Evan Schuman's StorefrontBacktalk

A 403 Labs QSA, PCI Columnist Walt Conway has worked in payments and technology for more than 30 years, 10 of them with Visa.

When I walk into a retail store, especially a larger retailer or supermarket, I often see one or more independent businesses operating in that store. My first thoughts are how convenient it is to have a pharmacy, DVD rental or even an ATM right there, and how the retailer is using its space to generate (presumably) additional revenue. My second thought, however, is to ask myself whether I just walked into a retailer or a data processing co-location (“colo”) facility.

The reason for my question is that, depending on how those unrelated businesses process their card transactions, they will expand the retailer’s own PCI scope and risk. If the retailer doesn’t manage it properly, that retailer may discover the marginal revenue from these independent businesses may be more than eaten up with additional networking and PCI compliance costs. If a retailer stores, processes or transmits card transactions for an unrelated third party—and that includes merely allowing that business to use its LAN and to send payment data through it—that retailer becomes a PCI service provider and it needs to validate its compliance as such.

Although PCI DSS is essentially the same for merchants and service providers (there are a few additional requirements for service providers), the validation requirements are not. This is because the merchant and service provider “levels” are different.

For example, a merchant with 300,000 Visa or MasterCard transactions a year would be a Level 3 or Level 4 merchant. Normally, that merchant would self-assess its compliance. That same number of transactions for a service provider, however, promotes it to a Level 1 entity and requires an outside compliance assessment by a QSA.

In most cases, the retailer housing these outside businesses will not necessarily have full visibility into the transactions. That is, the retailer is unlikely to be hosting the payment application for the independent enterprises within its walls. However, even if the retailer only provides networking and security services (e.g., put them behind the retailer’s firewall), the retailer would still be a service provider.

The PCI Council defines a service provider as follows: “Business entity that is not a payment brand, directly involved in the processing, storage or transmission of cardholder data. This also includes companies that provide services that control or could impact the security of cardholder data. Examples include managed service providers that provide managed firewalls, IDS and other services as well as hosting providers and other entities.”

To this QSA, if an unrelated third party uses a retailer’s network infrastructure, that retailer can “impact the security of cardholder data.” That means the retailer has, in effect, just become a “colo” and needs to validate compliance as such. This is the case even if the retailer provides only network or firewall support to an unrelated third party. The list of PCI-compliant service providers maintained independently by Visa and MasterCard is full of companies that don’t “store, process or transmit” cardholder data, but they can affect the security of those transactions or that data.

We should note that PCI has a single exemption.