Secure Electronic Transaction (SET)

Secure electronic transaction (SET) was an early protocol for electronic credit card payments. As the name implied, SET was used to facilitate the secure transmission of consumer credit card information via electronic avenues, such as the Internet. SET blocked out the details of credit card information, thus preventing merchants, hackers and electronic thieves from accessing this information.

Secure electronic transactions were backed by most of the major providers of electronic transactions, such as Visa and MasterCard. SET allowed merchants to verify their customers' card information without actually seeing it, thus protecting the customer. The information on the card was instead transferred directly to the credit card company for verification.

The underlying protocols and standards for secure electronic transactions were backed and supported by Microsoft, IBM, MasterCard, Visa, Netscape, and others. Digital certificates were assigned to provide the electronic access to funds, whether it was a credit line or bank account. When a purchase was made electronically, encrypted digital certificates were what let the customer, merchant, and financial institution complete a verified transaction.

Digital certificates were generated for participants in the transaction, along with matching digital keys that allowed them to confirm the certificates of the other party. The algorithms used would ensure that only a party with the corresponding digital key would be able to confirm the transaction. This way a consumer’s credit card or bank account could be used without revealing details like account numbers. Thus, SET was a form of security against account theft, hacking, and other criminal actions.

The development of SET came in response to the emergence and growth of e-commerce transactions over networks, especially consumer-driven purchases over the Internet. Conducting business online was a new, untamed frontier in the mid to late 1990s, and the same could be said of the varying degrees of security available across the developing networks. The protocols defined by the secure electronic transaction standards allowed for payment systems to be developed and used retailers and financial institutions. Merchants and financial institutions needed to have the appropriate software to properly decrypt and process the digital transactions.

Other standards for digital security for online debit and credit card transactions emerged after SET was introduced. Visa, one of the early proponents for SET, would later go on to adopt a different protocol, 3-D Secure, as the framework for secure digital payments and transactions for its customers.