Will The Recession Kill PCI Or Bring Needed Rationality?

Written by Evan Schuman
July 17th, 2008

Guest 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.

With the economic prospects for the next year or more so dour, it’s not obvious that PCI compliance should be immune from cutbacks. The big issue is whether there is room in the PCI process for more rationality in light of these economics?

Over the last few years, PCI compliance has consistently generated larger security budgets, with little or no requirement for justifying them, other than "our bank told us we have to do it." But with some acquirers being no better off financially than many retailers, it’s time to ask some hard questions: Is the risk of a security breach great enough to risk the financial health of our company?

Even as a certified security professional (CISSP), I find it hard to justify some of the things merchants are being told to do by their acquirers. Just last week, a PCI project manager told me his Level 1 retail employer had spent more than $4 million so far to achieve PCI compliance and they were anxiously awaiting a decision from their 28-year-old assessor (and their bank) as to whether this would be satisfactory. After discussing this retailer’s situation for more than 45 minutes, with multiple thwarted project plans and conflicting standards interpretations, and going through three different assessors (but staying with the same "leading" assessment firm), the whole process began to sound so convoluted that I was nearly left speechless (which, anyone who knows me will tell you, is pretty darn rare).

I think it’s time to fight to bring some more rationality to the PCI compliance process. The rumor mill says that PCI 1.2 (coming in October) will only bring minor "tweaks" to the standards because the card brands are reportedly pretty pleased with them and seek only to "clarify" some of the interpretations and eliminate some redundancies between standards. All these changes are good, of course. I’m a huge fan of PCI DSS as providing a level of detail that is needed in security standards. No, the problem isn’t with the standards; it’s with the process, which largely ignores the established concept of "risk acceptance" and which allows all parties (except the merchant) to avoid assuming any liability.

Make the switch to rationality. More than 80 percent of the merchants we’ve interviewed for the PCI Knowledge Base have stayed with the same PCI assessor for more than a year, even though less than half of them are happy with that assessor. More than 90 percent have stayed with the same acquirer, but many of them find their acquirer to be less than helpful when it comes to PCI.

Of course, switching acquirers involves many more issues than PCI, and there is no reason to let the tail wag the dog just to ease the path to compliance. That said, too many merchants simply sign up with the assessor recommended by their acquirer without doing a thorough interview process and ensuring that the assessor (the person and the company) is comfortable with both the industry and the specific "idiosyncrasies" of the merchant that may require compensating controls. A much more thorough assessor evaluation is needed, as is a willingness to switch more often.

Actively negotiate with your acquirer. I’ve talked to many merchants who feel that non-compliance with PCI puts them in an uncomfortable, disadvantageous position vis-à-vis their acquirer. As a result, they stop acting like the customers they are and sometimes neglect or refuse to exercise their market power when dealing with their acquirer. I would suggest to all retailers and other merchants that it is worthwhile to do some analysis of the monthly bank statement, focusing on downgrades, service fees and fines.

The goal is simple: Understand the revenue and profit that your company generates for your acquirer, so if there are additional fees, fines and interchange rate changes related to PCI, you can both identify these items and be prepared to discuss and even negotiate them with your acquirer. I have talked to several acquirers who have "subsidized" their most profitable merchant customers, simply because they want to keep their business. These same acquirers tend to be the most likely to listen to reason when it comes to helping merchants manage their risk, rather than dogmatically insisting on a "100 percent checklist completion" approach to PCI.


Finally, our "PCI Best Practices" study for the National Retail Federation continues. If you’re a retailer, we would like to do a 100 percent anonymous interview with you for this NRF study. If you’d like to participate, just register at, or send me an E-mail at


One Comment | Read Will The Recession Kill PCI Or Bring Needed Rationality?

  1. A reader Says:

    Couldn’t rationality be achieved more easily if PCI were to mandate a specific encryption protocol at a specific point in the transaction, and equally mandating the acquirers to hold up their end of the protocol?

    Place the encryption requirement (and keys) in the PCI PED approved device, and then DSS can be reduced to proper handling of the PEDs. That’s it. The data is encrypted before it gets into the merchant’s systems, and remains encrypted while passing through them. The merchants would then be relieved of the entire burden of securing their networks, and would stop being the target of attacks by hackers.

    Verifone already has such a device available that Evan reported on a few months ago here:

    Today’s problems are caused because securing systems is left entirely up to the merchants. Few retailers have enough CISSPs on staff to inspect and secure every intermediate system, let alone the authority. And we certainly don’t want to pay for them all. But true securing of systems requires that depth and application of knowledge, and on an ongoing basis — anything less and you get an ad hoc collection of systems protected to varying degrees, any one of which might be subjected to an attack.

    Instead, remove all those requirements from the merchants. Make it simple: merchants must buy and use a secure device from an approved vendor in order to use the network’s cards. And a member bank must buy and use an approved decryption appliance in order to participate in the network.

    I know I sound like a broken record, but it’s true: if you remove the value of the information that the merchants handle, the merchants stop being the point of weakness.


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.