The biggest beneficiaries from the development of the Internet have been the banks. The banks have started offering their services by using the Internet, and likewise, many individuals have become dependent on modern techniques for paying the price of goods electronically. In order to make it easier for users, the banks have started to use the Internet in offering their services. Many people now use credit cards to pay for goods and services. They avoid carrying paper money which is often exposed to theft or loss. Therefore, the payment service providers play an essential role in pay the price of goods and services in e-transactions. This paper will examine the role of payment service providers in e-transactions in Palestine. In addition, this paper seeks to clarify the issues of security and confidentiality of the users during of the payment process in e-transactions. This study mainly used the analytical and library research to examine the issues of payment security and privacy in e-transaction. The laws of Palestine are used in this study to clarify the legal positions on the relevant issues above. It is found from this study that the issues of security and privacy require the legislations which regulate the legal matters of payment service providers in Palestine such as the security of the websites against any risks including viruses and hackers. Moreover, the banks are obliged to protect the privacy of the users when they open an account and provide the bank with their personal information. On the other hand, the users need information and some experience in using internet banking and maintain their security during payment and money transfers between many accounts. Likewise, the users need information about protecting their information when accessing the website of the bank including protecting their passwords and usernames and the secret number of their credit cards, besides of protecting their computers against any viruses. Therefore, the cooperation between the government, legislators, banks and the individuals is necessary to overcome such problems and to develop e-banking in Palestine and e-commerce in general. The benefit of this paper is to propose some recommendations to develop the Palestinian laws in order to address the issues of payment security and privacy which will contribute in the development of e-commerce in Palestine.