What Are the Most Secure Payment Methods for Online Auctions?

In 2024, 79% of organizations fell victim to payment fraud attacks or attempts. 

Payment fraud is any type of fake or illegal transaction where money, items, or information is stolen. There are many ways payment fraud happens, like a purposefully bounced check, using a stolen credit card, or hacking.

Nonprofits and schools raising money online are not immune to fraud attempts. In fact, many scammers see nonprofits and schools as easy, vulnerable targets. In the context of a charity auction, many scammers will try to bid on items for cheap using fake transactions, hoping the organization is inexperienced enough not to catch it.

Furthermore, about 1 in 5 people say they’d no longer donate to a charity if it was hacked and data was stolen.

Most auction platforms have secure payment processing to protect you, but knowing why the chosen payment method is secure will reassure your board and donors. 

In this article, we’ll cover the two most secure payment methods and why they’re secure:

1. Third-party processors
2. Digital wallets

Why Large-Scale Payment Processors Are More Secure

Let’s take a moment to understand why it’s a safe choice for online auction platforms to defer payment to a third-party processor or digital wallet (instead of processing payments themselves).

Think of these processors as a heavily guarded vault at a major bank. It’s constantly tested by sophisticated criminals, but nearly impossible to breach because of layers of security, 24/7 monitoring, and massive investments in protection. 

Smaller, unknown auction platforms are like a safe in a small office—they’re not targeted as often, but they’re much more vulnerable if someone does try.

How Tokenized Payment Processing Works

Another concept to understand about platforms using third party processors is tokenization. 

With tokenization via third party payments, actual credit card numbers never get stored inside of the auction platform’s database. Even if your platform asks donors to pre-register a credit card before bidding, that information is being stored via tokens. Hackers may target auction platforms to steal donors’ payment information, but they wouldn’t find any actual financial information if they got in.

Here's the step-by-step process of how tokenization works:

1. A donor enters their card information on your online auction site.
2. The card information is securely transmitted to the processor and is never stored in the platform’s database.
3. The processor verifies the card and processes the payment using their secure, PCI DSS Level 1 certified infrastructure.
4. The processor sends back a token—a meaningless string of random characters—that represents the donor's payment method.
5. Your auction platform stores only this token for future transactions.

The Most Secure Payment Methods for Charity Auctions

1. Third-Party Processors

Any type of payment method done via a trusted processor is significantly safer than platform-stored payments. This includes credit card, debit card, direct ACH transfers, and digital wallet payments.

Examples include:

• Stripe
• Authorize.net
• PayPal
• Square 
• Deluxe & iATS
• CardConnect

Beyond basic security, established processors have fraud detection that flags suspicious transactions automatically. They handle currency conversions for international donors and stay up to date with new security standards.

2. Digital Wallets

Many donors are participating in auctions on their phones, so auction platforms now offer mobile payments for donors. These mobile payments are secure when done through trusted digital wallets.

Examples of secure mobile/digital wallets include:

• Apple Pay
• Google Pay
• Samsung Pay
• PayPal

When a donor uses Apple Pay or Google Pay, they don’t have to enter their credit card information. The wallet will open on their phone, ask for their password or fingerprint within that app (which is an added layer of protection!), and the payment gets processed. This uses tokenization, so the transaction is secure.

Payment Methods to Avoid

Just as important as knowing which methods to use is knowing which ones to avoid:

• Direct card storage: If an auction platform stores credit card numbers or bank information in their own database, walk away. Most auction platforms and fundraising platforms are not as secure as a trusted payment processor.
• Unknown payment processors: Using a processor with little reputation might save money, but can you verify their security credentials? If not, you're gambling with your donors' financial data.
• Manual payment handling: Collecting credit card numbers over the phone, via email, or through unsecured forms creates multiple points of vulnerability.

Peer-to-peer payment apps like Venmo and Cash App can be used safely, BUT they have fewer fraud protections and are less regulated.

Secure Payment Processing with CharityAuctions.com

At CharityAuctions.com, we've spent nearly 20 years helping nonprofits run secure online auctions. We understand that your donors trust you with their financial information, and we take that responsibility seriously.

Our platform implements secure payment methods via Stripe:

• Credit/Debit: All card payments are processed through Stripe.
• Digital Wallet Support: We support Apple Pay and Google Pay via Stripe.
• ACH Transfers: For high-value items, donors can use ACH bank transfers, secured via Stripe.

We also provide admin permission controls, automatic chargeback prevention measures, refund management tools, and donor visibility settings. Our 24/7 customer service team is always available if you have questions about security.

For more information about online auction security, read our Nonprofit’s Guide to Auction Software Security.

Tom Kelly

Tom Kelly, TEDx speaker and CEO of CharityAuctions.com, helps nonprofits raise millions through auctions and AI. He hosts The Million Dollar Nonprofit podcast and inspires leaders to live their legacy, not just leave it.