Data encryption plays a vital role in online transactions by safeguarding sensitive information such as credit card numbers, personal identifiers, and financial details from unauthorized access. Encryption transforms data into a secure format that can only be decrypted with a specific key, ensuring data confidentiality during transmission. It helps to establish trust between parties involved in an online exchange, as customers feel more secure providing personal information. Consequently, encryption is essential for maintaining the integrity of e-commerce and protecting against cyber threats.