Mobile Payments May Make PCI Obsolete

Written by David Taylor
August 6th, 2009

Columnist David Taylor is the Founder of the PCI Knowledge Base and former E-Commerce and Security analyst with Gartner.

As more people start paying for goods and services using their phone, rather than a credit card, they are venturing into that ethereal netherworld that is “beyond PCI” – in this case, literally, as their daring actions challenge the Payment Card Industry to drop “card” from their name. But there’s more to the challenge than semantics.

As the mobile payment wave has hit Asia and Europe, the payment networks, major banks and international retailers have not been the leaders of the revolution. Instead, the wireless service providers, cell phone manufacturers, and emerging mobile payment specialty firms, working with mostly Ecommerce merchants have taken most of the risks and are reaping the rewards (if any). How will this change as the mobile payments wave reaches the American shores?

  • Work with PCI Compliant Service Providers for Pilots
    Even though mobile payment technologies such as Near Field Communication (NFC) are not specifically addressed in the PCI standards, the companies providing them for your pilot should still have their software development and services reviewed by a PCI QSA, in order to ensure that the standards for the protection of data are being met, within the limits of the current standards. This would include the mobile communications companies, the payment service providers, the cell phone and POS hardware providers and the systems integrator (if any). Mobile payment is both new and complex, so merchants have a responsibility to ensure that by implementing a pilot they do not “poke a hole” in their otherwise compliant and/or secure infrastructure. But beyond looking for PCI compliance, there are several other issues and organizations that merchants should pay attention to when they are evaluating the implementation of mobile payment.

  • Watch the Moble Network Players
    In mobile payment, “mobile” is more important than “payment” at this point in driving the market and determining whether it’s safe for retailers to make technology investments. Essentially, this is a technology infrastructure issue. Before it will be financially justifiable for retailers to invest in mobile payment beyond the pilot phase, essentials like NFC-capable phones and POS devices have to be available at reasonable prices.

    One organization to watch to help determine when mobile payment is “ready for prime time” in the U.S. is the GSMA (Global System for Mobile communication Association), which includes 700+ worldwide mobile technology and service providers. For example, one metric to consider is the percentage of mobile phones that have (or can support) mini-SD or micro-SD chips that support TDES or AES 256 level encryption, which is important for secure mobile payment, and will likely be required for PCI compliance as the standards are, presumably, extended to include mobile payment.

    Another issue is whether a phone that has a stored 16 digit card number, even if encrypted, is in PCI scope. I expect to see the credit card number tokenization made into a critical part of mobile payment, so that the only thing the NFC phones have stored is a token, with the card numbers centrally stored and mapped by the TSM (Trusted Service Manager). That would be a more secure implementation, IMHO.

  • Monitor Emerging Mobile Payment Standards
    Another organization to watch when it comes to mobile payment security is the FSTC (Financial Services Technology Consortium), a group of financial institutions and technology providers, which recently announced that is has formed a working group to develop mobile payment security standards. Since the PCI SSC has committed to an “every other year” cycle of releasing standards, I’m expecting the FSTC to come out with a draft of their standards before the PCI SSC’s next release in the Fall of 2010. Whether (or when) the FSTC standards are reconciled with the work of the PCI SSC will likely be a gating factor to widespread mobile payment adoption by either Ecommerce or traditional retailers. Speaking of retailing and standards, I expect that the National Retail Federation’s ARTS (Association for Retail Technology Standards) group’s UnifiedPOS standard will also be impacted by the need to support mobile payment at the POS.

  • The Bottom Line
    There are enough aspects of mobile payment that are “in flux” that I believe the best strategy at this point is for multi-channel and E-Commerce merchants to look for mobile payment technology providers that can demonstrate the security of their approach and/or for partners who are mobile payment specialists, have run multiple pilots, and are willing to share the risk and manage the pilot.

    If your customer demographics fit the profile of the aggressive mobile device user, then mobile payment deployment may be justifiable before all of the mobile payment security issues are shaken out. But these issues and market indicators I’ve mentioned are certainly worth consideration as part of your mobile payment project due diligence. In conclusion, we’d love to speak with anyone involved in mobile payment, to broaden our mobile PCI best practices research. Please visit the PCI Knowledge Base, and our Contact Us page. If you want to have a personal discussion about PCI and mobile payment issues, just send me an E-Mail at

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    4 Comments | Read Mobile Payments May Make PCI Obsolete

    1. Daniel Lambert Says:

      Mobile Payment to become universal must leverage from existing payment infrastructure as much as possible. Mobile Payment and NFC will therefore never be universal and as convenient as today’s credit/debit cards until it becomes PCI DSS Compliant or FSTC compliant.

    2. Eric Meniere Says:

      Mobiles can leverage the global credit/debit cards infrastucture and solve many PCI DSS compliance issues; To start mobiles (or POS) should never have to store a credit/debit card number. Mobiles can be enabled to compute one-time-use credit/debit cards – a token for a single purchase. One-time-use is the best form of security (it cannot be re-used). No personal data or (plastic) credit/debit card details need to be stored in a phone, or at a TSM. Your sensitive data should remain with your Financial Institution at all times and not be shared with anyone. FI should worry about PCI DSS, no one else!

    3. Dave Taylor Says:

      Eric, i agree about the value of OTU passwords, but i also believe tokens are another option. Either way, the centralization of card data is critical from an architecture perspective, as well as simplifying compliance and minimizing data breach risk. Good point!

    4. Nealle Says:

      I believe that the move to an infrastructure will make requirements like PCI more important. As we move further away from physical instruments like cards, which at least have physical security features (for what they are worth, I know most merchants don’t give them a second look). But if data from one of my transactions was compromised and put onto someone else’s mobile their is no real way for a merchant to identify one mobile from another as being the genuine payment token

      The fact that the device could support features like (more) advanced encryption of the transaction data is just a bonus.



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