Secure Electronic Transaction (SET)

Secure Electronic Transaction (SET) is a standard protocol for securing credit card transactions over insecure networks, specifically, the Internet. SET is not itself a payment system, but rather a set of security protocols and formats that enables users to employ the existing credit card payment infrastructure on an open network in a secure fashion.

SET was developed by VISA and MasterCard (involving other companies such as GTE, IBM, Microsoft, Netscape, RSA and VeriSign) starting in 1996. SET is based on X.509 certificates with several extensions. SET makes use of cryptographic techniques such as digital certificates and public key cryptography to allow parties to identify themselves to each other and exchange information securely. SET uses a blinding algorithm that, in effect, lets merchants substitute a certificate for a user's credit-card number. This allows traders to credit funds from clients' credit cards without the need of the credit card numbers.

SET was heavily publicized in the late 1990's as the credit card approved standard, but failed to win market share. Reasons for this include:

Network effect - need to install client software (an e wallet).
Cost and complexity for merchants to offer support and comparatively low cost and simplicity of the existing, adequate SSL based alternative.
Client-side certificate distribution logistics.
SET was said to become the de facto standard of payment method on the Internet between the merchants, the buyers, and the credit-card companies. When SET is used, the merchant itself never has to know the credit-card numbers being sent from the buyer, which provide a benefit for e-commerce.