When you’re a popular name in the payment gateway market, like Stripe, you need to maintain a reputation for intelligent payment processing as well as strict payment security. Customers expect proactive fraud prevention and compliance management features to be inherently included in your offerings. Failing to do so will harm your brand, and you might not even get two more strikes to reaffirm your presence.
Recently released data by the Federal Trade Commission suggests losses of over USD 10 billion due to investment and imposter fraud are among the top ones. Many of these frauds are planned and maneuvered through online means, and payment gateways play an essential role.
A robust risk management platform can help you ensure zero fraud incidents and stern regulatory compliance for your payment gateway platforms and services.
Our experts at Zymr bring deep insights into such solutions, having led a project for risk management for the payment solution WePay. The following blog attempts to collate these insights and help you visualize a secure, anti-fraud risk management solution for your payment gateway.
Understanding the Risks in Payment Gateways
Payment gateways are responsible for operating upon some of the most sensitive and vulnerable data points like credit card numbers, bank details, security numbers, and more. Having access to such sensitive data makes them a desired target for a large number of cyberattacks. Therefore, to build a risk management platform for these software solutions, we must understand the associated risks:
Absence of security automation: The security of an infrastructure handling thousands of financial transactions at any given moment cannot be left to human monitoring. While manual intervention might be needed for high-level decision-making, the fundamental processes and data handling need to be responded to with automated security measures. Therefore, a lack of security automation measures is a huge risk for payment gateways.
Data security: A breach in data security for payment gateways can directly lead to financial losses. Regulations like PCI-DSS were implemented because of this very concern. Therefore, if proper encryptions, access controls, and alert systems are not in place for data security, the payment gateway is at a high risk of breach.
Third-party risks: In 2013, Target, the retail mogul, had to pay USD 18.5 million as a settlement after losing its customer data to hackers. The third-party vendor that fell victim to this attack exposed crucial server credentials to the attackers. The story's moral is that a system’s security is as good as its third-party vendors. As payment gateways deal with many third-party vendors, the associated risks can come naturally.
Regulatory Compliance: We discussed PCI-DSS, but administrative authorities follow many other regulations to ensure security compliance. The payment gateway needs to meet GDPR, SBOM regulations, and more to ensure secure financial transactions. Any mismanagement of compliance with these regulations is a direct invitation to cyberattacks.
What is a Risk Management Platform for Payment Gateways?
A risk management platform for payment gateways is a collaborative ecosystem of various applications designed to protect payment gateways from risks such as fraudulent transactions, data breaches, and compliance failures. Payment gateways, of course, are the solutions that help individuals or businesses make online payments. A risk management platform offers a countermeasure that security admins take to address risks associated with these payments. It helps ensure that any suspicious activities are immediately flagged, all the sensitive data is well protected, all the compliance measures are strictly adhered to, and all the third-party tools and apps are well-audited and thoroughly checked for security loopholes.
Why Risk Management is Crucial for Payment Gateways?
As soon as commercial transactions are involved, the security risks for any solution can escalate exponentially. This makes payment gateways vulnerable to expectantly severe and repetitive attack risks. Therefore, risk management becomes crucial for these solutions. Here’s a breakdown to better understand these needs:
Eliminating Fraud: The most considerable risk for payment gateways is being used in fraudulent transactions. Mindful risk management can help them eliminate these risks by bringing in technology resources that can flag possible fraudulent transaction attempts.
Protecting Data: While focusing on processing transactions and ensuring data integrity, payment gateways find it difficult to seal all possible entry points for cyber attackers. Risk management helps with this task by handling all encryptions, access controls, secret management, etc.
Compliance Management: Commercial transactions also touch upon sensitive legislative matters. Therefore, country—and region-wise administrations have regulations that payment gateways must abide by to be permitted to operate. Risk management assures this compliance by offering adherence to regulations like PCI DSS, SBOM, GDPR, and more.
Key Features of a Risk Management Platform
The security concerns of a payment gateway are more concentrated around compliance, data protection, and mismanagement of access privileges. Handling the resulting risks, therefore, would require direct addressing of these concerns. Here are some key features of a risk management platform that enables this addressing:
Fraud detection: Risk management platforms have integrated means to detect fraudulent patterns, such as multiple transactions in a short time, suspicious changes in account details, and the usage of proxy servers. Using AI-powered tools, the platforms can assess these patterns and take remedial actions without human intervention.
Centralized monitoring: Any flagged risks or any countermeasures can be monitored and assessed for future strategies leveraging a dashboard. Risk management platforms use these dashboards to configure new risk-scanning rules and develop new auto-fixes.
DevSecOps: Engaged with a CI/CD pipeline, payment gateways can be consistently updated with new patches. However, the DevSecOps resources that the risk management platform inherently comes with can help detect and eliminate any vulnerabilities. Scanning the IaC policies, avoiding any hard-coded secrets, and ensuring strict access controls are some of the offerings of the DevSecOps feature.
API Security: Payment gateways generally engage with multiple APIs to offer their services to the end customer. These APIs are lucrative targets for cyber threat actors as they don’t necessarily abide by the security best practices one would expect them to. Risk management platforms ensure that proper encryptions, role-based access controls, and data protection measures are taken when engaging with APIs.
Compliance Management: The platforms are cognizant of the regulatory requirements that the payment gateways must adhere to. It takes care of monitoring and implementing KYC, SBOM, PCI-DSS, or any other such compliance requirements to make the gateways risk-free.
Building a solution like a risk management platform requires a multi-phase strategy. We begin with assessing the existing ecosystem around the payment gateway that is handling any potential risks. This gives us the user stories that might need to be either modernized or built from scratch for the payment gateway. Here’s what the whole process looks like, step by step:
Step 1—Understanding the legacy ecosystem
The factors to watch here include the architecture of the legacy systems, the programming languages, the scaling limitations, and the UI/UX. A nuanced look would also consider the AI/ML maturity, the compliance management resources, and the automation friendliness, among other things. If there is no existing system for risk management, we can directly move to step 2.
Step 2—Strategizing user stories and business goals
As a collaborative effort with the decision-makers for the payment gateway, this step helps lock down the functional and non-functional goals expected from the risk management platform. These would include the number of transactions that need to be handled daily, compliance regulations that the gateway has to follow, the third-party APIs that the software engages with, and more. It is also essential to check on the infrastructure that the tool will be operating upon. Risk management for virtual machines will look very different from risk management for IaC.
Step 3—Technical Requirements
Once the requirements are locked and different user stories are defined, we need to bring in suitable technologies for the system. Java is a reliable programming language for such applications where security is to be the topmost priority irrespective of the cost. A suitable cloud vendor among GCP, AWS, Azure or any other can be picked as per the gateway's own security requirements. IaC can also be used to make the platform infrastructure agnostic. AI-powered tools can be integrated to ensure threat intelligence.
Step 4—Agile Development
The end-to-end development can begin once the DevSecOps resources are in place. Tools for automated testing, containerization, UI/UX design, and more can be integrated to build, test, and deploy various facets of the risk management systems.
Step 5—Delivery
With efficient documentation for notable challenges, various architecture details, version details, and the modernizations done in legacy systems, the delivery can be concluded. An SBOM is also required to make sure all the dependencies in the platform are accounted for.
Technologies and Tools to Use
Here are technologies that are required to build a robust risk management platform for a payment gateway like Stripe:
Frontend - Angular and React
Using technologies like Angular and React for front-end development allows us to build a fast, interactive, and scalable UI.
The technologies are very effective in building interfaces that will help administrators, risk managers, and analysts interact with the platform.
Both frameworks are popular for building single-page applications (SPAs) and offer extensive libraries for real-time updates and intuitive responses.
They also support advanced dashboards for the risk management system that can present real-time alerts, reports, and analytics.
Cloud - GCP, AWS, or Azure Cloud
Picking a suitable cloud vendor is necessary for the platform's foundational cloud infrastructure.
Cloud infrastructure would ensure the platform's scalability to handle high transaction volumes with minimal latency.
It will also help with built-in security features like Identity and Access Management (IAM) and encryption that abide by the security and compliance standards.
Data analytics capabilities these vendors offer are also necessary to efficiently integrate and utilize AI/ML models and ensure real-time fraud detection and risk assessment.
Java is robust, highly scalable, and has a rich ecosystem of libraries.
Java can efficiently process high transaction volumes and handle real-time data streaming.
PostgreSQL is a powerful, open-source database that provides secure, stable data storage with strong ACID (Atomicity, Consistency, Isolation, Durability) compliance.
PostgreSQL’s support for JSON, full-text search, and other data types is useful for storing diverse risk profiles, customer data, and transaction logs.
AI/ML - TensorFlow, PyTorch
TensorFlow and PyTorch are critical for implementing machine learning and AI models.
AI models can detect patterns and anomalies that may indicate fraudulent activity.
TensorFlow and PyTorch allow for deep learning models to analyze massive datasets and identify unusual behaviors.
AI-driven fraud detection reduces manual review, flags suspicious transactions, and continuously learns from data.
Quality Assurance - Python-based custom framework
The Python-based custom QA framework is used to build test cases and run automated testing.
It helps ensure that every function within the risk management system works as expected.
For a platform dealing with financial data, thorough QA is essential to prevent any potential bugs or vulnerabilities that could compromise data integrity.
Python is flexible and powerful, making it a good fit for writing unit tests, integration tests, and end-to-end tests to validate both the platform’s business logic and the AI/ML algorithms.
DevOps - Kubernetes, Docker
Kubernetes and Docker can enable seamless deployment, scaling, and management of the platform’s services.
The tools offer reliability and scaling to handle increased traffic and processing demands as transaction volumes grow.
They also ensure resilience by isolating services in containers so individual components (like microservices) can be independently managed or scaled without impacting the entire system.
Automated deployment through continuous integration and delivery pipelines helps reduce manual errors and speeds up security updates and patches.
Infrastructure Management - Terraform, Datadog
Terraform is essential for infrastructure as code (IaC) capabilities that allow developers to define, manage, and version infrastructure.
The platform also enables consistency, reproducibility, and efficiency in building and maintaining a complex cloud environment like GCP.
In a risk management platform, IaC ensures that the infrastructure remains consistent and easily replicable, making it easier to scale securely.
Datadog helps with monitoring and observability to ensure real-time updates and scanning for performance, infrastructure health, and security metrics.
The tool also ensures that any unusual spikes, anomalies, or errors can be quickly detected for immediate response to potential security or performance issues.
SaaS Features (Role-Based Access Control, API Security, Encryption)
Role-Based Access Control (RBAC) is crucial for regulating access, ensuring only authorized users have access to sensitive data and specific functionalities based on their role, which minimizes internal security risks.
API Security and Encryption are integral to protecting the data exchanged between the platform and external systems. Strong encryption methods safeguard sensitive information during transmission and storage, while robust API security protocols help prevent unauthorized access to data and services.
Case Study: How we implement the risk management platform for WePay
We helped modernize a risk management platform for the payment gateway vendor WePay. The project required building some features from scratch, leveraging the above-mentioned processes, technologies, and tools. Below is an overview of the project.
Challenges in Building a Risk Management Platform
Based on our own experiences with building the platform for WePay, here are the major challenges that can come up while building a risk management system for a payment gateway:
Legacy systems: Legacy systems often lack the flexibility and responsiveness to detect fraud effectively in real time. They may have been developed when transaction volumes were lower, and fraud patterns were simpler. This limits their offerings in risk management, especially with the exponential growth in daily transactions that payment gateways now have to face.
API specifications: Third-party APIs may not always meet the security standards posed by gateway vendors, leaving their access or connection points vulnerable to security mishaps. Also, many APIs don’t have a software bill of material (SBOM) that would offer specifications about all the dependencies within their code. This might cause blind spots in the platform's security visibility.
Integration challenges: Fraud detection systems must pull data from various sources, including customer accounts, transaction records, and external tools. Integrating this data from diverse systems—each with its own architecture and data format—can be complex.
Real-time processing: Risk management systems must operate in real-time to minimize potential losses. This demand for instant processing has its own challenges when dealing with high transaction volumes. Without properly implemented dashboards that offer constant surface visibility, the platforms can overlook many vulnerabilities.
Conclusion
Payment gateways like Stripe have helped businesses of all scales and sizes across industries maintain ease of financial transactions. They relieve businesses of many financial and compliance management issues and are, therefore, an essential part of their digital ecosystems. However, the gateway vendors need to be proactive about taking useful security measures to maintain a reliable relationship with the customer businesses. A risk management system can offer exactly that by bringing together many technologies and tools that solely focus on keeping the transactions safe and the customer data secure.
Conclusion
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