GDPR and Payments: A Guide to Data Protection Compliance

Payment data requires strict GDPR compliance to protect your business from fines of up to €20 million or 4% of global annual turnover. Every credit card transaction your business processes contains personal data that must be protected under the General Data Protection Regulation (GDPR). This guide provides practical steps to ensure your payment processing operations comply with European Union data protection standards.

Key Takeaways

• GDPR has been enforcing strict data protection standards for payment processing since May 25, 2018

• Payment data, including credit card numbers and bank details, is classified as highly sensitive personal data under GDPR

• Non-compliance can result in fines up to €20 million or 4% of global annual turnover, as demonstrated by high-profile cases.

Understanding Payment Data Under GDPR

Payment data falls squarely within GDPR’s scope as it constitutes personal data that requires protection. This means businesses must comply with rigorous data protection requirements when handling customer payments.

Types of payment information classified as personal data include credit card numbers, expiry dates, CVV codes, and cardholder names; bank account details including IBANs, sort codes, and account information; transaction histories and purchase patterns; biometric payment data such as fingerprints used for mobile payment authentication; and IP addresses and device identifiers used during payment authentication.

The collection, storage, and processing of this information is regulated under GDPR, making compliance essential for any business that handles payments within the European digital economy.

Legal Basis for Payment Data Processing

Processing payment data requires a valid legal basis under GDPR. Most payment transactions rely on one of these six legal grounds:

• Contract performance (Article 6(1)(b)): Covers most standard payment transactions that are necessary to fulfil an order or service

• Legal obligation (Article 6(1)(c)): Applies to processing required for anti-money laundering checks and other regulatory requirements

• Legitimate interests (Article 6(1)(f)): Often used for fraud prevention and risk assessment activities

• Consent (Article 6(1)(a)): Required for additional services like storing payment methods for future use

• Vital interest: Rarely applicable to payment processing

• Public task: Generally not relevant for commercial payment processing

Most daily payment operations will fall under contract performance as the primary legal basis, as processing credit card data is typically necessary to complete transactions initiated by customers. However, using payment data for marketing purposes requires separate consent beyond the completion of a transaction.

GDPR Principles in Payment Processing

Data Minimisation and Purpose Limitation

Data minimisation requires businesses to collect only the payment data necessary for specified purposes. In practice, this means avoiding the storage of full credit card numbers after transaction authorisation. Companies should implement tokenisation to replace sensitive payment data with non-sensitive tokens. It is crucial to define clear purposes for each type of payment data collected and processed, and delete payment information when it’s no longer necessary for the original purpose.

For example, if your business only needs to process one-time payments, there’s no justification for storing complete card details after the transaction is complete.

Transparency and Lawfulness

GDPR requires transparency in how you handle customer payment data. To ensure compliance, provide clear privacy notices explaining payment data collection and processing purposes. Make your privacy policy easily accessible from payment pages and checkout flows. Inform users about data retention periods for payment information and disclose which third-party payment processors handle customer data. Ensure all payment processing activities have a valid legal basis.

Transparency builds trust with your customers while also helping you adhere to GDPR’s legal requirements for information disclosure.

Technical Security Measures for Payment Data

Encryption and Data Protection

GDPR requires the implementation of appropriate technical measures to ensure the security of payment data. Key measures include implementing end-to-end encryption for payment data transmission using TLS 1.2 or higher, using AES-256 encryption for payment data storage and at-rest protection, deploying secure key management systems for encryption keys and certificates, and ensuring encryption is applied across all storage and processing environments.

These encryption standards help protect payment data from unauthorised access and create a secure processing environment.

Access Controls and Authentication

Restricting access to payment data is another essential security measure. Enforce multi-factor authentication for access to payment systems and databases. Implement role-based access controls that limit payment data access to authorised personnel. Use secure authentication protocols, such as OAuth 2.0, for payment API integrations. Deploy session management controls to prevent unauthorised payment data access. Regularly review and revoke access when it is no longer necessary.

These measures ensure that only authorised staff can access sensitive payment information, reducing the risk of internal data breaches.

Data Subject Rights in Payment Processing

GDPR grants individuals specific rights over their payment data that businesses must honour:

Right	Application to Payment Data	Timeframe
Access	Customers can request copies of their payment transaction data	30 days
Rectification	Individuals can correct inaccurate payment information	30 days
Erasure	Customers can request the deletion of payment data when no longer needed	30 days
Data portability	Allows customers to transfer payment history between service providers	30 days
Object	Enables customers to opt out of certain types of processing	30 days

Businesses must implement systems to handle these requests within the required timeframes. For example, suppose a user requests access to their payment history. In that case, you must be able to provide this information in a structured, commonly used, and machine-readable format within one month.

Limitations on the Right to Erasure

It’s crucial to understand that the ‘right to erasure,’ also known as the ‘right to be forgotten,’ is not absolute. While customers can request the deletion of their payment data, businesses are often bound by other legal requirements that override this right. For example, tax laws, specifically those related to Value Added Tax (VAT), require businesses to retain invoices and transaction records for several years for auditing and compliance purposes. Therefore, even if a customer’s account is closed, the underlying payment data necessary for VAT documentation must be stored securely for the legally required period. This retention is a valid reason under GDPR, as it falls under the ‘legal obligation’ basis for data processing.

Third-Party Payment Processors and Data Protection Agreements

Using third-party payment processors like Stripe, PayPal, or Square doesn’t exempt your business from GDPR compliance; in fact, it creates additional requirements:

• Establish Data Processing Agreements (DPAs) with all payment service providers
• Ensure payment processors maintain GDPR compliance certifications
• Include specific clauses for international data transfers and adequacy decisions
• Conduct regular audits of third-party processors to verify ongoing compliance
• Implement Standard Contractual Clauses (SCCs) for cross-border payment data transfers

Remember that your business remains responsible for ensuring that these third parties comply with data protection requirements. This means conducting thorough due diligence before selecting payment providers and maintaining oversight throughout the relationship.

Incident Response and Data Breach Management

In the event of a payment data breach, GDPR mandates specific actions within strict timeframes:

• Notify supervisory authorities within 72 hours of discovering a payment data breach
• Inform affected individuals without undue delay when breaches pose high risks
• Document all aspects of the breach and response measures taken
• Coordinate with payment card networks and banks during the notification process
• Implement remediation steps to address the breach and prevent recurrence

A comprehensive incident response plan should include detection mechanisms, assessment procedures, notification protocols, and remediation steps designed explicitly for payment data breaches.

Data Protection Impact Assessments for Payment Systems

Data Protection Impact Assessments (DPIAs) are required under GDPR for high-risk processing activities, which often include payment processing. Businesses should conduct DPIAs for new payment processing systems before implementation and assess privacy risks when implementing biometric payment authentication methods. It is also crucial to determine the cross-border data transfer of payment data and its impact on the rights of data subjects. Documenting risk mitigation measures for high-risk payment processing activities is vital, as is regularly reviewing and updating Data Protection Impact Assessments (DPIAs) to reflect changes in payment systems or processes. A thorough DPIA helps identify and mitigate potential privacy risks before implementing new payment processing systems or making significant changes to existing ones.

Best Practices for Payment GDPR Compliance

Implement these key practices to ensure your payment processing meets GDPR requirements:

• Adopt Privacy by Design principles: Integrate data protection measures into payment systems from the outset rather than adding them later

• Conduct regular compliance audits: Schedule periodic reviews of payment processing activities to ensure ongoing GDPR compliance

• Provide staff training: Ensure all personnel handling payment data understand GDPR requirements and their responsibilities

• Maintain comprehensive documentation: Keep detailed records of processing activities, legal bases, and security measures

• Implement data mapping: Create and maintain detailed maps of how payment data flows through your organisation

• Manage vendors rigorously: Assess and monitor third-party payment processors for GDPR compliance

• Deploy robust technical measures: Implement encryption, access controls, and other security measures appropriate to the risks

• Establish clear data retention schedules: Define how long different types of payment information will be stored based on business needs and legal requirements

Regular application of these practices will help protect your business from regulatory penalties while building customer trust in your payment handling processes.

Conclusion

Implementing comprehensive GDPR compliance for your payment processes protects both your customers’ data and your business from substantial penalties. The key to success lies in understanding what constitutes personal data, establishing proper legal bases for processing, implementing appropriate technical and organisational measures, and respecting the rights of data subjects.

Start by conducting a payment data audit today to identify potential GDPR compliance gaps in your systems. This will help you prioritise necessary changes and build a roadmap toward full compliance. Remember that GDPR compliance is not a one-time project but an ongoing commitment to data protection that must be integrated into your daily business operations.

FAQ

How long can payment data be stored under GDPR? Payment data retention periods depend on legal requirements, typically ranging from 6 to 10 years for tax and accounting purposes, but must be deleted when no longer necessary for the original purpose.

Is consent required for all payment data processing? No, most payment processing relies on contract performance as the legal basis; however, permission is required for storing payment methods or using data for marketing purposes.

What happens if a payment processor has a data breach? Both the payment processor and the merchant may be liable, depending on their roles as data controllers or processors, and must notify the authorities within 72 hours.