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A Merchant Processing Score: The Anti-PCI
A CIO somewhere in this country has been asked this week by his board or executive team, “Do we really need to do that to be compliant?” (Read: Do You Really Need To Spend The Money?) [EXASPERATED SIGH] “No. Technically, we don’t. This is what we need to do to be secure. If you are looking for the minimum required to be compliant, we could issue a new policy that outlines what people ‘shouldn’t do’ instead of implementing a technology that won’t let them do it.”
With an MPS approach, the merchant’s goals will be aligned with the goals of credit card companies (Associations, Issuing Banks and Acquirers): becoming more secure. In the scenario above, what if the policy earned the company +2 points but the technology earned them +8 points?
I believe that this approach could be a win for everyone.
For those merchants who are serious about protecting data, their costs go down. Acquirers and the Associations would raise the rates to those merchants with lower scores. Knowing how capitalism works, I’d be willing to bet that the increased fees to the merchants with lower scores would more than offset the discounts offered to those with higher scores. This system would mean that the credit card companies would get what they want (better security) and get paid more in the process. What’s not to love?
Now for the fun part, the Merchant Processing Score would be publically available. Anyone would be able to see how your business rates in protecting its customers’ credit card data. Merchants will be required to print their MPS at the bottom of each receipt. Customers can then make decisions on which retailers they want to provide their sensitive data to. As a result, merchants must consider not also the impact of their credit card fee structure but also the impact to their sales from a low score.
Some of you may be thinking that this approach seems anti-merchant. I would disagree. The entire payment industry is a train off the tracks, and something needs to be done. It is the few merchants not playing by the rules, and those doing “just enough,” who are impacting those of us who are trying to do the right thing and protect our customers’ data. If everyone is held to a higher standard, everyone will benefit.
Although there may be a short-term impact to costs that merchants will have to pay to increase security, in the long run that extra money will be washed away by a more efficient system (even industry) that does not have to cover the multiple millions of dollars it takes to clean up after a merchant is breached.
I think it’s time for change. How about you?
What do you think? Love it or hate it, I’d love to gain some additional perspectives. Leave a comment, or E-mail me at Todd.Michaud@FranchiseIT.org.
-Marc
April 21st, 2010 at 10:07 pm
An interesting concept that sounds like it has some merit for the big guys in Level 1 and 2 but what about the Level 3 and 4 merchants, especially those that are eligible for the shorter SAQ?
As theDirector of Merchant911, I represent over 4,000 on-line merchants, at least 70% of which fall into the Level 3 and 4 categories. I doubt that these merchants will see any ROI in going above and beyond. In fact, I don’t think they have much wiggle room to get much better than what’s required. You’re certainly not going to get them to agree to a full security audit when most of them are complaining about a $99 scanning fee.
My fear is that these mom and pops would end up paying higher fees to make up the lost revenue from the millions of transactions those big guys would get at reduced rates.
Tom Mahoney, Director
Merchant911, LLC
April 22nd, 2010 at 9:44 am
Tom,
I understand completely, as I deal with 1,000’s of small business owners (our franchisees) every day. But let me ask a question, why shouldn’t those merchants who put are putting credit card numbers at risk pay more than those who do not?
The fact that the smaller merchants cannot justify the costs associated with good security is not an excuse for it not to be done. I am of the opinion that if you want to take credit cards (decision), then you need to pay all the costs associated with that decision, including the costs to appropriately secure the information.
The merchant can either stop accepting credit cards, raise their prices, or eat the additional costs. With today’s PCI, there is no incentive to go above and beyond. With this scenario, they would see reduced fees and potentially see a competitive advantage when their score is higher than their competition.
April 22nd, 2010 at 10:09 am
Although the concept sounds tempting, it just won’t work. Main reason is that PCI is a business more than a watch dog or traffic cop. Merchants that don’t comply are being charged an additional fee above a fee for the PCI compliance program. The guy that is going to get hurt is the guy that still uses a dial terminal face to face, picking up the cost for all the other types of processing merchants. You can’t control the interchange or discount because the card brands are now upping the cost of a transaction and banks need to recover income lost from everywhere else. Interchange changes regularly to increase revenue at the issuing level. PCI and the banks and the card brands have no connection to each other when it comes to pricing, and each has their own greed factor.
April 22nd, 2010 at 3:08 pm
Interesting concept. The major flaw I see is it opens up the assessment process to even more ‘negotiation’ than it already does. Assessment companies would be marketing “I can reduce your transaction fees by X% if you use us as your assessor”, they would be sharing in the savings, etc.
April 27th, 2010 at 2:25 pm
“Why is this scenario better than the current approach? PCI compliance sets a standard that all retailers must meet. But these standards create somewhat of a conflict of interest. The retailer is incented to do the minimum to meet the requirements, which may be at the expense of becoming secure.”
All standards and requirements are by definition a MINIMUM attainment. Anyone who claims to write standards and doesn;t understand this fact should resign immediately.
So let’s put the onus where it properly belongs with this — on the PCI SSC and those who wrote the requirements.
If PCI SSC sets a requirement and then is unhappy that no one is going beyond that requirement, they should re-cconsider the particular requirement. But they’d best do so very carefully. PCI DSS is a CONTRACTUAL obligation; if PCI SSC insists I have to demonstrate that I am doing more than the required minimum, even the most minuscule action beyond the defined requirements would qualify. If they want companies to do specific activities to show they are exceeding a certain requirement, then change the requirement to be that level.
If PCI demands that a merchan do X, and the merchant does X, then PCI has no one but itself to blame when the merchant doesn’t do X-plus-a-bunch-more. If PCI wants X+ instead of X, then say so specifically and change the requirement — otherwise any first year law student would have a field day in court with them.