Evan Schuman's StorefrontBacktalk

Before a typically staid Federal Reserve Bank of Chicago symposium last week, the CEO of a security device vendor violated Jim Croce’s rule of not tugging on Superman’s cape. In a speech, the CEO ripped into the PCI Council, dubbing it a “dangerous false God” and saying that “PCI has rapidly become a self-perpetuating, self-aggrandizing, profit-motivated authority. It has and will continue to stifle innovation by its often nonsensical rule making.” And she then stopped pulling her punches.

To put this into context, PCI has unquestionably improved retail security in the U.S. and few have suggested a concrete alternative approach that wouldn’t bring with it even worse problems. Like the criminal courts, a system can be very far from perfection and still be the best of all alternatives. It’s also true that when security choices are made, some vendors are not going to be happy with the new rules. Even with all of that said, the directness and intensity of the speech by Magtek CEO Mimi Hart is worthy of note.

Hart argued that PCI compliance has no safe harbor and that if a breach happens, retail IT execs will be punished whether or not they went through the PCI-compliance program. “Your board of directors won’t care that you followed PCI. You will still be fired. An entrepreneur’s Board of Directors can’t spell PCI,” she said.

“The PCI Security Standards Council is not a standards making body by our industry’s definition. It makes rules. It is not inclusive, nor consensus building, nor open like ANSI and ISO. It has an advisory board that is informed what new rules were made last week, just before they’re announced to the public,” Hart said. “PCI is a private rules company with a very pious persona. The PCI DSS is not a standard, it’s a strategy. It is an agent of the brands, who are its owners. It exists solely to serve their needs. Make no mistake about it. Its stated mission is to protect cardholder data, but its true purpose is to delay, deny, deflect and distract. It is the ultimate preserver of the status quo and a serious obstacle to innovation.”

Any group trying to improve security by getting everyone to agree to a set of approaches and minimal specs is going to have to focus on compromise and the lowest common denominator. That’s the policy decision made by the community, the industry. There are times when innovation and cutting edge are essential and there are times—as the technology matures—when standardization and interoperability become even more critical. Then, at the next stage of growth, it’s time for more innovation, but only on top of common elements that all are working from. Although Hart’s point is valid, it needs the broader context.

Hart continued: PCI “exploits the relative weakness of the merchants, vendors and processors. And it does this all in the righteous name of ‘consumer protection.’ This fox in sheep’s clothing has no interest in curtailing fraud. After all, ‘No Fraud’ translates to ‘No need for PCI’ and do not forget that this is a for-profit enterprise.”

The PCI Council itself has argued that the endpoint for its objectives has been to dissolve, because it will no longer be needed. But I don’t think anyone is predicting that to happen for a very long time, if ever. A legit downside to the current—and almost any other—security approach is that fraudsters evolve and adapt much more quickly than retailers possibly can.

Hart then continued her case for PCI’s profit motives. “Remember that the brands make money on every transaction, fraudulent or legitimate. The same organizations that set the interchange rates make the PCI-DSS rules and enforce those rules with the power to levy steep penalties and fines. That’s somewhat like the power to be judge, jury and executioner all rolled into one. Is there not something wrong with this picture? PCI has rapidly become a self-perpetuating, self-aggrandizing, profit-motivated authority. It has and will continue to stifle innovation by its often nonsensical rule making.”

This is a very valid point.