Overpaying For PCI Compliance

A 403 Labs QSA, PCI Columnist Walt Conway has worked in payments and technology for more than 30 years, 10 of them with Visa.

Are you paying too much to validate your PCI compliance? It’s possible, even likely, that you are. The reason is not that your QSA is too expensive or that PCI is too demanding. Rather, the reason many merchants pay too much is that they forget PCI Requirement 0. You don’t know Requirement 0? It says: Minimize Your PCI Scope. Failing to comply with Requirement 0 may be due to inertia or ignorance or both. Regardless of the reason, the result is excessive and unnecessary spending on people, process and technology, together with a lot of frustration.

Although there may be legitimate reasons for storing cardholder data, many merchants store too much data and keep that data in too many places. One reason is inertia: “We always did it this way.” Another reason is that merchants do not understand all the ins and outs of the payment card business. Some acquiring banks have excellent education and support programs for their merchants. But the blame rests with the majority of acquirers and processors that do a poor job of educating and informing their merchants. Despite the reason, too many merchants fail Requirement 0.

For example, many merchants retain PAN data for chargebacks and refunds. In reality, there should be no need for this storage; your acquirer can locate any transaction based on date, amount, authorization response code and the last four digits of the PAN--all of which you may keep and are out of PCI scope. Similarly, storing cardholder data for recurring payments is not necessary if the merchant sets up the initial authorization properly. The merchant only needs the response code for subsequent transactions. And there is no need to retain cardholder data for customer service; for example, to locate a transaction. Again, some combination of the date, amount, authorization code and last four digits can be used to find any transaction with your acquirer. If any one of these needs is causing you to retain cardholder data, you may rate a Requirement 0 FAIL. And if your acquirer can’t help you fix the situation, you might consider getting a new acquirer.

Requirement 0 tells you to stop, take a deep breath, analyze your processes and challenge everything. The two things you need are a network diagram and a map of your cardholder dataflow. Interestingly, it may be difficult to get a comprehensive network diagram. A Department of Justice prosecutor once told me how the DOJ busted a carder ring that had remotely mapped out a target merchant’s network and put it on a giant poster. Upon seeing the poster, the merchant asked if it could keep it. Turns out the bad guys had a better network diagram than the merchantThe cardholder dataflow diagram should include all your payment card activity--POS, MOTO, E-Commerce, fax, carrier pigeon, whatever. Be thorough. Think about whether you take payments at tradeshows or if you have old card data for system testing that never got purged. Should you use an automated tool to make sure you locate all your cardholder data? You might have servers and laptops containing years’ worth of PANs that you don’t know about, so it’s worth considering.

Using the two diagrams, critically question where and why you are storing cardholder data. Your goal is to reduce PCI scope ruthlessly. Here is where it pays to get some payment expertise. Can your acquirer advise you on reducing your PCI scope in areas like chargeback processing, refunds and recurring payments? Can your QSA? Can someone else? If you go the acquirer route, speak to someone with payment processing and compliance experience, not necessarily your sales rep.

Once you have completed Requirement 0 you are ready to tackle the other 12 requirements with a (hopefully greatly) reduced scope. Otherwise, you will spend too much money segmenting your network to protect unnecessary databases, configuring unneeded logging and monitoring systems, encrypting data you don’t really need and overspending to satisfy PCI requirements. The PCI Council covers scope reduction when it trains QSAs. I hope the new Merchant QSA training will emphasize it even more. (Note to Bob and Troy: We’re counting on you.)

Every merchant needs to understand that there are two immutable laws of PCI. The first is that your costs will increase. They may go up a little or a lot. Either way, you have to spend something on PCI compliance to continue to take payment cards, even if you outsource everything. It is not PCI’s fault. Blame the bad guys; they are the enemy.

The second law of PCI is that you will change the way you do things. Here is where Requirement 0 comes into play. Treat cardholder data as toxic. Seek out and eliminate cardholder data wherever and whenever you can. You likely will need to change some back-office procedures (e.g., processing chargebacks and refunds), and the inconvenience may increase your costs. But it may be cheaper than protecting cardholder data that is spread around the enterprise.

A side benefit to Requirement 0 is that it may make you more secure. No merchant is likely to be 100 percent PCI compliant 100 percent of the time. Unfortunately, the bad guys only have to be right once. That is why there are continuing compliance requirements, from quarterly vulnerability scans to daily log checks, built into the standard. When you minimize your scope and reduce the amount of cardholder data, you not only minimize your compliance effort, you reduce the attack surface for the bad guys. There is no such thing as 100 percent security, but every little bit helps.

How have you reduced your PCI scope? What has been your experience working with your acquirer? Do you think you are spending too much to get compliant? Leave a comment or E-mail me at [email protected].