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Federal Reserve Listens To Security Vendor CEO Rip Into PCI
This is a very valid point. Indeed, a potentially more serious issue is the power to choose to not levy those punishments. The inconsistency of the punishments creates an environment where retailers have no certainty of punishment, which undercuts the incentives the fines are supposed to establish. Fines and discounted interchange rates are the only tools PCI has, given that no one really believes Visa would really tell Target, Wal-Mart or Home Depot that they’re not allowed to take credit-card payments anymore.
In her speech, MagTek’s Hart then zeros in on more Magtek-specific concern, which is the hardship on vendors of having to get existing hardware approved by the Council. She cited as an example card readers MagTek launched in 2005 (pre-PCI days).
“We have also worked for the last two years with many industry players on an ANSI standard for encryption. As of last week, PCI has announced that all magstripe readers will soon be subject to new rules and bureaucratic certifications,” she said. “In other words, now all reading hardware will require the PCI blessing from a certified PCI lab. You may think this is a good idea, but it is actually ridiculous.”
Her concern is that the process is trying to protect data that is already widely available. “The cardholder data on a magstripe is in the clear. It consists of a bunch of zeros and ones. It is a machine-readable magnetic barcode. Twenty of the characters it contains are printed or embossed on the front of the card. The other sixteen characters can be viewed just as easily. They are not secret. Encryption, no matter how strong, cannot protect data that has already been written on the blackboard. The serial number on a $20 bill cannot be protected with encryption, because anyone can read it. And so you might say, well not everyone can read the data on the stripe, so let’s add encryption to protect it. If you think of the data on the magstripe as written in braille rather than binary code, just because you can’t read braille does not mean the data is safe.”
She continued: “Why should merchants and processors be forced to protect data expensively and needlessly? It starts out in the clear on the card and it ends up in the clear at the brands, but in the middle it’s your responsibility to shroud it. And now PCI will dictate just exactly how to do it.”
Hart then got pointed again: “We know how to protect the card data and PCI doesn’t, or I should say they do know but choose to look the other way. You must understand, PCI is not about fraud reduction or cardholder data protection. Compliance is the name of the game. That’s how you are measured—not by fraud reduction.”
That last point is quite interesting. It’s true, but it’s not clear how it would be done or whether it would even advance anyone’s objectives. Compliance is, in theory, within the control of a retailer (assuming the retailer has an unlimited supply of money, but that’s a different column). Fraud reduction involves what bad guys do, which is out of the control of merchants. It’s like protecting a bank. You can buy an ultra-powerful safe and hire armed guards, but if you put enough money in that safe, the criminals will simply outgun you. Fines and other punishments need to be focused on what the retailer can control
Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code.
-Marc
