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Secure electronic transactions protect sensitive information during online financial transactions, using encryption and digital signatures. The SET protocol was developed by credit card companies and endorsed by Microsoft and Netscape, but its complexity led to its replacement by simpler methods like SSL.
A secure electronic transaction is a process used to enable the secure transfer of information over the Internet. Examples include credit card numbers, bank account numbers, government-issued identification numbers, and other data that must be exchanged to complete a financial transaction. It is most often used for e-commerce with credit cards or direct withdrawal of funds from a bank account and for sensitive activities such as online investing or online bank account management. In fact, the development of secure electronic transactions integrated into a website’s payment system has made electronic commerce not only possible but in many ways safer and more secure than traditional financial transactions.
The term “secure electronic transaction” refers specifically to SET, a specific security protocol that uses multiple layers of encryption to protect sensitive information. In SET, a typical secure electronic transaction works on the basis of a series of electronic signatures. Merchants, customers and banks receive individual digital signatures, often encrypted for an individual secure electronic transaction so that each individual purchase has its own set of encryption keys, and all credit card or bank account numbers are protected against exposure and possible fraud. This results in a complex but ultimately very secure system. To use SET, both the client’s browser and the merchant’s server must be SET-enabled.
Providing another layer of security, each transaction uses a dual signature. A set of order information is sent to the merchant with one signature, and payment information is sent to the customer’s bank with another signature. Therefore, the credit card number is not disclosed to the merchant, and the content of the customer’s order is not disclosed to the bank. This system requires order information and payment information to be linked, and requires the use of a digital “wallet”, in which customer information is stored.
When initially introduced, the secure electronic transaction protocol was supported by several credit card companies and merchants, including MasterCard and Visa, who were originally involved in its development. Microsoft and Netscape also endorsed the protocol, and it was expected to become the standard for electronic commerce. However, using SET requires additional software to create and maintain the digital wallet, as well as additional expenses and support to maintain the system. Ultimately, the level of complexity required for SET led to its being largely replaced by simpler and less expensive secure electronic transaction methods based on protocols such as Secure Socket Layers (SSL).
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