Q: Can you please help me understand what I need to do for PCI compliance? I know it’s important to secure data, but I can’t help but think that PCI is a scam, just a way for vendors to grab money out of my pocket without any measurable return.

A: Sure, and I understand. PCI (Payment Card Industry) compliance has been a cause of both great concern and great confusion to retailers. There has been much fear, uncertainty and doubt on the part of retailers about the best way to secure their customer credit card information from hackers, coupled with frustration and resistance given what seems like an insurmountable task that will cost retailers money. They ask, will there be an ROI? What am I getting for the time, effort and money I am putting into PCI compliance?

Let me start off by saying that PCI compliance is very real, here to stay, and serves a very important purpose, to protect your customers’ credit card data. And protecting data, especially customer data, is a best practice that should be taken seriously regardless of any mandates by PCI. But with so many companies vying for your PCI compliance dollars, merchants can feel that the entire PCI compliance machine is just a big money grab.

It’s easy for a merchant to become jaded and lose sight of the seminal point of PCI. It’s about protecting your business from a data-breach that can compromise your clients’ credit card data. The reality is that it can potentially devastate your business, as well as cost you a fortune in fines and fees.

So let me give it to you straight, PCI data standards are not optional. Merchants discovered to be out of compliance can be hit with serious fines: anywhere from $5,000 to $100,000 per month, at the sole discretion of the card brands. Depending on the size and overall health of your small business, being handed one of these fines could mean a major problem or total bankruptcy. Beyond the fines, your business reputation is at stake when you are responsible for securing client data.

Now that you hopefully see that PCI is real and important, you need to have a plan of action for PCI compliance. Allow me to review some facts about PCI, and walk you through some steps to take:

The full name of the organization that created the security standards is “The PCI Security Standards Council,” or PCI-SSC, which is an organization founded by American Express, Discover, JCB International, MasterCard, and Visa.

The PCI-SSC mandated the PCI-DSS (Data Security Standard) which is comprised of 12 steps required for retailers to properly secure their credit card data (view those 12 steps here). PCI-DSS mandates that any merchant who takes payments must be PCI-DSS compliant and it is the merchant’s responsibility to ensure that compliance. These 12 steps are best practices for any organization to secure their data.

In the PCI-DSS world, retailers are divided into four levels to determine compliance requirements. So the first step is to determine what level your business falls into:

Level 1: More than 6 million Visa/MasterCard transactions per year.
Level 2: 1 million to 6 million Visa/MasterCard transactions per year.
Level 3: Merchants processing 20,000 to 1 million Visa e-commerce transactions annually.
Level 4: Merchants processing less than 20,000 Visa e-commerce transactions annually and all other merchants processing up to 1 million Visa transactions annually.

Most of the independent specialty retailers we serve fall into the Level 4 grouping. Once you’ve determined your level under PCI, what is your next move? If you’re Level 1 or 2, then you need to hire an auditor, called a QSA or “Qualified Security Assessor” to verify your compliance with the PCI-DSS standard. The PCI Security Council has developed a set of self-assessment questionnaires (SAQs) that can be used by Level 3 and Level 4 merchants to help them figure out if they’re compliant with the PCI-DSS standards.

There are 4 different SAQ forms to use depending on the following criteria:

SAQ A: Card-not-present (e-commerce or MOTO) merchants, all cardholder data functions are outsourced. This would never apply to face-to-face merchants.
SAQ B: Stand-alone or dial-up terminal merchants with no electronic cardholder data storage.
SAQ C: Merchants with payment application systems (POS or credit card processing software) connected to the internet with no electronic cardholder data storage.
SAQ D: All other merchants not covered above, and service providers.

You can download the SAQ forms directly at pcisecuritystandards.org.

What is validation?

In addition to PCI compliance, there are also PCI validation requirements (depending on what level retailer you are, as discussed above) which means you need to prove you are compliant by submitting validation certificates, SAQs and network scans to the PCI Security Council or your payment processor.

Your validation requirements, deadlines and penalties for non-compliance will vary depending on your PCI level, and what your payment processor may require of you. Validating PCI compliance is required for levels 1, 2 and 3 retailers but not set in stone for Level 4 retailers. The reason for the Level 4 ambiguity is there is much debate on who will own the process to make sure level 4 retailers are PCI Compliant.

Many payment processors are now taking on that role and forcing their merchants to validate and document compliance or face monthly penalties, and there are others that choose to educate the merchants and direct them on the best course of action. At this time, it is totally up to the credit card processor for level 4 merchants whether they need to validate their compliance.

The bottom line

So you will either be self-policing your PCI compliance and filing away an SAQ each year, or you may be asked by your processor to validate your compliance by completing an SAQ and performing quarterly network scans. These scans must be performed by an approved scanning vendor (ASV), as specified by the PCI Security Standards Council.

All retailers who take credit cards need to complete the SAQ annually, and if they have difficulty can work with their POS or IT support to help them, as well as the many approved organizations that specialize in helping retailers complete the SAQ and run scans.

You need to take the PCI-DSS seriously and be proactive and develop best practices to secure your data and networks. Get deeply acquainted with the SAQ, and get it completed. If you want to be more proactive and get guidance, I recommend working with an ASV and have them help you complete your SAQ and perform quarterly scans to achieve validation.

PCI-DSS is a collaborative effort between parties. Your processor, your POS software company, your IT department and management need to work together to make sure you are complying with the 12 Steps of PCI-DSS.

If you would like more information on PCI, on the 12 Steps of PCI-DSS, or any other questions you may have, please email me atmichael@retailmerchantservices.com.