Squeezing More Value From Your PCI Assessment

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

How do you use your PCI risk assessment? Requirement 12.1 tells you to have "an annual process that identifies threats, and vulnerabilities, and results in a formal risk assessment." The questions for retailers and their CIOs are: "What do you do with that risk assessment once you are done? Do you use it to question your current practices and reduce your PCI scope?"

Speaking for myself, I hate to do a bunch of work and get nothing for it. That's too much like paying for dinner and then not sticking around to finish dessert. Often, merchants prepare a thoughtful risk assessment and then file it away (a.k.a., "shelfware") until their QSA returns the next year, at which time it gets dusted off, reviewed and, hopefully, updated. If that describes your situation, you could be missing a golden opportunity to reduce your PCI scope, lower your risk and cut your cost of PCI compliance. Now doesn't that sound like a dessert worth sticking around for?

Requirement 12 contains one of the hidden gems of PCI. For those not intimately familiar with PCI, Requirement 12 addresses information security policies. In particular, 12.1 tells you to look at your threats and vulnerabilities (resulting in no small part from all that cardholder data you are keeping) and then to produce a formal risk assessment.

Other than a brief entry in a glossary, the PCI Council doesn't offer very much in the way of guidelines for level of effort or what an "annual process" or a "risk assessment" should look like. You may think of it as a cost-benefit analysis or an ROI evaluation, but the idea is to put a dollar value on the assets you are protecting. That means you need to quantify those risks.

Most merchants and processors use industry data to put a dollar value on some of the risks, particularly data breaches. One widely cited measure says the average total cost to a merchant of dealing with a data breach is about $6.6 million. Looked at another way, an accepted industry standard is that a data breach will cost a merchant about $200 per record compromised.

Using this metric, a compromise of only 10,000 PANs would cost you about $2 million. If you are a large merchant or a processor with, say, a few million card numbers stored, your financial exposure rapidly escalates into the financial stratosphere. This cost is in addition to brand damage when you find yourself in the headlines for the wrong reason.

Here is a radical idea: Once you recover from the shock of looking at these numbers, you might want to ask some direct questions about your PCI scope and why you are paying to store and protect all that cardholder data. Smart merchants and their CIOs focus on minimizing their PCI scope, to both reduce risk and lower their cost of compliance. Maybe Requirement 12.1 is one more wake-up call telling you to take a look, at least once a year, at your risks and ask if you should be doing some things differently.Next let's consider the benefits of storing cardholder data. We need to make one point clear from the start: The card brands do not require merchants to keep cardholder data. That is the case, no matter what you may have heard. Your acquirer or processor may need to keep the data, but if you choose to do so, I hope you are getting something in return.

You definitely should keep what I call "payment data," which includes date, amount, name, and either the first six or the last four digits of the PAN. All this information is out of scope for PCI, and the data can be used to locate any card transaction from your acquirer for chargebacks or refunds. So far, then, your benefits from storing PAN data add up to $0.

Some retailers keep PAN data for loyalty programs or other post-purchase applications. Re-coding these applications to use a different identifier will cost money. Your risk assessment should lead you to ask if you might use a secure one-way hash instead of the PAN.

The hash will be unique to the card, and it also will be out of PCI scope. It will cost to change your systems to use the hashed values, but that amount may be a lot less than the cost of storing and protecting all those PANs.

The hospitality industry presents an interesting challenge, as hotels like to retain guests' PANs after checkout to cover any additional charges. The business case here is whether the benefits of the late charges for those $2 bottles of water (that the guest will dispute anyway) outweigh the costs of retaining the PAN data. There may be situations where keeping cardholder data makes sense. For example, hotels might want to retain it when housing rock groups that trash their rooms on a regular basis. But I have seen cases where, as much as we tried, the hotel could not cost-justify storing the data based on post-checkout charges.

The risk analysis you prepare for your PCI compliance presents yet another opportunity to reduce your risk and costs. If you decide to keep 60 days of PANs for exception item processing as a favor to your acquirer, maybe you can reduce that to 30 days. If you use PAN data for velocity checking or loyalty programs, maybe you can use a hash value instead.

Whether or not you act is almost secondary. The key thing is to use the work you have done to ask some direct questions. How you choose to answer those questions can have significant implications on your risk profile and your budget.

How do you use your PCI risk assessment? Whether or not we agree, I'd like to hear your thoughts. Either leave a comment or E-Mail me at [email protected].