Establishing a well-defined contract that explicitly stipulates data protection and handling requirements is vital when a financial institution outsources credit card processing to a third party. This contract must delineate the expectations, roles, and responsibilities, including security controls and breach notification protocols, ensuring the service provider processes the data in compliance with the applicable data protection standards and legal obligations. While regular security audits and encrypting data in transit are important aspects of a comprehensive security strategy, they lack the overarching governance framework that a detailed contractual agreement provides. Data anonymization might reduce the risks associated with data handling but would not be feasible in the context of credit card transactions where personal data is inherently required for processing.