Key Advantages of ZKPs for Payment Security

The modern financial ecosystem is experiencing a rise in cyber threats, among which phishing attacks with fake payment forms, social engineering manipulations by malicious actors, data interception during transmission (MITM attacks), massive leaks of personal information from organisational databases, fraudulent refunds, and the substitution of user identification data.

Despite the widespread use of classic protective measures such as data encryption, tokenisation, and the 3D Secure protocol, a fundamental paradox remains: the more thoroughly transactions are verified, the higher the risk of unauthorised access to sensitive information. This is where zero-knowledge proofs (ZKP), which are radically changing approaches to security and privacy.

ZKP allows you to verify the truthfulness of statements without having to transfer the source data itself. Transaction participants are able to check balances, personal information, and other important parameters without compromising confidentiality. This innovative technology is becoming the gold standard for modern payment gateways seeking to balance data protection and verification efficiency.

How ZKP works: the basis of security

Let's take a closer look at how the ZKP protocol works, what types there are, and how they differ.

Basic interaction scheme

ZKP technology involves the interaction of two parties:

• The prover has certain data (e.g., bank account balance) and generates special proof of its correctness.
• The verifier decides on the validity of the statement without having direct access to the source data itself.

A simple example. A buyer wants to prove that their balance exceeds a certain amount, say $300, without revealing the exact balance in their account. The ZKP system allows such a check to be carried out by transmitting only confirmatory evidence that guarantees the correctness of the statement, but does not reveal any additional information.

The reliability of the protocol is achieved through the use of advanced cryptographic mechanisms such as hash functions, elliptic curves, and interactive or non-interactive verification protocols.

Key types of ZKP

Among the existing implementations of ZKP, there are several types that differ in their characteristics and scope of application.

• zk-SNARK. It is characterised by compact proofs (only hundreds of bytes) and the absence of the need for constant participation by both parties. However, it requires special trusted setup and is potentially vulnerable to quantum computers. It is ideal for private transactions in networks such as Zcash and Ethereum scaling.
• zk-STARK. Characterised by absolute transparency (no trusted setup) and resistance to quantum attacks, although the size of the proofs generated is significantly larger. Suitable for high-load infrastructures such as decentralised finance (DeFi) and central bank digital currencies (CBDCs).
• Bulletproofs. Combines compactness and ease of implementation without the need for complex configuration, but is inferior to other solutions in terms of scalability. Widely used in coins with enhanced privacy, such as Monero.

Regardless of the type chosen, all ZKP variants have three main properties:

• Completeness. Correct data is guaranteed to pass verification.
• Correctness. Incorrect statements are rejected with a probability close to one.
• Zero disclosure. Verifying parties do not learn anything unnecessary except the fact that the statement is correct.

Key advantage #1: data privacy protection

One of the most important advantages of ZKP in crypto is its ability to maintain complete data privacy. The technology allows you to hide specific transaction amounts, mask the personal details of senders and recipients, and verify age, citizenship, and residency without providing supporting documents.

This approach significantly reduces the need to store personal information (PII), which in turn minimises the potential consequences of information leaks.
According to an IBM study, the average cost of a single major data breach in 2024 will be around $4.5 million. In addition to financial damage, such incidents carry the threat of serious fines for non-compliance with regulations (for example, GDPR provides for fines of 2% to 4% of a company's annual turnover) and significant damage to business reputation.

The ZKP blockchain introduces changes to the existing KYC (Know Your Customer) procedure, allowing, for example:

• to confirm the status of an accredited investor without disclosing income;
• demonstrate the absence of connections to sanctions lists without transferring personal data;
• check credit ratings above a certain threshold without disclosing the entire credit history.

The use of ZKP payments changes the very concept of identification and authentication, making it possible to perform mandatory procedures without the traditional disclosure of personal information.

Key advantage #2: enhanced fraud protection

ZKP make a significant contribution to the fight against fraudulent activities, as they allow checks to be performed without direct access to protected data. This is possible thanks to the following mechanisms:

• cryptographic fingerprints – allow you to check the history of transactions without revealing the data itself;
• anomaly analysis – detection of non-standard behaviour patterns is performed without access to personal information.
• immunity to identifier forgery – the mathematical nature of proofs makes it impossible to falsify them.

An example demonstrates the effectiveness of this approach: a payment system can block a transfer attempt from a suspicious IP address without having any additional information about the user.

Additional security features of ZKP include:

• The inability to reuse the same evidence.
• The ability to make secure micropayments (e.g., $0.01) without the risk of data compromise.
• Proof of sufficient funds in the account without revealing the exact balance.

All of this increases payment security.

Key advantage #3: Regulatory compliance

ZKP is ideal for complying with numerous legal and regulatory requirements, such as AML (Anti Money Laundering) and KYC procedures. Using this technology, companies can:

• perform mandatory checks on the origin of funds without having to disclose the sources of income;
• perform cross-institutional verification, forming a single piece of evidence for several regulatory bodies;
• generate aggregated reports for the FATF (Financial Action Task Force) without detailing specific transactions.

ZKPs also contribute to the implementation of the ‘right to be forgotten’ principle, allowing users to control the distribution of their own data and determine the extent to which it is accessible to third parties.

Examples of successful applications include:

• banks confirming the absence of links to persons on sanctions lists without transferring customer information;
• payment systems demonstrating compliance with established limits on money transfers without disclosing specific amounts.

Key advantage #4: scalability of payment systems

One of the main problems facing the modern financial industry remains low productivity and high costs associated with processing large numbers of transactions. The solution to this problem is ZK-Rollups, an innovative solution based on ZKP technologies.

The main advantages of ZK-Rollup are as follows:

• Transaction aggregation. Combining hundreds of transactions into a single proof, which significantly reduces the load on the main network.
• Significant reduction in fees. Savings can reach 10–100 times (for example, from £15 to £0.15 per transaction).
• Fast verification. Instant transaction verification without long waits for consensus.

Such solutions integrate seamlessly with legacy systems through standard API interfaces and support high transaction rates of up to 10,000 transactions per second. Hybrid architectures combine the advantages of ZKP, blockchain, and centralised data storage, creating powerful and effective solutions for modern businesses.

Want to reduce fees by 10–100 times and process thousands of transactions per second? With the 0xProcessing payment gateway, you get ZK-Rollups – aggregation of hundreds of operations into a single proof, integration via API. Test of the ZK solution today – simply submit a request and receive a response on the same day.

Key benefit #5: reduced operating costs

The use of ZKP significantly reduces operating costs for businesses by automating many routine processes:

• KYC/AML checks eliminate the need for labour-intensive manual audits.
• Transaction verification reduces processing time from hours to milliseconds.
• Data storage eliminates the need for long-term PII retention.

The economic effect of implementing ZKP can result in a 40-60% reduction in infrastructure costs, a reduction in penalties for non-compliance with legislation, and an increase in payment processing speed.

Real-world examples of ZKP use in payment systems

Today, ZKP is used in a wide range of industries and areas:

• International transfers are made instantly and privately, without the need to disclose the details of the parties involved.
• New generations of payment cards use ZKP to securely verify limits and one-time tokens when making online purchases.
• Central banks are introducing digital currencies with ZKP support, ensuring the anonymity of offline payments.
• DeFi platforms use ZKP for lending without mandatory disclosure of credit histories and issuing private stablecoins.
• Micropayments are becoming commonplace: paying for content by the character (e.g., €0.001 per word) or transactions between Internet of Things (IoT) devices.

The zkSync project uses ZK-Rollups to process transactions outside the main Ethereum network, which reduces fees and increases throughput. This allows businesses to save on transaction costs and speed up processing. For example, zkSync Era has processed over 180 million transactions in 8 months, demonstrating high efficiency.

Challenges and limitations of ZKP

Despite the obvious advantages, the implementation of ZKP is fraught with a number of difficulties:

• Technical difficulties: high computing power requirements, long proof generation time (up to 1–5 seconds), large size of some types of proofs (up to 100 KB).
• Regulatory uncertainty: lack of generally accepted standards for ZKP recognition in different jurisdictions, doubts about the legal validity of evidence, conflicts with existing KYC regulations.
• User experience: difficulty for users to understand the concept of ‘proof without data’ itself, the need for educational campaigns and intuitive interfaces.

Conclusion

ZKPs represent a comprehensive approach to solving a range of challenges in the modern financial sector:

• minimising data disclosure when verifying transactions;
• increasing resilience to cyberattacks and fraud;
• scalability of payment systems with low transaction costs;
• compliance with strict regulatory requirements without excessive information collection.

For payment gateway operators, the implementation of ZKP is becoming an important competitive advantage, attracting customers who care about their privacy and helping to save significant funds on infrastructure costs and penalties.

The main areas for further improvement of ZKP include:

• optimisation of computing resources and reduction of proof generation time;
• standardisation of approaches and recognition of ZKP protocols by leading regulators;
• simplification of the user experience by integrating ZKP into the familiar interface;
• creating hybrid architectures that combine the advantages of ZKP with classic protection methods.

Investing in ZKP is insurance against the rising cost of storing PII, increasing fines for data leaks, and loss of customer trust due to compromised information.

Ready to implement ZKP and save up to 60% on operating costs? The 0xProcessing payment gateway allows you to:

• accordance AML;
• reduce transaction verification time;
• comply with GDPR and PCI DSS through zero data disclosure;
• integrate ZKP into existing payment processes via a ready-made API.

Submit a request and our expert will audit your payment flows and select a customised ZKP solution.

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