Handling E-Commerce Payments
Commerce using the Internet relies solely on trust; users will not use systems that they believe are insecure. This chapter presents best practices compliant with the Payment Card Industry (PCI) guidelines. You must be compliant with the PCI guidelines – they are not optional. Whilst this chapter is very useful in its own right, it is best advised that you validate your application against the PCI guidelines separately.
This chapter sets out to document methods to:
- Handle payments in a safe and equitable way for users of e-commerce systems
- Minimize fraud from cardholder not present (CNP) transactions
- Maximize privacy and trust for users of e-commerce systems
- Comply with all local laws and PCI (merchant agreement) standards
Compliance and Laws
If you are a e-commerce merchant, you must comply with all your local laws, such as all tax acts, trade practices, Sale of Goods (or similar) acts, lemon laws (as applicable), and so on. You should consult a source of legal advice competent for your jurisdiction to find out what is necessary.
If you are a credit card merchant, you have agreed to the credit card merchant agreements. Typically, these are extremely strict about the amounts of fraud allowed, and the guidelines for “cardholder not present” transactions. You must read and follow your agreement.
If you do not understand your agreement, you should consult with your bank’s merchant support for more information.
In brief, here are the twelve requirements you are required to use if you are going to handle credit card payments:
|Build and maintain a secure network||Install and maintain a firewall configuration to protect data|
|Do not use vendor-supplied defaults for system passwords and other security parameters|
|Protect Cardholder Data||Protect stored data|
|Encrypt transmission of cardholder data and sensitive information across public networks|
|Maintain a Vulnerability Management Program||Use and regularly update anti-virus software|
|Develop and maintain secure systems and applications|
|Implement Strong Access Control Measures||Restrict access to data by business need-to-know|
|Assign a unique ID to each person with computer access|
|Restrict physical access to cardholder data|
|Regularly Monitor and Test Networks||Track and monitor all access to network resources and cardholder data|
|Regularly test security systems and processes|
|Maintain an Information Security Policy||Maintain a policy that addresses information security|
Handling Credit Cards
Every week, we read about yet another business suffering the ultimate humiliation - their entire customer's credit card data stolen... again. What is not stated is that this is often the end of the business (see CardSystems being revoked by Visa and AMEX in the Further Reading section). Customers hate being forced to replace their credit cards and fax in daily or weekly reversals to their bank’s card services. Besides customer inconvenience, merchants breach their merchant agreement with card issuers if they have insufficient security. No merchant agreement is the death knell for modern Internet enabled businesses.
This section details how you should handle and store payment transactions.
Payment Card Handling Best Practices
The PCI DSS 1.1 restricts which card data elements can and can not be stored. While the ultimate guide is the PCI DSS document, card handling best practices are summarized below, along with guidelines for implementing the requirements.
Following is a summary of Payment Card elements which can, and can't be stored:
Storage permitted but protection required:
PAN (Primary Account Number) - Must be stored in unreadable form per PCI DSS 3.4. Strong one way hash, truncation, index tokens and pads with secure storage for pads, or strong cryptography with associated key management processes and procedures are allowed.
The PAN, at the minimum, should not be stored in a readable format.
There are a number of commercial database encryption vendors with products that perform column and database level encryption. Used properly, these fulfill the 'strong cryptography with associated key management processes and procedures' requirement. Several are listed in the references at the bottom of this article. This type of solution is typically used for recurring transactions.
Sensitive authentication data - storage not allowed:
Full magnetic stripe
PIN / PIN Block
After successfully processing a transaction, you are returned an authorization number. This is unique per transaction and has no intrinsic value of its own. It is safe to store this value, write it to logs, present it to staff, and e-mail to the customer.
Handling Recurring payments
About the only business reason for storing credit card numbers is recurring payments. However, you have several responsibilities if you support recurring payments:
- You must follow the terms of your merchant agreement. Most merchant agreements require you to have original signed standing authorizations from credit card holders. This bit of signed paper will help you if the customer challenges your charges.
- It is best practice to encrypt credit card numbers. This as a mandatory requirement in the PCI guidelines
- Limit the term of the recurring payment to no more than one year, particularly if you have “Card holder not present” (CNP) transactions
- Expunge the credit card details as soon as the agreement is finished
The problem with encryption is that you must be able to decrypt the data later on in the business process. When choosing a method to store cards in an encrypted form, remember there is no reason why the front-end web server needs to be able to decrypt them. Database-layer column or table level encryption is considered best practice.
Displaying portions of the credit card
PCI only allows the presentation of the first six (the BIN) or the last four digits. We strongly urge you to not display the credit card at all if it can be helped.
There are many reasons why tracing, sending or presenting a credit card number is handy, but it is not possible to present credit card numbers safely:
- If a large organization has several applications, all with different algorithms to present an identifying portion of the credit card, the card will be disclosed.
- Sending an email invoice is a low cost method of informing users of charges against their credit cards. However, e-mail is not secure.
- For many workplaces, call center staff traditionally has high employee turnover rates.
- Logs are attacked not to eliminate evidence, but to obtain additional secrets.
- In countries with small numbers of banking institutions, the institutional BIN numbers are limited. Therefore, it is possible to guess workable BIN numbers and reconstruct the card number even if most of the card number has been obscured.
Most credit cards consist of 16 digits (although some are 14 or 15 digits, such as Amex):
XXXX XXYY YYYY YYYC
C is the checksum. X is the BIN number, which refers to the issuing institution. Y is the client's card number.
You must not store the CCV, CCV2 and PVV (or PIN Verification Value). These are a credit card validation field used by many payment gateways to protect against imprint fraud as the value is on the reverse of the card. Storing this value is not allowed as per sections 3.2.3 and 3.4.
- For online forms, you must use a "password" type field for CCVs to provide some protection against shoulder-surfing. Some browsers can not tell the difference between this and a login form, and will offer to remember the details. This is not good, because it interupts the checkout process and many users click "Yes" without thinking and thus violate their cardholder agreement. Adding autocomplete="off" to the form tag will prevent many browsers from doing this.
For these reasons, it is strongly recommended that you do not present the user or your staff with open or obscured credit card numbers. If possible, do not to display any digits of a credit card at all – just the expiration date.
Patching and maintenance
The PCI DSS 6.6 requires that patches are applied within one month of becoming available for any part of your system that stores, processes, or transmits payment card information. Additionally, a formal change management process and patch testing procedure must be in place, utilizing separate development, test, and production environments.
There are two potential frauds from reversals: an insider pushing money from the organization's account to a third party, and an outsider who has successfully figured out how to use an automated reversal process to "refund" money which is not owing, for example by using negative numbers.
- Reversals should always be performed by hand, and should be signed off by two distinct employees or groups. This reduces the risk from internal and external fraud.
- It is essential to ensure that all values are within limits, and signing authority is properly assigned.
For example, in Melbourne, Australia in 2001, a trusted staff member used a mobile EFTPOS terminal to siphon off $400,000 from a sporting organization. If the person had been less greedy, she would never have been caught.
It is vital to understand the amount of fraud the organization is willing to tolerate.
Many businesses operate on razor thin margins, known as "points" in sales speak. For example, "6 points" means 6% profit above gross costs, which is barely worth getting out of bed in the morning.
Therefore, if you find yourself on the end of many charge backs after shipping goods, you've lost more than just the profit of one transaction. In retail terms, this is called "shrinkage,” but police refer to it as fraud. There are legitimate reasons for charge backs, and your local consumer laws will tell you what they are. However, most issuers take a dim view of merchants with a high charge back ratio as it costs them a lot of time and money and indicates a lack of fraud controls.
You can take some simple steps to lower your risk. These are:
- Money is not negative. Use strong typing to force zero or positive numbers, and prevent negative numbers.
- Don't overload a charge function to be the reversal by allowing negative values.
- All charge backs and reversals require logging, auditing, and manual authorization.
- There should be no code on your web site for reversals or charge backs
- Don't ship goods until you have an authorization receipt from the payment gateway
- The overwhelming majority of credit cards have a strong relationship between BIN numbers and the issuing institution's country. Strongly consider not shipping goods to out-of-country BIN cards
- For high value goods, consider making the payment an over-the-phone or fax authority.
Some customers will try charge backs one time too many. Keep tabs on customers who charge back, and decide if they present excessive risk
Always ask for the customer's e-mail and phone number that the issuing institution has for the customer. This helps if other red flags pop up.
A 10 cent sign is worth a thousand dollars of security infrastructure. Make it known on your website that you prosecute fraud to the fullest extent of the law and all transactions are fully logged.
- AMEX, Visa, Mastercard, Discover, JCB, Diner’s Club – Payment Card Industry
Payment Card Industry (PCI) Data Security Standards council
- PCI DSS 1.1
Supporting Documents (Audit Guide, Annual Self Assessment doc, 1.0 to 1.1 changes, etc)
Cardholder Information Security Program
Account Information Security Program
- Visa and AMEX revoke CardSystems for PCI breaches: