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Encryption is a technical term it pays to understand in today’s world. Bankrate explains.
What is encryption?
Encryption is a method of data security that encodes information stored or transmitted from one computer or device to another in a way that can only be encoded by the person or computer with the encryption key. The most popular techniques used by leading financial institutions to secure sensitive personal information rely on data-encryption technology.
Due to the volume of sensitive information that is exchanged via the internet every day, more websites and online commerce services also are adopting sophisticated encryption systems.
There is more than one way to encrypt data.
- Private key encryption means each computer on a network has a secret code or key that is used to encrypt information before it sends it to another computer. For private key encryption to work, you need to know the computers that will “talk” to each other and have the key installed on them. Having a private key is similar to a secret code shared between two computers that is known only to them in order to decode messages sent between them. If the message is seen by anyone else, it looks like meaningless information.
- Public key encryption uses both a public and a private key. Only your computer knows its private key, but it gives out its public key to any computer that requires secure communication with it. The computer that receives the message uses its own private key and the public key received from the originating computer to decode encrypted messages.
For companies that rely on transmission of sensitive data, especially those in the financial industry, suffering a data breach due to lack of encryption spells doom. Besides having to deal with a damaged reputation, there may be significant financial and labor costs needed to repair any damage that has been done.
When sensitive financial information is stored on a device like a laptop or smartphone, it is often overlooked by users who assume the data is safe. However, these systems can still be hacked, and confidential information can be accessed. Encryption of data stored on devices is necessary to keep it away from hackers or thieves.
Each time you login to a web-based email service or other permission-based website, you enter a username and password that are then encrypted by the browser. The server hosting the website and your computer or mobile device then agree on the protocol they will use to transfer encrypted information back and forth online.
The use of encrypted online communications offers several benefits to you, including:
- Reducing the number of people who know what you are doing.
- Making it more difficult for hackers to gain access to your login details.
- Obscuring your browsing data.
- Reducing the chance of being deceived into visiting a malicious website.
A lot of the time people spend on the internet involves sending their information to others. When you buy something online or fill in a signup form to open an online account, you enter a lot of personal information.Thus, encryption is essential.You can tell if your online communications are securely encrypted within your browser if a padlock icon is displayed in the URL bar and the website address contains “https://.”
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