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Secure Electronic Transactions (SET): Working & More

Secure Electronic Transaction

Secure Electronic Transaction (SET) is an electronic payment system designed to guarantee the confidentiality and authentication of online transactions. It was created to tackle security issues related to online payments and establish a secure environment for conducting transactions on the Internet. SET operates by encrypting sensitive financial information for all transaction participants. In this blog, we will explore Secure Electronic Transactions (SET), benefits, participants, and many more. Let’s delve into it.

What is Secure Electronic Transaction (SET)?

Secure Electronic Transaction (SET) is a standard protocol for securing credit card transactions over the Internet. Visa and MasterCard developed it in collaboration with other technology companies to ensure the security and integrity of online transactions. SET provides a secure method for transmitting credit card information between customers, merchants, and banks.

Secure Electronic Transaction Participants

  • Customer: The customer is the individual making a purchase online using a credit card. They initiate the transaction by selecting items to purchase and providing payment information. In SET, the customer’s role includes encrypting their payment information using the merchant’s public key and ensuring the security of their transaction details.
  • Merchant: The merchant is the online retailer or business that sells goods or services to customers. In the context of SET, the merchant’s role includes providing a secure website for customers to make purchases, obtaining a digital certificate to authenticate their identity, and ensuring the integrity of the transaction process.
  • Payment Gateway: The payment gateway is a service provider that securely processes credit card transactions between the customer, merchant, and bank. Payment gateways play a crucial role in SET by encrypting and transmitting payment information, verifying transaction details, and obtaining authorisation from the issuer before completing the transaction.
  • Issuer: The issuer is the bank or financial institution that issued the credit card to the customer. In SET, the issuer’s role includes verifying the customer’s identity, authorising the transaction based on available funds, and providing a digital certificate to authenticate their identity in the transaction.
  • Acquirer: The acquirer is the bank or financial institution that processes the credit card transaction on behalf of the merchant. In SET, the acquirer’s role includes receiving transaction details from the payment gateway, verifying the merchant’s identity, and facilitating the transfer of funds between the issuer and the merchant’s account.

Overall, these participants work together in a Secure Electronic Transaction to ensure the security, integrity, and authenticity of online credit card transactions, providing a safe and reliable method for customers to make purchases over the Internet.

How does Secure Electronic Transaction work in E-commerce?

SET works in e-commerce in the following ways:

  • Initialisation: The customer starts a purchase on the merchant’s website and selects to pay with a credit card.
  • Encryption: The customer’s web browser encrypts the payment information using the merchant’s public key. This ensures that the payment details are secure during transmission.
  • Certificate Exchange: The merchant sends its digital certificate, which includes its public key, to the customer. The certificate helps authenticate the merchant’s identity.
  • Payment Information: The customer uses the merchant’s public key to encrypt the payment information, including the credit card number and transaction amount. This encrypted data is then sent back to the merchant.
  • Authorisation: The merchant forwards the encrypted payment information to the payment gateway for authorisation. The payment gateway decrypts the data and verifies it with the issuer (customer’s bank) to ensure that the customer has sufficient funds.
  • Confirmation: After the issuer approves the transaction, the payment gateway sends a confirmation to both the merchant and the customer. This confirmation indicates that the transaction was successful and the payment will be processed.
  • Transaction Completion: With the authorisation and confirmation in place, the merchant completes the transaction and fulfils the customer’s order. The customer receives the purchased goods or services, and the payment process is finalised.

Secure Electronic Transaction

Security Architecture of Secure Electronic Transaction

The security architecture of Secure Electronic Transaction (SET) is based on a blend of digital certificates, encryption, and digital signatures, ensuring the security of online transactions. This architecture comprises:

  • Digital Certificates: These certificates authenticate the identity of participants involved in the transaction. They verify that the merchant, payment gateway, and other entities are legitimate and can be trusted.
  • Encryption: SET employs encryption to secure sensitive information, like credit card numbers, during transmission. This ensures that the data is unreadable to unauthorised parties, safeguarding it from theft or interception.
  • Digital Signatures: Digital signatures are used to provide proof of the authenticity and integrity of transaction data. They ensure that the data has not been altered or tampered with during transmission, verifying its validity.

Benefits of SET

  • Security: SET provides a secure method for transmitting credit card information over the Internet.
  • Privacy: Customer information is protected from unauthorised access.
  • Authentication: Participants in the transaction are authenticated using digital certificates.
  • Integrity: The integrity of the transaction data is maintained through digital signatures.
  • Fraud Prevention: SET helps prevent fraud by verifying the identity of participants and ensuring the integrity of the transaction data.

Future of SET in e-commerce

The future of Secure Electronic Transactions (SET) in e-commerce will likely focus on enhancing security with measures like biometric authentication and blockchain integration. SET may also expand to support new payment methods and prioritise user experience. Compliance with regulations and global adoption are critical considerations for its future development.

Secure Electronic Transaction


Secure Electronic Transaction (SET) is a secure protocol for online credit card transactions, providing confidentiality and authentication. It ensures a safe environment for online transactions, with encryption and digital signatures safeguarding sensitive information. SET involves participants such as customers, merchants, payment gateways, issuers, and acquirers working together to ensure secure transactions. The future of SET in e-commerce will likely focus on enhancing security, supporting new payment methods, and improving user experience.


1. Is SET secure for online transactions?

Ans. Yes, SET provides a secure method for transmitting credit card information over the Internet, ensuring confidentiality and authentication.

2. Who are the participants in SET?

Ans. Participants include customers, merchants, payment gateways, issuers, and acquirers, all working together to secure online transactions.

3. How does SET work in e-commerce?

Ans. SET encrypts payment information, exchanges digital certificates, and obtains authorisation from the issuer to complete transactions securely.

4. What is the future of SET in e-commerce?

Ans. The future of SET may include:

  • Enhanced security measures.
  • Support for new payment methods.
  • A focus on improving user experience and global adoption.

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