What Is Secure Electronic Transaction (SET)?

The secure electronic transaction (SET) was created in 1996 as a communications protocol for e-commerce websites to process electronic debit and credit card payments safely. Merchants can now use secure electronic transaction protocols to verify their customers' card information without actually seeing it. This helps to protect customers from account theft, hacking, and other criminal actions. Additional digital security standards for online debit and credit card transactions were established following the implementation of secure electronic transaction protocols in the mid-1990s. Visa was one of the first to implement 3-D Secure, a new security standard later adopted by Mastercard, Discover, and American Express in various forms.

Basics

In e-commerce, an early communications protocol called Secure Electronic Transaction emerged as a crucial tool to ensure the safety of electronic debit and credit card payments. SET enabled the secure transmission of consumer card information through internet-based electronic portals. These protocols played a pivotal role in shielding personal card details, effectively deterring unauthorized access by merchants, hackers, and cybercriminals.

What Is Secure Electronic Transaction (SET)?

Major electronic transaction providers like Visa and MasterCard actively supported secure electronic transaction protocols. These protocols offered a protective shield for customers, allowing merchants to verify card information without direct exposure. Instead, the card details were securely transferred to the credit card company for verification.

At the core of secure electronic transactions were digital certificates. These certificates granted electronic access to funds from a credit line or a bank account. Whenever an electronic purchase occurred, encrypted digital certificates were generated for the transaction participants: the customer, merchant, and financial institution. These certificates were accompanied by corresponding digital keys, enabling the parties to authenticate each other's credentials and validate the transaction. Through sophisticated algorithms, only the party possessing the appropriate digital key could confirm the transaction. Consequently, consumers could utilize their credit card or bank account for transactions without disclosing personal information like account numbers. Secure electronic transactions effectively countered account theft, hacking, and other criminal activities.

Evolution of Online Transaction Security: From SET to 3-D Secure

In response to the rise of e-commerce in the mid-1990s, secure electronic transaction protocols were developed to address the security challenges associated with online transactions. At the time, online business was a new frontier, and the existing security measures were evolving with varying effectiveness. SET protocols defined standardized guidelines that allowed retailers and financial institutions to implement secure online payment systems, provided they had the necessary decryption and transaction processing software.

In 1996, the SET Consortium, comprising VISA, Mastercard, GTE, IBM, Microsoft, Netscape, SAIC, Terisa Systems, RSA, and VeriSign, united to merge incompatible security protocols, namely STT from Visa and Microsoft, and SEPP from Mastercard and IBM, into a cohesive standard.

Following the introduction of SET protocols, alternative standards for secure online debit and credit card transactions emerged. Visa, an early proponent of SET, eventually adopted a different framework known as 3-D Secure for its customers' secure digital payments and transactions. The 3-D Secure method is an XML-based protocol that functions as an additional layer of security for online credit and debit card transactions. Originally developed collaboratively by Visa and Arcot Systems (now CA Technologies), similar protocols based on 3-D Secure have since been adopted by Mastercard, Discover, and American Express.

Conclusion

The development of Secure Electronic Transaction protocols revolutionized the security of electronic debit and credit card payments in e-commerce. By enabling the secure transmission of consumer card information and blocking access to personal details, SET protocols safeguarded customers from account theft and cyber threats. These protocols received support from major providers like Visa and Mastercard, allowing merchants to verify card information without direct exposure. The introduction of SET spurred the emergence of additional digital security standards, with Visa leading the way in adopting the 3-D Secure framework, later followed by other major card issuers. Overall, SET and its subsequent advancements have significantly enhanced the safety and trustworthiness of online transactions.