfers. The process is quick and has all the necessary protection measures to ensure security. Currently, some of the most popular payment gateways are Stripe, PayPal, Adyen, and Amazon Pay.

My final recommendation is to leverage AI for fraud detection. It’s a relatively new strategy capitalizing on the recent popularity of artificial intelligence, specifically large language models (LLMs). These tools utilize machine learning to quickly and automatically identify suspicious activity and other anomalies that indicate potential fraud. This can greatly increase efficiency when evaluating fraud cases at a large scale.

Best practices for e-commerce sites

Online businesses running e-commerce sites must follow a strict security regimen to ensure their online transactions are confidential. These tips aren’t particularly groundbreaking if you’re remotely familiar with standard cybersecurity practices, but it’s always worth refreshing your memory.

Firstly, you must constantly ensure that all the security software and plugins you use are up to date. Outdated software can have security vulnerabilities that malicious hackers swiftly exploit. This is crucial because a poorly secured e-commerce site can have disastrous consequences for your customers, which can lead to a damaged reputation for you.

You should also pay special attention to securing your servers and databases, both physically and virtually. Regarding physical security, they must only be accessible to authorized technical personnel responsible for maintaining the hardware and software. This ensures outsiders won’t have the opportunity to tamper with the servers. As for digital security, the servers should use the latest security software that’s up-to-date and reliable. Details will depend on the specifics of your server network and business needs.

Lastly, you should allocate resources to educating your customers about cybersecurity basics and the importance of online payment safety. The tech-savvy side of your customers will likely be familiar with this topic. However, you should ensure that your less knowledgeable users can access the necessary resources to learn more about this topic. Ideally, the information should be easily noticeable and accessible on your website. After all, if your customer has a bad experience while using your product, they will blame you for everything, damaging your reputation.

Consumer tips for safe online transactions

Consumers must also adhere to a few best practices to ensure their online transactions are safe under any circumstances.

The first step is to check whether the site you’re visiting is properly encrypted using SSL certificates. You’ll know that’s the case if the site’s URL starts with HTTPS. Most browsers will warn you if you’re connecting to an unsecured website, but it’s wise to double-check this part, especially if you plan on spending a lot of money on the page.

Secondly, you must ensure that the website’s page is spelled correctly. Nowadays, scammers can create visually indistinguishable phishing websites to deceive users and steal their data. You can accidentally visit a malicious website if you type in the URL manually or click a link on a malicious email or website.

I also recommend avoiding using public Wi-Fi networks when making online payments. Public hotspots typically aren’t secured to the highest standards and thus are a favored hunting ground for malicious hackers. They can monitor all traffic on the network and perform a man-in-the-middle attack or siphon your payment details whenever you buy something. If you absolutely must pay while on public Wi-Fi, at least protect your connection with a reliable VPN service.

Lastly, you should be fully aware of all your bank statements and recurring payments. If your personal information is leaked, malicious actors could impersonate you and start various unauthorized payments to your account. You can quickly freeze your account if you notice new, unfamiliar payments. However, as a precaution, you should freeze your accounts in advance if you become a victim of a data leak.

Famous fraud examples

Perhaps the best way to illustrate the importance of transaction security is to highlight some of the most notorious financial fraud cases from recent years. These instances show how vital it is to stay vigilant against phishing scams and why financial institutions must be transparent about their activities.

The first case that came to my mind was the phishing scam perpetrated by Evaldas Rimašauskas in 2017. He crafted convincing emails and stole over $100 million from Facebook and Google by sending fake invoices to them. However, the scheme was quickly unraveled, the companies got their money back, and Evaldas was sentenced to five years in prison.

Another notorious fraud case involves Sam Bankman-Fried and his FTX cryptocurrency exchange platform. He took around $8 billion of customer funds from the platform for his personal gain to buy luxury real estate and to finance his Alameda Research hedge fund. The scheme eventually fell apart, and Sam Bankman-Fried was sentenced to 25 years.

Conclusion

Securing online transactions is a two-way street, and both the customer and service provider have particular responsibilities. Unsurprisingly, online businesses must do more work to ensure the entire payment process is well-protected. Most notably, they must handle encryption, authentication, tokenization, and compliance with industry standards. Failure to take care of these parts can be disastrous for either party involved in the online transaction.

Meanwhile, the customer has to stay vigilant and ensure the online store is reliable by checking if it has the necessary SSL certificates, uses proper payment gateways, and isn’t a phishing website. In general, the visitor should be familiar with today’s best cybersecurity practices to ensure that online transactions don’t become a frequent danger.

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