The PayPal Problem: Will It Impact Retailers' PCI Scope?
A 403 Labs QSA, PCI Columnist Walt Conway has worked in payments and technology for more than 30 years, 10 of them with Visa.
Everyone understands that PCI DSS applies to payment transactions for the five major card brands: American Express, Discover, JCB, MasterCard and Visa. PayPal transactions, therefore, would not normally be considered to be in scope for PCI. Recent pilot programs by at least one major retailer and an announcement by a POS device vendor, however, have me questioning the conclusion that PayPal transactions will remain out of PCI scope.
The first question is, if a PayPal card triggers a transaction on an underlying Visa or MasterCard, might that PayPal account be considered a "high-value token" and, therefore, be in scope for PCI? The follow-up question is, if the PayPal account is in scope, is it necessarily a big deal?
I read the recent StorefrontBacktalk piece about Home Depot letting shoppers pay in-store using PayPal: "On the payment front, this is also a test of Home Depot accepting a rectangular magstripe card that doesn't say MasterCard, Visa, American Express, Discover or Home Depot on it."
Separately, I saw where Ingenico launched a new PayPal offering. It enables PayPal users to make retail purchases (using Ingenico terminals, of course) by swiping their PayPal payment cards or entering the mobile phone number and PayPal PIN. Because many (although not all) PayPal accounts are tied to an underlying payment card, which is in scope for PCI, and because using such a PayPal account ultimately triggers a payment-card transaction, would PayPal in this case fit the PCI Council's definition of a high-value token?
A high-value token is a new concept the PCI Council introduced and defined in its PCI DSS Tokenization Guidelines. Specifically, the Council defines a high-value token as one that "could potentially be 'monetized' or used to generate fraudulent transactions." The guidance goes on to say: "Additionally, tokens that can be used to initiate a transaction might be in scope for PCI DSS, even if they cannot directly be used to retrieve PAN or other cardholder data."
PayPal accounts were not designed to be tokens. However, because a stolen or compromised PayPal account could be used to generate fraudulent transactions, that PayPal account appears to act like not just any old token but a high-value token. The PCI Council states that high-value tokens may be in scope for PCI and, at the least, they require "additional controls in place to detect and prevent attempted fraudulent activities."
Let's move on to the second question. If a retailer (or its acquirer or QSA) considers PayPal accounts to be high-value tokens, does it matter? For many merchants, the PayPal transactions will use the same devices, networks and procedures that are already in scope for PCI.
Therefore, there might be no significant impact of PayPal acceptance for a retailer with a PCI-compliant POS system. Things might get complicated when the merchant stores the cardholder data, in which case the PayPal account information may expand the scope of data to be protected.
I only have the questions right now. I'd like to hear what you—retailers, acquirers, processors, QSAs—think. Do you have any experience that can help shed some light on this topic? Either leave a comment or E-mail me at email@example.com.