Growing vulnerabilities in financial security in Nigeria have led to financial losses for businesses and undermined customers’ trust. For example, unauthorized Point of Sale (POS) frauds accounted for 24.6% of reported cases last year, while web-based fraud made up 16.9% of incidents, highlighting the urgent need for enhanced security measures.
To tackle this rising concern, some financial institutions have implemented strict compliance and security-related protocols and taken action against fintech companies involved in fraudulent activities. These measures aim to reduce the impact of fraud, safeguard financial transactions, and rebuild trust in the fintech ecosystem.
In a competitive market, where one security breach can affect a business’ credibility, impacting users and future growth, this landscape creates a pressing need for developers, product managers, and fintech operators in general to prioritize compliance with Nigeria’s rigorous regulatory frameworks and to embed robust security measures into their payment solutions from day one.
This guide will equip you with the tools to meet compliance requirements, prevent fraud, protect payment details, and build resilient security for your payment gateway.
What is a Payment Gateway?
A payment gateway is a technology solution that allows businesses to confidently process online payments without relying on traditional banking systems. By eliminating the need for your customers to go through the banking system directly, payment gateways provide a seamless and efficient way for merchants to accept payments.
Rather than requiring customers to visit physical locations or use traditional payment methods, businesses can integrate these digital payment solutions into their systems. This is especially beneficial in regions like Nigeria, where the growing digital economy is driving the need for efficient payment processing.
Choosing the right payment gateway providers allows merchants to accept payments securely and build customer trust. For example, integrating the hosted payment gateway into your system allows you to optimize payment processing, enhance customer experience, and ensure your business complies with industry standards. Let’s take a closer look at hosted payment gateways and how they work:
What is a Hosted Payment Gateway?
A hosted payment gateway is a solution that redirects your customers to a third-party platform to complete their transactions. Unlike self-hosted options, where payment processing occurs on your servers, a hosted payment gateway ensures secure payment processing by transferring sensitive payment information to the provider’s platform. This approach minimizes the risk of fraud and ensures compliance with PCI DSS standards.
Using a hosted payment gateway, your business can accept various payment methods while relying on your payment gateway provider to handle the complexities of compliance and security. This makes it easier to reduce the risk of exposing payment details while maintaining control over the transaction flow.
For example, Flutterwave is a hosted payment gateway that facilitates reliable transactions across multiple methods, including bank transfers, card transfers, and mobile money. It simplifies setting up and integrating payment methods into your system, offering businesses a wide range of solutions for their payment needs.
Top Compliance Regulation for Payment Gateways
As a developer integrating a payment processor into your application, there are certain legal rules and standards that you must follow to comply with the payment gateway providers you’re working with.
These requirements are centered around legal obligations, data security, financial protection, reputational management, customer trust, and many more. Given the importance of strong compliance, global financial bodies collaborate to establish unified frameworks like the Payment Card Industry Data Security Standard (PCI DSS) to help developers understand how to protect cardholder data and transaction security.
Although the requirements differ by location, they still guide you toward making the right decisions while building your solution and upholding the security of your assets. Here are examples of regulatory and compliance frameworks enforced in Nigeria:
- Central Bank of Nigeria (CBN) Regulations
- Nigeria Data Protection Regulation (NDPR)
- Anti-Money Laundering (AML) and Know Your Customer (KYC) Standards
- Other Regulatory Bodies and Standards
- Central Bank of Nigeria (CBN) Regulations
The Central Bank of Nigeria is the primary financial regulator in Nigeria. One of its key responsibilities is to enforce compliance for all financial-related companies. Some of these regulations include the New CBN Licensing Framework for payment solutions, the MPC mandate, and the CBN Cybersecurity Framework.
The Central Bank of Nigeria (‘CBN’) issued a new circular (PSP circular) on December 9, 2020, setting out a new licensing framework for payment service providers. This means that payment gateways must now comply with this licensing framework set by the CBN, which defines the specific categories of licenses available.
Flutterwave strengthens its credibility and supports businesses in providing seamless, secure payment solutions. In addition to licensing compliance, Flutterwave adheres to the CBN Cybersecurity Framework, safeguarding payment processing systems against potential threats. This commitment to regulatory and security standards enables Flutterwave to deliver a reliable payment service.
- Nigeria Data Protection Regulation (NDPR)
The Nigeria Data Protection Regulation is a legal framework introduced by the National Information Technology Development (NITDA) in January 2019 to ensure the privacy and protection of personal data in Nigeria. They govern how organizations collect, store, process, and share customers’ payment details in Nigeria.
Non-compliance could lead to penalties and damage your customers’ trust, making it essential for payment solutions to prioritize data privacy and security in their operations.
Flutterwave, as a secure payment gateway, complies with the Nigeria Data Protection Regulation (NDPR) to ensure the privacy and protection of customer data. In addition to complying with NDPR, Flutterwave integrates advanced data protection measures, such as encryption and PCI DSS compliance, into its payment processing systems.
- Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Standards
The Anti-Money Laundering and Combating the Financing of Terrorism are measures to uphold the stability and integrity of global financial systems and national economies. The aim is to prevent criminals from legitimizing illicitly obtained assets by concealing their unlawful origins. Financial institutions and payment service providers are required to implement control over the procedures to detect and report any suspicious transactions.
Flutterwave, as a leading payment gateway provider, incorporates stringent AML protocols and CFT verification processes into its platform, allowing identity verification and automated transaction monitoring. These measures ensure regulatory compliance while protecting businesses and customers from fraudulent activities.
- Other Regulatory Bodies and Standards
Several other regulatory bodies and standards govern Nigeria’s payment gateway operations. These organizations verify that the financial industry complies with global best practices while maintaining security, data protection, and consumer trust. Some of these bodies include the Nigerian Financial Intelligence Unit (NFIU), the Securities and Exchange Commission (SEC), and the Financial Action Task Force (FATF).
Through these measures, Flutterwave reinforces its position as a secure payment gateway by adhering to these regulations.
Flutterwave maintains high standards of security, data protection, and consumer trust. It allows Flutterwave to offer a reliable payment service, including support for credit cards and digital wallets to protect customers from risks of fraudulent transactions.
Compliance helps you keep up with industry standards, avoid legal issues, and maintain an ethical operation. On the other hand, payment gateway security is all about taking active steps to protect your business from risks when building them. Let’s consider some key steps when integrating a secured payment gateway.
Security Requirements for Payment Gateways
Here are some key considerations to look out for in a secure payment gateway:
- Secure Socket Layer (SSL) and Transport Layer Security (TLS)
- Payment Card Industry Data Security Standard PCI DSS
- Tokenization and Encryption
- Two-factor authentication (2FA)
- Fraud Detection and Prevention
- Secure Socket Layer(SSL) and Transport Layer Security(TLS):
SSL and TLS are protocols that establish secure connections over the internet so that data transferred between users and servers is encrypted and safe from interception. In a payment system, these protocols protect sensitive information, such as card details, for credit card payments during the transaction.
Flutterwave ensures protected data transmission between customers, merchants, and its payment gateway by utilizing SSL/TLS encryption. This encryption secures the request and response pipeline, protecting sensitive information exchanged during the transaction.
- Payment Card Industry Data Security Standard PCI DSS:
PCI DSS is a global security standard that applies to organizations handling cardholder data, including payment gateways like Flutterwave. Flutterwave meets strict security requirements for protecting your customers’ payment information by complying with PCI DSS.
- Tokenization and Encryption:
Tokenization replaces private information, such as credit card or bank details, with a non-sensitive identifier, or “token,” that is useless if intercepted. Encryption, on the other hand, encodes sensitive information, rendering it unreadable to unauthorized parties during transmission. Together, tokenization and encryption significantly reduce the risk of data breaches.
Flutterwave uses tokenization and encryption to protect sensitive financial information, particularly during card transactions such as Flutterwave Card Charges. Tokenization replaces sensitive data, such as card and bank details, with a unique identifier (token) that has no exploitable value. This token is then used for transactions without exposing the original data, significantly reducing the risk of data breaches and ensuring a seamless experience as a payment processor.
- Two-Factor Authentication (2FA):
Two-factor authentication (2FA) is a security measure that requires users to verify their identity through two distinct forms of authentication, adding an extra layer of protection against unauthorized access.
Flutterwave enhances transaction security by implementing Two-Factor Authentication (2FA), which adds an extra layer of verification during the transaction. With 2FA, users must confirm their identity using a combination of something they know (such as a password) and something they have (such as a mobile number, email, or One-Time Password).
This process helps ensure that only the legitimate cardholder or account owner can complete their transaction.
- Fraud Detection and Prevention:
Fraud detection and prevention are essential practices in payment security aimed at identifying and stopping suspicious activities before they result in fraud.
Flutterwave incorporates fraud detection and prevention mechanisms to identify and block suspicious transactions. These techniques include monitoring for unusual activities, like multiple failed login attempts and unusual IP addresses. Flutterwave also employs measures like limiting the number of transactions within a specific time or blocking transactions from known fraudulent sources.
Best Practices for Ensuring Compliance and Security with Payment Gateways
Here are some general best practices to look out for as a developer when integrating your Payment Gateway:
- Regularly auditing payment gateways helps you identify vulnerabilities and potential fraud risks and ensure adherence to industry standards and regulatory requirements.
- Make sure that end-to-end encryption is used in the transaction processes. This means that even if your data is intercepted during transmission, it remains unreadable and safe from unauthorized access.
- Staff training on compliance, security protocols, and fraud detection. This type of training equips your employees with the knowledge to handle data. It would help your employees understand the importance of safeguarding transaction information.
- Working with a certified and reputable payment processor. Flutterwave, for example, provides the necessary requirements to help businesses meet global security standards.
- Staying updated with new regulations and technological advancements, such as those outlined in PCI DSS compliance, is essential for maintaining a secure payment infrastructure. By regularly monitoring changes in technological developments, you can proactively adapt to emerging trends and mitigate risks to optimize your payment processes.
Wrapping Up
Now that you understand a payment gateway, the importance of compliance and security in relation to payment gateways, and how they contribute to running a smooth and successful business, you’re ready to take the next step in building your solutions.
Flutterwave is a powerful payment gateway that prioritizes compliance, ensuring your business can reliably process transactions while adhering to regulatory standards.
Sign up for a Flutterwave account to get started, or join the Slack community to stay up-to-date with the latest developments. Visit our developer documentation page to learn more about the best practices for integrating our payment solutions into your websites and apps.