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Are Merchant Accounts Secure?

Posted on 9 April, 2020

Regardless of which industry your business operates in, security will always be a significant concern for both the owner and the customers. As more and more transactions are completed via credit or debit card payments, high-risk merchant accounts must be able to prove to their customers that their personal and sensitive information can securely be transmitted. But are merchant accounts as secure as they claim to be?

Let’s take a look at what merchant account services providers do and why security is so vital in payment processing.

 

What Do Merchant Service Providers Do?

Merchant service providers give businesses the ability to collect transactions using payment card information, receive authorization for the pending sale, then collect the funds from the payment card’s financial institution, and transmit the funds to the merchant.

Most merchant account services offer a range of services that often vary between each provider, but they all aim to facilitate payments and make running a business more convenient for the merchants, as well as the customers.

Another critical service that merchant account services provide is making sure each merchant is compliant with their rules and regulations so that they can continue to guarantee their payment processing services.

Now, let’s take a look at how the payment processing chain works so that you can get a better understanding of the process.

 

Payment Processing Chain

To be a successful business, you have to always incorporate new ways to streamline the process of completing transactions. As billions of credit card transactions are being made each year, many merchants are setting up more ways to accept payments from their customers. But, to understand how to make the process more efficient, it’s essential to know how it works.

  1. A consumer seeks goods or services to purchase. Once found, the consumer enters their data into the merchant account payment system to make their purchase.
  2. The data is then sent to the payment processor, who then routes the information for processing.
  3. The payment processor then sends the data to the card issuer who forwards the payment to the issuing financial institution.
  4. Once the financial institution has verified the data, an authorization number is issued to the card issuer, and the funds are made available to complete the transaction.
  5. The card issuer then forwards the authorization number to the payment processor, who then sends it to the merchant.
  6. Once the merchant has received the authorization, the sale is finalized, and the transaction data is stored for the processing of returns, chargebacks, and other analytical purposes.

 

Why Security Matters in Payment Processing

With the amount of credit card purchase transactions that are conducted on a daily basis, it’s no surprise that the information is a significant target for cybercriminals.

As cybercriminals have become more adept at exploiting vulnerabilities in the payment processing system, fraudulent activity is often used to acquire sensitive information. Thus, security in merchant account services has become a significant talking point across the industry.

With such active ingredients in the payment processing chain, including consumers, merchants, acquirers, card brands, financial institutions, and more, sensitive data exchanges many hands throughout the entire process. With so many data collection points, data becomes more vulnerable to criminal exposure and identity theft.

Fortunately, there are several solutions to help keep personal and sensitive information secure and reduce compliance costs in the process.

 

Making Merchant Accounts More Secure

Without quality security, a merchant’s ability to ensure customers that their personal information is secure can significantly affect their ability to do business. The good news, however, is there are several pieces of technology available that can make payment processing more secure and prevent cardholder data from the risk of being compromised.

Let’s take a look at two of the most popular solutions below.

 

End-to-End Encryption

One of the most popular solutions to merchant account security is end-to-end-encryption. Encryption refers to algorithms that encode plain text into a non-readable format, providing privacy for the data that is being transmitted.

Through encryption, transaction data is never sent in plain text for cybercriminals to compromise. In the event that data is somehow stolen, it is virtually useless without the encryption key.

Encryption starts the moment that cardholder data is entered remains until the data has been fully transmitted. Most merchants rely on encryption in both the transaction process, as well as in their databases, where customer information is stored.

 

Tokenization

Another popular solution to solving security issues with merchant accounts is the practice of tokenization. In this approach, cardholder data is used in a transaction, and once it has been authorized, this data is then sent to a centralized and secure server where it is stored.

During this time, a random and unique number is generated and sent to the merchant account provider’s systems to be used in place of the cardholder data.

Tokenization works best in solving the problem of storing cardholder data in storage once the transaction has been completed. Additionally, tokenization helps eliminate the chance of cardholder information being stolen because the data exists elsewhere.

Unlike encryption, tokenization dramatically reduces the chances of cardholder data being stolen from the merchant because, technically, the data is stored in a separate location.

Read more about setting up a merchant account for ecommerce.

Security Solutions for Merchant Account Providers

Payment processing is a complex structure with several risks involved throughout the entire process. Unfortunately, as cybercriminals become more inventive in their methods, there is no single solution that can completely eliminate the threat of data theft.

As risks and vulnerabilities evolve, merchants and payment processors must also learn to adapt to new ways of conducting business and keeping customer data safe and secure.

Figuring out which merchant account service provider offers your business the best security can be a challenging process to navigate. If you’re looking to learn more about your options when it comes to high-risk merchant account services that offer secure and trustworthy options for your business, contact us today. We offer quick approvals, competitive rates, and secure solutions for all of your merchant account needs. Learn more about high risk account.

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High Risk Merchant Account Services

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Regardless of Credit History!