Rethinking Payment Security Outsourcing

Written by David Taylor
June 3rd, 2009

GuestView Columnist David Taylor is the Founder of the PCI Knowledge Base, Research Director of the PCI Alliance and a former E-Commerce and Security analyst with Gartner.

Is adopting a superior technical or business approach the right choice, even if that approach results in the loss of jobs for the company? Or, put another way: Is it justifiable to implement a less secure technology, if employees’ jobs are preserved in the process?

I bring this up because we have noticed a “protectionism” trend in our research results recently, when it comes to the outsourcing of payment management for the purpose of reducing PCI compliance scope. We’re talking about companies opting to store and manage more credit card and other confidential data than necessary, and we suspect protecting jobs in technology, compliance and finance is the main reason for this. But is this “bad”? Let’s do some analysis.

  • Outsourcing, By Any Other Name
    Outsourcing is usually about taking jobs away from people who get paid relatively well (usually in so called “developed” countries) and giving them to people who will work for less (often in other countries). So, for most people (who don’t run companies), outsourcing is “bad.”

    On the other hand, when it comes to the cost and the scope of a PCI compliance assessment, merchants are generally inclined to want to want to reduce cost and scope, often by eliminating cardholder data itself. When the data cannot be simply purged, many merchants consider approaches such as end-to-end encryption and/or tokenization. The hope is that by adopting such approaches and the process changes brought with them, they can remove their POS and/or their E-commerce website from PCI scope, reducing their risk of a security breach in the process.

    But some of the companies that offer these types of approaches have found that they have to avoid the term “outsourcing,” even if it’s a payment processor offering to take on full responsibility for the dreaded PCI data. It’s not just the word that’s the problem.

    I’m seeing two distinct trends when talking to merchants: Senior business and technical executives are strongly motivated to consider hosted payment approaches and tokenization. But the application managers, security managers and compliance managers are generally opposed to these approaches. Maybe they are simply trying to protect their jobs. After all, with fewer pieces of sensitive data to protect, and more monthly bills coming in from service providers, it would seem like somebody’s job will be in jeopardy. There is, however, more to it than that.

  • advertisement

    Comments are closed.


    StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

    Most Recent Comments

    Why Did Gonzales Hackers Like European Cards So Much Better?

    I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
    Two possible reasons that I can think of and have seen in the past - 1) 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. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
    A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
    The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
    @David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

    Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.