Secure Electronic Transaction (SET)

by anupmaurya
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Secure electronic transaction (SET) was an early communications protocol used by e-commerce websites to secure electronic debit and credit card payments. Secure electronic transaction was used to facilitate the secure transmission of consumer card
information via electronic portals on the internet. Secure electronic transaction protocols were responsible for blocking out the personal details of card information, thus preventing merchants, hackers, and electronic thieves from accessing consumer
information.

What is Secure Electronic Transaction(SET)?

SET is a system that ensures security and integrity of electronic transactions done using credit cards in a scenario. SET is not some system that enables payment but it is a security protocol applied on those payments. It uses different encryption and hashing techniques to secure payments over internet done through credit cards. SET protocol was supported in development by major organizations like Visa, Mastercard, Microsoft which provided its Secure Transaction Technology (STT), and Netscape which provided technology of Secure Socket Layer (SSL).

  • Secure electronic transaction was an early communications protocol that was developed in 1996 and used by e-commerce websites to secure electronic debit and credit card payments.
  • Secure electronic transaction protocols allowed merchants to verify their customers’ card information without actually seeing it, thus protecting the customer against account theft, hacking, and other criminal actions.
  • Other standards for digital security for online debit and credit card transactions emerged after the protocols defined by secure electronic transactions were introduced in the mid-1990s.
  • Visa was an early adopter of a new standard of security protocols, called 3-D Secure, which was eventually adopted in different forms by Master card, Discover, and American Express.
  • Secure electronic transaction protocols were supported by most of the major providers of electronic transactions, such as Visa and MasterCard. These protocols allowed merchants to verify their customers’ card information without actually seeing it, thus protecting the customer. The information on the cards was transferred directly to the credit card company for verification.

The process of secure electronic transactions used digital certificates that were assigned to provide electronic access to funds, whether it was a credit line or bank account. Every time a purchase was made electronically, an encrypted digital certificate was generated for participants in the transaction–the customer, merchant, and financial institution–along with matching digital keys that allowed them to confirm the certificates of the other party and verify the transaction. The algorithms used would ensure that only a party with the corresponding digital key would be able to confirm the transaction. As a result, a consumer’s credit card or bank account information could be used to complete the transaction without revealing any of their personal details, such as their account numbers. Secure electronic transactions were meant to be a form of security against account theft, hacking, and other criminal actions.

Other standards for digital security for online debit and credit card transactions emerged after the protocols defined by secure electronic transactions were introduced. Visa, one of the early proponents for secure electronic transactions, eventually adopted a different protocol, called 3-D Secure, as its framework for the secure digital payments and transactions of its customers. The 3-D Secure method is an extensible markup language (XML)-based protocol designed to be an additional security layer for online credit and debit card transactions.

What Is a Payment Gateway?

A payment gateway is a technology used by merchants to accept debit or credit card purchases from customers. The term includes not only the physical card-reading payment but also gateways in recent years have begun accepting phone-based
payments using QR codes or Near Field Communication (NFC) technology.

  • Payment gateways are the consumer-facing interfaces used to collect payment information.
  • In physical stores, payment gateways consist of the point of sale (POS) terminals used to accept credit card information by card or by smartphone.
  • In online stores, payment gateways are the “checkout” portals used to enter credit card information or credentials for services such as PayPal.
  • Payment gateways are distinct from payment processors, which use customer information to collect payments on behalf of the merchant.
  • There are also payment gateways to facilitate payment in crypto currencies, such as Bitcoin.

How Payment Gateways Work

The payment gateway is a key component of the electronic payment processing system, as it is the front-end technology responsible for sending customer information to the merchant acquiring bank, where the transaction is then processed.

Payment gateway technologies are always evolving to reflect new consumer tastes and technical capacities. In the past, terminals would accept credit cards using magnetic strips and required paper signatures from the customer. With the development of chip technologies, the signature phase could be removed in favor of a personal identification number (PIN) entered directly into the payment gateway hardware. Today, contactless purchases are also available, with many customers now using their phones as a payment device instead of plastic credit cards.

The architecture of a payment gateway will differ depending on whether it is an in-store gateway or an online payment portal. Online payment gateways will require application programming interfaces (APIs) that allow the website in question to communicate with the underlying payment processing network. In-store payment gateways will utilize a POS terminal that connects to the payment processing network electronically using either a phone line or an Internet connection.

Payment Gateway vs. Payment Processor

A payment gateway is distinct from a payment processor, a service that connects the customer’s bank to the merchant account and facilitates the actual movement of money. You can think of these like two halves of the transaction: a payment gateway collects customer information for payment, and a payment processor uses that information to contact the customer’s bank and the merchant account, debiting one account and crediting the other.
Allows customers to easily accept payments at ad-hoc locations such as conventions or farmer’s markets, or through roaming storefronts such as food trucks.
With the Square Reader payment gateway technology, a merchant can attach a small piece of hardware to their mobile phone which allows the customer to swipe their payment card for processing through the mobile phone’s electronic connection. The Square Reader sends the payment information to a merchant’s acquiring bank which then processes the information for the merchant momentarily.
It is likely that new products will continue to increase the versatility and speed of payment gateways. In recent years, blockchain start-ups have even introduced payment gateways for cryptocurrencies.

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