In the age of the unrelenting cyber fraud pandemic, payment gateways serve as safeguards that protect direct avenues into the well-being of financial institutions. Simultaneously, these safeguards become one of the main logical targets for malicious actors who use an ever growing range of means to exploit any possible vulnerabilities they have. Insecure payment gateways are often targeted by hackers, as they are the primary channel through which payments are processed. Outdated software or weak security can allow attackers to gain access to sensitive payment card industry data.
The average cost of a data breach in the US has reached nearly $9.5 million, underscoring the severe financial implications of inadequate payment security. Security breaches can also severely damage business reputation, leading to loss of customer trust and long-term attrition.
Because of their instrumental role in securing financial flows and financial transactions, payment gateways need to be protected in a diverse range of ways every one of which must be taken into account and duly attended to to achieve a viable level of security. More specifically, these techniques and approaches include Encryption (SSL/TLS), Tokenization (OAuth), Role-Based Access Control, and others.
In this article, we’ll find out in detail what protections your payment gateway needs, when in the solution delivery cycle they should be introduced, and how to implement them more optimally.
Key Takeaways:
- Implementing encryption, tokenization, and secure storage is essential to protect sensitive customer data, including bank account information and credit card payment data, while maintaining a payment system secure.
- Compliance with PCI DSS and data protection regulations, combined with regular audits, helps ensure payment security and minimize risks associated with fraudulent transactions and data breaches.
- Integrating real-time fraud detection systems enables businesses to quickly identify suspicious transactions, improving transaction approval accuracy and reducing financial losses.
- Securing APIs, sessions, and authentication flows with advanced security measures ensures secure online transactions and protects critical transaction details across the payment lifecycle.
- Continuous monitoring, logging, and updates strengthen resilience against evolving threats, helping fintech companies maintain a scalable and payment system secure environment.
Achieving Payment Gateway Security and PCI DSS Compliance During Custom Gateway Development Process
Let’s get started by discovering the security measures you have to keep an eye on when developing a payment gateway for your business from scratch, especially when it comes to securely processing payments. Payment processing systems must be designed to handle a variety of payment methods securely, including cards, digital wallets, and bank transfers, since customers don’t all pay the same way. Any payment gateway should include built-in security features such as encryption, tokenization, and real-time monitoring to protect sensitive data and ensure PCI DSS compliance.
Approaching payment gateway security issues in any payment gateway development project should start with understanding payment processing compliance regulations.
Andrii Semitkin
Delivery Director at SPD Technology
“The existing payment processing compliance is not a mere regulatory formality, but a comprehensive security-related approach that helps ensure a high enough level of payment gateway security. It is also important to understand that the matters of payment gateway compliance and security are closely interconnected, and one cannot sufficiently ensure the required compliance without applying some of the security measures and techniques (like, for instance Data Encryption and Penetration testing)”
Because of this, it is necessary to first become familiar with the PCI DSS compliance and gain a sufficient understanding of what needs to be done for implementing KYC standards. Card industry data security is governed by the PCI DSS framework, which is one of the most widely recognized security standards for businesses handling credit card transactions. What’s more, the issue of compliance remains relevant regardless of whether you choose to build a custom secure payment gateway or go for payment gateway integration. Data breaches are often the result of weak security measures, outdated software, or misconfigured systems. Failure to comply with PCI DSS can result in severe penalties, fines, or even the loss of the ability to process payments.
Correspondingly, the payment gateway security features that one should include and their related best practices fall roughly into two main groups, which we are going to discuss in the next sections.
The PCI DSS has 12 key requirements that businesses must adhere to in order to maintain compliance. Regular audits and assessments will help businesses identify areas where compliance with PCI DSS is lacking, making it easier to prevent potential security incidents. Maintaining PCI compliance improves your reputation with payment brands, builds customer trust, and helps prevent data breaches and credit card fraud.
Using End-to-End Data Encryption
Broadly used for data protection purposes otherwise, end-to-end Data Encryption plays a crucial role in securing transactional and cardholder data, specifically, payment data, that a website collects at a checkout and transmits to a payment gateway for further processing. The payment data being collected and transmitted gets encrypted (or, in other words, converted into a coded message) by the website and then deciphered by the payment gateway.
Encryption protocols such as SSL and, more specifically, transport layer security (TLS), ensure encrypted data transmission and protect sensitive customer payment information during online transactions. End-to-End Encryption (E2EE) encrypts sensitive data from the point of entry until it reaches the final authorized destination, ensuring data remains unreadable if intercepted.
One can say that employing strong protection algorithms dramatically reduces or, even, eliminates entirely the odds of data exposure or theft by malicious actors. However, to reach this effect, one should use a provenly robust encryption algorithm like, for example, AES 256 or Twofish. Notably, unlike the other major data protection approach called Data Tokenization we’ll dwell on next, Data Encryption is universal in terms of the kind of data it can be used to secure: this can be completely unstructured data for which Data Tokenization is not suitable. However, its considered to be a best practice to use Data Encryption in conjunction with Data Tokenization with a view to creating a more usable and optimal security combination.
Need more insights into ensuring fintech data security? Find them in our dedicated article!
Using Data Tokenization
Data Tokenization is a data protection technique that allows you to protect sensitive data by replacing sensitive data elements, such as payment details, with non-sensitive substitutes, or tokens. Such a replacement makes it impossible to reverse the tokenized data to the original form, thus making it impossible for nefarious parties to intercept and use this information for illegal purposes. The tokens and original data points are linked with one another by means of a mapping system that has security safeguards of its own. Due to this, even having gained access to tokens, a malicious actor is unable to get hold of the sensitive information they are after.
As we’ve mentioned previously, Data Tokenization is usually used to protect structured data, like, for example, Social Security numbers, card numbers, payment details, or transaction data. In this sense, it is not as flexible as Data Encryption. Nevertheless, it does have another upside – with Data Tokenization, the sensitive data being tokenized never leaves the website the payment originates from, making this security approach superior to any encryption algorithm no matter how robust.
Implementing Reliable Password Hashing and Secure Password Storage
Software development is the stage during which you must necessarily address one more payment gateway security issue – reliably secure user passwords. Secure password storage is a key aspect of network security, helping to prevent unauthorized access to payment systems.
To achieve this, it is necessary to employ different password hashing algorithms. You should pick a hashing algorithm with proper salting, i.e. the function that adds random data and thus protects the solution against attacks that use precomputed tables. The best choice here would probably be Argon2, while two more viable options would be bcrypt (password-hashing function)and scrypt (password-based key derivation function).
Volodymyr Soska
Senior Software Engineer at SPD Technology
“At the same time, there are also hashing algorithms that are patently unsuitable for password hashing, including that in payment gateways. In particular, they include MD5 and SHA-256 that are way too fast as compared with the other algorithms, especially bycrypt. This allows an attacker to use a much larger number of password combinations and impairs these algorithms’ protective ability.”
While working with credentials, you should avoid hardcoding any sensitive information within the code. Also, one should make it into a policy to store only salted and hashed passwords.
Employing Secure Session Management Techniques
Secure Session Management is another aspect of ensuring robust payment gateway security.
First off, it is important to implement secure attributes to prevent the cookies sent by the application server from being sent in plain text and reviewed by parties that are not authorized to see them. A cookie that contains a secure attribute is sent with an encrypted request using the https:// protocol.
It is also necessary to implement proper timeout values to automatically log users out after a period of inactivity. This minimizes the risk of unauthorized access to an active session and reduces exposure to potential threats.
Implementing Safeguards Against Cross-Site Forgery Attacks
Cross-site forgery attacks pose a serious threat as they cause a user with authorized access to perform a hacker-induced action, for example, an action that is required to change user access rights, submit a transaction, or delete some data. To launch a successful forgery attack, a hacker needs a cookie-driven user session and knowledge of the parameters of the requests that they want executed.
For preventing a cross-site forgery attack, one should implement CSRF tokens – randomly generated unique session values the application sends to the client-side and gets back from there inside the request.
However, there are several requirements that need to be met here in order for the procedure to be secure. For instance, one should:
- Validate and use CSRF tokens in both POST and GET requests.
- List all tokens in the system and validate them against this list too.
- Link both the current user session and the cookie that is used for tracking this session.
- Set the application to perform the validation procedure at all times, and not only in those cases, when the session token is present.
Along with CSRF tokens, one can also use the Same-Site Cookie Prevention that restricts the origin a cookie and related requests can be sent from, as well as Custom Request Headers.
Implementing the Principle of Least Privilege and Role-Based Access (RBA)
The user clearance for any user actions in your payment gateway application must be based on the principle of Least Privilege, whereby all users must be able to access only those parts of the functionality and digital assets that they vitally need in accordance with their role in the system and the related needs, duties, and responsibilities. Proceeding from this principle, one must implement Role-Based Access to all the different functions across the application.
Correspondingly, it makes all the sense to spend time on outlining the needs and rights of the different roles in the application’s user hierarchy and reflect this information in the functional specification for the payment gateway security architecture.
Feel like getting lost in Software Requirements Specification? Discover how to write a SRS document step-by-step!
Implementing Two-Factor and Multifactor Authentication
No matter how complicated, conventional passwords have several drawbacks that make using them as the primary means of securing access to an application a hazard.
For example, they can get stolen. Or they can be hacked if they are not strong enough, and most users tend to limit themselves to meeting the minimum acceptable password requirements while composing their passwords. Because of this, there is a need to use some other security factor in conjunction with a conventional password to reliably user secure access to a payment gateway.
Two-Factor Authentication (2FA) has now become the norm and most often includes a SMS, a security token, or a phone call to the user’s mobile device as the second security factor. Of these three options, the SMS option is the least reliable one as an SMS represents plain unencrypted text hackers can sometimes intercept.
To make the protection even stronger, you can increase the number of security factors. Multi-factor authentication (MFA) is a security process that requires users to provide multiple forms of identification before granting access or approving transactions. For example, you can do this by adding a USB token that contains an electronic signature, digital certificate, or biometric data. Unfortunately, this Multi-Factor (MFA) security combination would not be something most users would be comfortable with from the point of view of user friendliness.
A great way to create a very strong and user-friendly 2FA or MFA combination would be to add some reliable biometric authentication method. Biometric authentication leverages unique biological characteristics, such as fingerprints or facial recognition, to provide seamless and secure user verification within the broader landscape of secure payment methods.
Using Biometrics-Based User Access
In fact, one can use Biometrics both as one of the factors in 2FA security combination and even as the only means of securing user access to a payment gateway. Some of the Biometric Identity Verification methods are considered to be reliable enough for the latter to be an option (although we’d still recommend using them in a 2FA combination). These methods are based on human biometrics that are impossible to fake and include:
- Fingerprint Scanning
- Vein Recognition
- Iris Recognition
- Voice Recognition.
Of these techniques, Iris Recognition and Voice Recognition are the most widely used and practicable ones as, unfortunately, techniques like Fingerprint Scanning or Vein Recognition require some specific types of devices. For Iris Recognition, you need a special IR camera or a mobile device with an iris scanner. Iris and Voice Recognition are considered to boast a 90-99% accuracy of the recognition result.
Performing Updates and Security Audits
Lastly, it is essential to not only know the specifics of fintech software development and use this knowledge, but also make sure your system’s security does not degrade over time and stays up to date. You must keep tabs on all the latest software patches and apply them to all the corresponding software components, including libraries and dependencies, in a timely manner. Additionally, to identify and eliminate various vulnerabilities, one must conduct regular security audits and make regular code reviews.
Implementing Payment Gateway Security During Payment Gateway Integration
In one of our recent articles, we explained how to integrate a payment gateway into your app. Now, let’s find out what payment gateway security measures you have to pay attention to when integrating a third party gateway solution into your payment processing system. Online payment security strategy is crucial during this process to safeguard customer information and prevent fraud. Additionally, implementing real-time monitoring is essential to promptly detect suspicious activity and security breaches during payment gateway integration.
Using Secure API Protocols
During payment gateway integration, it is essential to implement security protocols such as HTTPS and TLS/SSL to secure the APIs that facilitate interactions between your payment application and the payment gateway. These security protocols encrypt the data being transmitted and provide authentication, ensuring that sensitive information remains protected. Using HTTPS encrypts the communication, while TLS/SSL adds an additional layer of encryption to all your traffic, further enhancing the security of your payment gateway integration.
Implementing Sound Input Validation
As a process, input validation allows you to counter injection attacks, like SQL injections and Cross-Site Scripting (XSS). For example, in the case of SQL attacks, hackers can use user-supplied data to insert malicious code into database queries. To preempt such attempts, one can use such input validation approaches, as:
- White lists – creating a list of characters and strings that are allowed to be used.
- Server side validation – using server-side validation in conjunction with client-side validation for the server to detect any malicious code that has bypassed the client side.
- Parameterized queries and prepared statements – using these types of queries and statements allows one to separate the user-supplied data from the SQL queries and thus prevent any malicious code from being injected into the SQL queries.
Similarly, for averting Cross-Site Scripting attacks, you can use both Input Validation with the help of regular expressions and other techniques, as well as a technique called Output Encoding. In the latter case, your system will encode all the user-provided inputs so that they are not interpreted as JavaScript or HTML code. It should also be mentioned that reliable protection against SQL injections and Cross-Site Scripting (XSS) can also be provided by Wall Application Firewalls (WAFs).
Conduct Regular Security Audits, Vulnerability Assessments, Penetration Testing, and Use Fraud Detection Tools
To keep your system efficient at all times and rule out security breaches, you must conduct payment gateway security testing, security audits and vulnerability assessments on a regular basis. One should also pay most close attention to Penetration Testing that is, incidentally, mandated by PCI DSS: according to the PCI DSS regulation, this kind of testing is to be conducted at least once in 12 months.
Make sure your company is compliant with the latest regulations by using our PCI DSS compliance checklist!
Penetration testing essentially represents a security assessment that aims to detect any security vulnerabilities in the company’s infrastructure and applications by testing them from both inside and outside their network environment.
Using Secure Redirects in the Payment Process
Open URL redirection is a security hazard that occurs in those cases when one can specify the redirected URL from outside the application. Malicious actors most frequently use Open redirects to plant malware or launch a phishing attack, but sometimes they can also use it for Cross-Site Scripting.
To reduce the attack surface, you can:
- Impose a white list of the allowed redirects.
- Implement only the redirection requested by the application and exclude as much as possible any user input-related redirection.
- If user input is still required, limit the user inputs to http and https URLs only.
It should be mentioned that there are various tools, like, for example, automated security scanners, that allow you to find open redirect vulnerabilities in an application.
Implementing Logging For Security Events
Your payment gateway security requirements should include implementing a capability that logs any events related to enforcing your security policy and ensuring robust payment gateway security. In addition, this functionality must also enable your staff in charge to easily review the created logs for any unusual activities. In this sense, it may be very useful or, even, necessary to implement corresponding alerts and reminders.
Payment Security Best Practices for Fintech Product Companies
Fintech product companies that handle digital payments must treat security as a core product capability rather than an afterthought. Payment providers, digital banks, and card issuing platforms operate in an environment where trust, regulatory compliance, and system resilience are critical to business success. The following checklist highlights key best practices for financial institutions to secure payments and protect customer data across modern payment infrastructures.
- Implement End-to-End Encryption: Ensure that all sensitive payment data is encrypted both in transit and at rest. Modern encryption protocols and proper key management reduce the risk of data interception and unauthorized access within secure payment systems.
- Adopt Tokenization for Sensitive Data: Tokenization replaces sensitive cardholder information with non-sensitive tokens. This approach significantly reduces the exposure of payment data across applications and infrastructure, strengthening payment gateway compliance and security practices.
- Comply with PCI DSS and Regulatory Requirements: Maintaining PCI DSS compliance and aligning with regional financial regulations is fundamental for fintech companies. These frameworks define baseline reliable payment processors security standards and help organizations manage risks associated with card payments.
- Integrate Fraud Detection and Monitoring Systems: Advanced AI and behavioral analytics-powered systems help identify suspicious activity in real time. Continuous monitoring ensures fast responses to potential threats and protects both merchants and customers.
- Secure APIs and Third-Party Integrations: Payment ecosystems rely heavily on APIs for integrations with banking partners, merchants, and external platforms. Implement strong authentication, rate limiting, and access controls to protect API endpoints and maintain security standards for money movement vendors.
- Conduct Regular Security Audits and Penetration Testing: Routine vulnerability assessments and penetration testing help identify weaknesses before attackers do. Many fintech companies rely on specialized cybersecurity services for payment gateways to perform independent security testing and compliance verification.
- Strengthen Identity and Access Management (IAM): Strict role-based access control, multi-factor authentication, and privileged access monitoring reduce the risk of internal threats and unauthorized system access.
- Build Enhanced Security into Card Platform Architecture: Companies developing issuing or processing infrastructure should align their systems with modern card platforms security compliance requirements, ensuring secure transaction processing, data isolation, and regulatory alignment.
Conclusion
A good understanding of the robust security features and techniques, and strict compliance with the payment gateway security standards, are central to preventing online payment fraud associated with payment gateways. The multi-faceted and complex character of these processes and the relatively high complexity of payment software development as such make it quite hard for both client businesses and less experienced software providers to cope with the related challenges.
We, at SPD Technology, would be glad to help and share our practical experience, gained during our collaboration with industry-recognized payment processing security and eCommerce companies. Our experts would be keen to answer your questions on payment gateway security and other technical issues your business may face.