PCI Confusion Is The Norm

Written by Evan Schuman
November 29th, 2007

With all of the concern today about retailers inadequately protecting their credit card data, it’s logical to assume that retail IT managers would have made themselves quite familiar with the ins-and-outs of the Payment Card Industry Data Security Standard (PCI DSS).

But every day, we see evidence that PCI adherence is fraught with confusion. For example, the lists of elements that PCI tries to enforce has fostered the mistaken belief that PCI compliance is automatically and instantly granted to any retailer whose systems do what the list says.

Hardly. PCI Compliance for Level 1 retailers is granted only after an authorized assessor conducts his/her own assessment and that assessment is accepted by the merchant’s credit card processor aka acquirer.

A good example of that confusion cropped up this week when VanDyke Software released the results of its IT Security Survey of 350 IT managers and network administrators. That survey concluded that more than 80 percent of its surveyed said they were PCI compliant. That’s odd, given that even PCI cheerleader Visa itself claims compliance for Level 1s in the 60s and even that claim is challenged by some. Levels 2 through 4—smaller retailers–are much lower.

Delving into the numbers presents an even more intriguing mystery. The statement about the report—released from VanDyke—said that "33 percent said they were compliant and 48 percent said they were very compliant."

Very compliant? Isn’t that like very pregnant? Isn’t PCI compliance a binary? The merchant has either been declared compliant by the PCI powers-that-be or it hasn’t. Not quite sure what "very compliant" means.

The release gets better: "Furthermore, of the 212 respondents that indicated their organization accepts credit card payments, 40 percent indicated that their organization had been audited for compliance with the PCI Data Security Standards." Hold on. How could 80 percent of the surveyed group be compliant when only 40 percent have thus far been audited? Were the surveyed only small merchants who self-audited, which raises lots of other questions?

VanDyke President Jeff VanDyke said the study makes it clear that there’s a lot of confusion today about what PCI compliance means and what it requires.

"The survey shows that more education on what it takes to be compliant needs to take place," VanDyke said. "For 80 percent to indicate they feel they are compliant and only 40 percent saying they have undergone an audit, demonstrates an education is needed about what it takes to be deemed ‘compliant’."

‘Tis true, but does the confusion run even deeper? Mark Rasch, the former head of the U.S. Justice Department’s high-tech crimes unit and a retail technology specialist, thinks it does.

"First of all, it’s an assessment, not an audit. And there are merchants that believe that conducting the assessment is the same as being compliant," Rasch said. "You have to conduct the assessment and then correct any deficiencies and then redo the assessment."

Level 1 retailers—which Visa defines as any merchant processing more than 6 million Visa transactions per year, regardless of volume or acceptance channel—are required to have a third-party assessment, but smaller retailers may do a self-assessment but the rules are identical.

"Among Level 1 retailers, there is a fairly high level of understanding today," Rasch said. "The lower down the food chain you go, the lower the understanding. Some don’t even know how to spell PCI."


3 Comments | Read PCI Confusion Is The Norm

  1. Andrew Fisher Says:

    Hi Evan,

    Not only this but SME retailers are having huge pressure put on them to become compliant without actually understanding the requirements.

    This is leading to a growing use of auditing companies who are charging ridiculous amounts for virtually no work.

  2. Tom Mahoney Says:

    Mr Schuman;

    Congratulations. You hit the nail on the head. PCI compliance is
    still a mystery to a huge majority of small merchants. They’re about
    70% of the membership of Merchant911 so I don’t have to be convinced,
    and the recent TJX fiasco has put a lot of focus on us merchants.

    But let’s not loose site of: May 13, 2006 – Baltimore’s Mercantile
    Bankshares Corp. Lost 50,000 records including names, DOB and SSNs;
    Sept. 8, 2006 when Chase Card Services lost 2.6 million credit card
    account details; Nov. 5, 2006 when the North Carolina State Employees
    Credit Union lost 27,500. In fact, what I was able to track in the
    on-line press in 2006 amounted to 4.5 million credit card records and
    a whopping 32.9 million data sets with enough information to commit
    full identity theft. A small portion of the card numbers could be
    attributed to merchants – none of the ID data sets were.

    As a merchant advocatem I’m all for PCI, but let’s not loose site of the fact that compliance is to fraud prevention like a bucket of water is to the South China
    Sea. It will certainly stop some credit card fraud but when you look
    at the statistics posted by and
    others, credit card numbers are only a part of the picture.

    Then too, there’s a total lack of enforcement of PCI compliance. We
    now know that Visa knew about TJX’z weaknesses even as the thiefs
    were mining the data and yet they STILL aren’t being forced into
    compliance buy the very entities that pushed so hard for PCI. And
    what the heck, TJX just settled with Visa for a sum of money that
    equals a bit less than fifty cents per exposed card number. I’d say
    that amounts to small slap on the wrist for the largest date breach
    in the history of the world.

    Tom Mahoney, Founder & Director
    Over 3600 Merchants united to protect themselves

  3. Alex Bender Says:

    I think Mark Rasch explanation is really good. I talk with many F1000 companies and the primary challenges they face around PCI is their decentralized infrastructure and data as well as manual process to support any type of assessments or compliance reporting. This makes the processes around issue tracking, resolution or even reporting impossible. When a break down in process, breach of security or loss of data happens it just adds fuel to the firestorm. Companies do perform assessments which is key but the companies who use manual process to gather assessments will have a limited amount of data and findings and when they go to resolve the issues and ultimately re-assess chances are they are already in trouble with compliance. That is why there is a huge shift for companies to obtain a system or solution that automates and manages processes, centralizes data, maps assessments back to policies and regulations as well as correct any deficiencies. I think Visa’s estimates of 60% of companies achieving a Level 1 compliance range is even high. Based on our analysis of the market and the knowledge of which companies are doing it right I would put the number more at 40%.


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