Secure payment systems for SMBs: discover the latest trends in payment safety 

Explore the latest trends in secure payment systems and methods. Enhance your SMB payment security with up-to-date solutions. Read now for top tips! 

Secure payment systems for SMBs: discover the latest trends in payment safety

Explore the latest trends in secure payment systems and methods and enhance your SMB payment security with up-to-date solutions. Here, we take you through how to keep the benefits of digital payments while keeping fraudsters at bay. 

In early 2024, Ticketmaster suffered a significant cyber-attack that affected 560 million customers worldwide. The attackers stole personal information along with encrypted credit card details. A class action is ongoing against the company, with Ticketmaster accused of exposing customers to increased risk of fraud and identity theft.  

Data breaches are soaring, and increasingly placing companies and their customers at risk of fraud. Data and financial transactions are intrinsically linked: as digital payments grow in popularity, security gaps and new exploitation methods have appeared. Payment security is not confined to large corporations; the SMB (small to medium-sized business) is not immune to the tactics of financial criminals. The modern SMB must often operate globally, bringing unique security challenges.

The evolving landscape of payment security 

From the first B2B electronic payment by Thomson Holidays in 1981 to the digital wallets of today, payments have evolved to cover a broad, interconnected ecosystem. In the early days of online payments, companies like Amazon disrupted the market driving the need for methods to streamline the payment process and map it to an online purchase. Companies like PayPal emerged to handle the increasing number of online payment-based marketplaces springing up on the internet. Payment service providers (PSPs), like PayPal, offer a way to bridge payments between customers and these online marketplaces. More recently, digital wallets and mobile payments have increased, with 44% of e-commerce transactions made using a mobile device. All in all, payments are an ecosystem with many moving parts. Security vulnerabilities come via people, processes, controls, or connection points.  

In 2022, 65% of companies were victims of attempted or actual payment fraud. 

JP Morgan and AFP

Cybercriminals follow the digital money 

As digital payments have become normalized, fraudsters have followed the money. While digitization brings many benefits, including real-time/faster and streamlined payments, it also attracts fraudsters. The exploitation of digital payments has reached epic proportions, with financial crime soaring.  

  • Payment fraud is estimated to exceed $362 billion globally between 2023 to 2028, according to a report from Juniper Research.  
  • Nilson forecasts that card fraud alone will top $35 billion in 2024, with 34% of merchants feeling the pain of payment insecurity in the form of chargeback fraud. 

The evolving landscape of payment security mirrors the evolution of digital payments.  

The security gaps in digital payments  

Paying for anything online requires releasing sensitive financial data, like credit card details. How to secure these data has been an ongoing battle for software designers and developers for decades. Way before the digitization of payments became ubiquitous, internet protocols were developed to ensure the secure transit of data across internet connections.

In 1994, Netscape released the Secure Socket Layer (SSL) protocol to encrypt internet-borne data. Today, Transport Layer Security (TLS) encryption has replaced SSL. However, fraudsters still find ways to circumvent protection even with encrypted data transactions. Scams, social engineering, and phishing were, and still are, used to bypass encryption. The attack at Ticketmaster, for example, was caused by a compromised employee account at a third-party vendor. This was likely initiated by stolen credentials gathered using spear phishing. 

Payment fraud takes many forms, but a recent roundtable with Pymnts.com highlighted that 70% of card-related fraud is card-not-present (CNP). This is not surprising as CNP fraud events are hard to detect. CNP fraudsters typically use attack methods like card skimming, database hacking, and phishing to obtain financial card details.  

Instant payments or faster payments are another area where potential security gaps can appear. Cybercriminals take advantage of the need for real-time anti-fraud checks and the pressure to keep sanction databases and other anti-fraud measures up to date. 

The SMB and cross-border transactions  

Cross-border payments are part of the digitization of payments and an area of growth. Boston Consulting Group (BCG) predicts their value will soar to over $250 trillion by 2027.  

Cross-border transactions add another layer of complexity to fraud prevention; each jurisdiction has data security and anti-fraud requirements. 

Research predicts that there will be a 120% increase in B2B cross-border eCommerce between 2023 and 2030. As cybercriminals follow the money, Payoneer expects fraudsters to target B2B payments that use instant payment platforms as cross-border payments soar. 

The digitization of payments has opened opportunities for cybercriminals to exploit. As a result of soaring payments fraud, security countermeasures have evolved 

As the digitization of payments has advanced, security has kept in lockstep with those changes. The following areas are core to establishing robust digital payment security: 

Enhanced authentication methods 

Authentication establishes that someone is who they say they are. Regulations like the EU’s PSD2 (Payment Services Directive version two) have strict requirements for validating customer identity. The Strong Customer Authentication (SCA) section of PSD2 sets out the payment authentication requirements for a financial transaction. This requirement requires customers to robustly authenticate themselves before any financial institution is allowed to exchange payment information with third parties.  

Multi-factor authentication (MFA)  

Having more than one factor when authenticating a transaction is known as MFA – multi-factor authentication. Multiple factors, like a password, followed by an authentication code, build up layers of security. Online transactions typically require authentication based on multiple factors: 

  • Something a person knows – PIN or password 
  • Something a person has – mobile app or hardware token that generates a code 
  • Something a person is – biometric 
  • Biometric authentication 

MFA can be onerous for customers who must remember passwords and PINs or install authenticator apps. Biometrics offers convenience and security. Biometrics like fingerprint and facial recognition are on the rise and provide security benefits with usability. According to research from iProov, 70% of people would prefer to authenticate themselves using facial biometrics when using mobile banking. 

3D Secure 

The 3D Secure card is a two-factor authentication system developed by Visa and now used by Mastercard. Payoneer can automatically collect the data needed to authenticate a customer using 3D Secure and apply step-up authentication if required.  

Tokenization  

Tokenization of financial card details uses a mechanism to replace the financial details with a string of letters and numbers—a token. The token is irreversible; if a cybercriminal steals one, they cannot reverse it to obtain the original card details. 

End-to-end encryption (E2EE) 

E2EE can be used for point-of-sale (POS) and online payments. This encryption method secures transaction data, which is only accessible by the sender and a legitimate recipient. A payment gateway performs the encryption process on behalf of a merchant. 

Artificial intelligence and machine learning 

Payment methods like faster and real-time payments benefit from the power of artificial intelligence (AI) and machine learning (ML, a subset of AI). As fraudsters use more sophisticated methods that are often obfuscated and use multiple channels, AI and ML are used to detect and prevent fraudulent activities in real time. 

Behavioral analytics 

Analyzing user behavior patterns helps identify and mitigate potential threats. Behavioral analytics systems are used to define a baseline of recognized behaviours. Customer behavior is then monitored in real time to identify anomalies from this baseline that signal a possible cyber-attack, like data exfiltration. 

Regulatory compliance and standards 

PCI DSS compliance 

The payment card industry data security standard (PCI DSS) requires varying levels of compliance depending on the card issuer and the value of transactions. Non-compliance can result in large fines. Requirements include protecting cardholder data, using a secure network, and taking strong access control measures.  

Read more about PCI DSS data security standards aimed at SMBs in this Guide to Safe Payments.

GDPR and data protection 

The GDPR is a privacy-specific regulation that is European but has worldwide implications for data protection. Requirements for data minimization and protection measures, like encryption, are stringent. Large fines for non-compliance are based on revenue: any firm performing global transactions that impact an EU citizen is expected to comply with GDPR. 

Implementing security best practices 

Making sure that you meet regulations, provide secure payment transactions, and offer a great customer experience is challenging for an SMB. Finding the right fit payment processor to do the hard graft for you is essential.” Maxim Polyachenko, VP of Financial Crime Prevention & FIU, Payoneer 

Using robust security practices will help mitigate the risk of exposure to or theft of financial data.  

Regular security audits and updates 

The threat landscape is always changing, and attackers adapt to new security measures quickly. Therefore, it is vital to carry out regular vulnerability assessments and security audits to determine your risk level. One fundamental part of staying safe is ensuring software updates are performed in a timely manner. Payment processing software and systems must be up-to-date to mitigate security risks. 

Employee training and awareness 

Human-centric attacks are being increasingly used to circumvent security measures. Attackers use social engineering and phishing to trick people into handing over authentication credentials like passwords. Even MFA is at risk of attack. Security training programs educate employees about the latest security threats and best practices. This knowledge helps them to identify and prevent attacks. Security awareness training should also include simulated phishing exercises. Fake phishing emails are delivered using a specialist platform. These are then used to help employees identify phishing emails. 

Partnering with secure payment processors 

An SMB should partner with a secure payment processor that can handle all the security requirements to comply with regulations and perform secure transactions. When evaluating a secure payment provider, you should look for processors who can handle the complex security requirements of cross-border transactions. The payment processor must offer robust MFA, encryption, and tokenization and comply with anti-money laundering (AML) laws like the MLD4 (Fourth EU Anti-Money Laundering Directive).   

Future innovations in payment security 

The evolving payment threat landscape demands innovation in security measures. Some of the latest development include the following: 

Blockchain technology 

Blockchain technology is used to ensure data integrity while enhancing data privacy and security. Blockchain can be applied to payment security and transparency in B2B transactions. Blockchain also has applications in AML, such as handling sanction checks in real-time. 

Quantum cryptography 

Quantum computing has the potential to break encryption. However, Quantum cryptography could hold the future of payment security. Groups like Emerging Payments Association Asia (EPAA) are forming to explore the potential of quantum cryptography in future payment systems. 

Conclusion 

Secure payment systems are an essential part of modern payments. Without security, the SMBs and large enterprises alike would be at the mercy of fraudsters. However, the threat to payments is not a static entity. Attackers will continuously change their tactics to circumvent detection. The dynamic nature of fraud strains SMB resources, taking them away from their core business. However, by choosing a payment processor that prioritizes security, an SMB can offset the pain of securing payments to the processor. 

Register for Payoneer to stay ahead of the payment security curve and stay informed about the latest developments. 

Disclaimer

The information on this blog is intended for informational purposes only and it does not constitute professional, financial and/or legal advice or forecast. Payoneer is not liable for the accuracy, correction and/or completion of the information provided herein. Payoneer disclaims all representations and warranties regarding the information presented on this page. anagement. Utilizing services like Payoneer can streamline your international payments, making your global transactions more efficient and secure. 

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