Skip to content

Secure Electronic Transaction

What is Secure Electronic Transaction (SET)?

SET is a security protocol designed to protect electronic payment transactions. It was developed in the mid-1990s by a consortium of companies, including Visa and MasterCard, with the goal of providing a safe method for consumers and merchants to conduct online credit card transactions.

The main purpose of SET was to secure the process of transmitting sensitive payment information (like credit card details) over the internet and ensure that the transaction is legitimate, private, and tamper-proof.

Key Features of SET:

  1. Authentication:
    • Cardholder Authentication: SET ensures that the consumer is indeed the rightful owner of the card being used. This is achieved through digital certificates.
    • Merchant Authentication: The merchant’s identity is also verified through digital certificates. This helps prevent fraud by ensuring the merchant is legitimate.
  2. Confidentiality:
    • All sensitive data, such as credit card numbers and personal information, are encrypted during transmission. This prevents unauthorized parties from accessing and reading the data.
  3. Integrity:
    • SET ensures that the transaction details (like the amount, card number, and merchant info) are not altered while in transit. It uses digital signatures to verify that the data received is identical to what was sent.
  4. Non-repudiation:
    • Once the transaction is completed, neither the cardholder nor the merchant can deny having participated in the transaction, because digital signatures are used to confirm both sides’ involvement.

How SET Works:

  1. Step 1: Cardholder Initiates Payment
    • The customer chooses to purchase an item from a merchant’s online store and proceeds to the checkout page.
    • The customer selects a credit card for payment, and the browser generates a transaction request.
  2. Step 2: Information Encryption
    • Before sending the payment information to the merchant, the customer’s payment details (credit card number, expiration date, etc.) are encrypted using the merchant’s public key.
    • The transaction request also includes a digital signature to verify the authenticity of the customer’s request.
  3. Step 3: Merchant Receives Payment Request
    • The merchant receives the payment request and decrypts it using their private key.
    • The merchant then sends the transaction details (still encrypted) to the payment gateway or bank for further authorization.
  4. Step 4: Authorization by Bank or Payment Gateway
    • The bank or payment processor verifies the transaction using the cardholder’s credit card details and authorizes or declines the payment.
    • The merchant is informed of the authorization status.
  5. Step 5: Transaction Completion
    • If the payment is authorized, the transaction is completed. The merchant ships the goods or provides the service.
    • A receipt or confirmation is sent to the customer.

Benefits of SET:

  • Security: With encryption and digital signatures, SET offers robust security for online transactions.
  • Privacy: Sensitive information, such as credit card numbers, is not exposed to the merchant directly.
  • Fraud Prevention: The authentication processes help prevent fraudulent transactions.

Challenges & Decline:

While SET was a strong and secure system, it never became widely adopted for several reasons:

  • Complexity: SET was relatively complicated to implement, requiring merchants, cardholders, and banks to have digital certificates and specific software.
  • Performance: The encryption and decryption processes added significant overhead to transactions, making it slower compared to other systems.
  • Alternative Protocols: Other simpler protocols like SSL (Secure Socket Layer) and later TLS (Transport Layer Security) emerged and became widely adopted for securing online transactions. These protocols offered encryption and data integrity with less complexity, which contributed to SET’s decline.

Current Relevance:

Although SET is no longer in widespread use today, the principles it introduced—such as encryption, digital signatures, and authentication—continue to play a vital role in securing electronic payments. Modern online payment systems use a combination of technologies like TLS, 3D Secure, and tokenization to secure online transactions and prevent fraud.

In summary, Secure Electronic Transaction (SET) was an early attempt to make online credit card payments more secure by using encryption, digital signatures, and authentication. Though it was eventually replaced by more efficient systems, it laid the groundwork for the secure online payment systems we use today.