- As cash transactions decline, digital transactions are on the rise & this surge in digital payments corresponds with an increase in credit card frauds.
- To ensure the safety and satisfaction of customers in electronic transactions, organizations must comply with the Payment Card Industry Data Security Standard (PCI DSS).
- PCI DSS mandates globally recognized compliance standards, aiming to prevent the misuse of cardholder data and create a secure environment for card-based transactions.
- Non-compliance with PCI DSS can result in severe consequences, including monthly penalties, data breaches, legal actions, damaged reputation, and revenue loss.
In today’s competitive marketplace, many businesses offer customers the convenience of paying with credit cards. However, this convenience comes with an increased risk of credit card fraud. Safeguarding sensitive customer data is paramount, making compliance with PCI Data Security Standards (PCI DSS) crucial for businesses.
Compliance with PCI DSS ensures the security of every credit card transaction your business processes. Whether you’re a startup or a mid-sized enterprise, understanding PCI DSS compliance is essential. Yet, comprehending its intricacies can be complex and daunting. Here’s a comprehensive guide to PCI compliance, covering what it entails, its requirements, and best practices. Let’s dive in.
What is PCI Compliance?
PCI DSS is a global security standard for credit cards that plays a crucial role in preventing payment card fraud and ensuring the secure handling of consumers’ personal information during transactions involving payment card data. Mandated by credit card companies, PCI compliance is essential in the payments industry and encompasses the technical and operational standards that businesses must adhere to safeguard cardholder information.
The PCI DSS compliance includes guidelines for capturing, processing and storing sensitive cardholder information. This compliance is mandatory for any company accepting credit card payments, including any organization that collects, transmits or stores cardholder information or any sensitive authentication data in any form.
PCI DSS Standards/Goals
To become PCI DSS compliant an organization needs to meet a set of requirements. However, prior to understanding what these requirements are it is essential to know what the goals of PCI DSS are. To become PCI DSS compliant organizations, need to meet all the twelve PCI DSS requirements as well as meet all these goals.
The six major goals of PCI DSS are.
- Build and maintain a secure network
- Protect cardholder data
- Maintain a vulnerability management program
- Implement strong access control measures
- Regularly monitor and test networks
- Maintain an information security policy
With the recent release of the PCI DSS V4.0, these goals have been further defined as:
- Continuing to meet the security needs of the payment industry
- Promoting security as a continuous process
- Adding flexibility for different methodologies
- Enhancing validation methods and procedures
12 Requirements of PCI compliance
To become PCI compliant organizations need to adhere to and fulfill twelve PCI DSS requirements and meet the six PCI DSS goals. These requirements cover the complete ambit of technical and operational aspects that organizations must meet to safeguard customer data. The PCI DSS requirements provide organizations a clear roadmap to achieve compliance.
Key Requirements for PCI DSS Compliance
Installing/maintaining a firewall configuration for networks and systems: Organizations need to establish and implement firewall and router configuration standards that formalize testing whenever configurations change.
Avoid using vendor-supplied defaults for passwords & other security parameters: Organizations should always change all vendor-supplied defaults passwords and remove or disable unnecessary default accounts before installing a system on the network.
Protecting cardholder data during storage: Organizations should limit cardholder data storage and retention time to that which is required for business as well as purge unnecessary stored data at least quarterly.
Using encryptions during cardholder data transmissions in open and public networks: Organizations need to ensure to use strong cryptography and security protocols to safeguard sensitive cardholder data during transmission over open, public networks.
Using and updating anti-virus software: Organizations should deploy anti-virus software on all systems commonly affected by malicious software. For systems not commonly affected by malicious software, they should perform periodic evaluations to evaluate evolving malware threats and confirm whether such systems continue to not require anti-virus software.
Developing and maintaining secure network systems and applications: Organizations should establish processes to identify security vulnerabilities, using reputable outside sources, and assign risk ranking.
Restricting user access to cardholder data: Organizations should limit access to system components and cardholder data to only those individuals whose job requires such access.
Creating a unique ID for users who need to access cardholder data: Organizations need to define and implement policies and procedures to ensure proper user identification management for users and administrators on all system components.
Restricting any physical access to cardholder information: Organizations should use appropriate facility entry controls to limit and monitor physical access to systems in the cardholder data environment.
Tracking and monitoring all access to network systems and data: Organizations need to implement audit trails to link all access to system components to each individual user.
Testing security processes and systems: Organizations need to run internal and external network vulnerability scans at least quarterly and after any significant change in the network.
Maintaining information security policies: Organizations need to establish, publish, maintain, and disseminate a security policy; review the security policy at least annually and update when the environment changes.
Different Versions of PCI DSS
Since its formation in 2006, the PCI SSC has been continuously monitoring the latest developments, monitoring industry risks and upgrading the PCI DSS security standards to ensure effective payment account security.
PCI DSS 1.0
The initial iteration of the Payment Card Industry Data Security Standard (PCI DSS), known as PCI DSS version 1.0, was unveiled on December 15, 2004. This release included a fundamental yet robust set of security standards for merchants. All entities, including online retailers and various organizations handling credit card transactions, were obligated to adhere to this new standard.
In 2006, PCI SSC became an independent global monitoring collective. They swiftly released version 1.1, urging merchants to review online applications, install firewalls for added security, and provide clarifications. Version 1.2 followed in October 2008 for enhanced clarity and addressing evolving risks. In August 2009, version 1.2.1 was released, covering minor adjustments for consistency across standards and documents.
PCI DSS 2.0
In 2010, the PCI SSC group implemented substantial changes aimed at enhancing merchants’ commitment to PCI DSS compliance with PCI DSS V2.0. The updated version emphasized crucial measures, such as restricting access to data on a need-to-know basis, prioritizing the encryption of sensitive information, and establishing robust management and control over encryption keys. These adjustments were pivotal in reinforcing data security practices and fostering a more resilient framework for organizations dealing with payment card transactions.
PCI DSS 3.0
In November 2013, PCI SSC released PCI DSS V3.0 to address the gaps in education, awareness, and intention related to PCI DSS. This release also recognized the impact of emerging mobile and cloud-based technologies, incorporating formal introductions of penetration testing and threat modeling. Following this, a short-term update, Version 3.1, was released in April 2015. It served as a transitional phase providing merchants time to adopt and comply with the changes outlined in the April 2016 PCI DSS 3.2 release.
PCI DSS Version 3.2 came into effect fully in 2018, to counter the growing threats to payment information. This version introduced new measures to prevent, detect, and respond to cyberattacks, emphasizing the importance of maintaining security standards in everyday business practices. Notable enhancements included the introduction of multi-factor authentication, designated entities supplemental validation, a more secure version of TLS, and increased scrutiny of service providers. In 2018, additional minor changes were implemented, leading to the introduction of PCI DSS V3.2.1.
PCI DSS 4.0
The PCI SSC introduced PCI DSS version 4.0 on March 31, 2022, replacing the prior version 3.2.1. A two-year transition period has been established until March 31, 2024, during which entities can choose between version 3.2.1 or version 4.0 to demonstrate PCI compliance. Following the retirement of version 3.2.1 on March 31, 2024, entities must adhere to version 4.0. The new PCI DSS requirements of version 4.0 will officially take effect from March 31, 2025. PCI DSS V4.0 is further accompanied by significant improvements to the validation process and report structure. These enhancements aim to provide increased clarity and assurance to entities subject to PCI requirements and the third-party stakeholders relying on PCI DSS reporting from their business partners.
Here's How to Become PCI DSS Compliant
PCI DSS categorizes compliance into four levels based on information security measures. The level of PCI DSS compliance for your organization hinges on the volume of debit card payments and credit card transactions processed annually, the types of credit cards accepted, and whether any breach or cyberattack has led to the compromise of credit card or cardholder data.
The four merchant levels are as follows:
Level 1: Applicable to merchants handling over 6 million total credit card payments annually across all channels. This level typically involves larger entities. To meet stringent compliance requirements, these organizations must undergo an annual on-site audit conducted by a Qualified Security Assessor (QSA) or an Internal Security Assessor. Level 1 compliance also mandates annual on-site audits, network vulnerability scans every 90 days, and, for service providers, penetration tests and internal scans.
Level 2: Targeted at merchants processing 1 million to 6 million transactions annually. This level generally encompasses mid-size and smaller enterprises. While Level 2 merchants usually aren’t obligated to undergo an on-site audit by a QSA, acquiring banks may, in certain cases, require an audit and a Report on Compliance (ROC), particularly for larger Level 2 merchants.
Level 3: Geared towards merchants handling 20,000 to 1 million transactions annually, with a focus on mid-size and smaller enterprises. In most cases, these organizations can skip an audit and instead complete a Self-Assessment Questionnaire (SAQ) and file an Attestation of Compliance (AOC).
Level 4: Applicable to merchants processing fewer than 20,000 transactions annually, typically involving mid-size and smaller enterprises. Similar to Level 3, these organizations can often forgo an audit and opt for completing a Self-Assessment Questionnaire (SAQ) and filing an Attestation of Compliance (AOC).
Once organizations have identified their classification as well as risk level, the following steps need to be followed for PCI DSS compliance.
Define the scope: Identify the system components and networks falling under the purview of PCI DSS.
Assessment: Evaluate the compliance of the system components within the defined scope by employing the testing procedures for each PCI DSS requirement.
Reporting: Complete the necessary documentation (e.g., Self-Assessment Questionnaire (SAQ) or Report on Compliance (ROC)), including a record of all compensating controls.
Attestation: Fulfill the appropriate Attestation of Compliance (AOC). AOC is a form that merchants use to record the successful completion of their PCI DSS assessment. In other words, an AOC paperwork lets PCI SSC know you’re abiding by the rules. Be sure to have a qualified security assessor review your work so that they can confirm your findings
Submission: Provide the SAQ, ROC, AOC, and any other requested supporting documentation, such as ASV scan reports, to the acquirer (for merchants) or the payment brand/requestor (for service providers).
Remediation: If necessary, undertake remediation efforts to address unmet requirements and furnish an updated report.
Importance of PCI DSS Compliance
Today, almost every business handles payment processing, storage, or transmission of credit card data electronically. Be it eCommerce or retail, storing payment card data for subscription and recurring payments can make business much easier for both you and your customers. However, handling such data entails responsibility and a hefty expense for data protection.
4 Reasons to be PCI DSS compliant.
- Control measures laid out in the PCI DSS reduce the risk of credit and debit card theft. It provides a secure environment for your business and customers, encouraging them to exchange PCI information and make recurring payments easily.
- PCI compliance is packed with best practices to detect, prevent, and remediate data breaches, thereby enhancing your organization’s data security.
- Becoming PCI compliant also protects an organization against data breaches if cardholder data is compromised. Visa, Mastercard, Discover, and American Express recognize PCI DSS compliant mid-sized businesses and actively promote information security practices.
- Failure to comply with PCI DSS comes at the cost of fines that may end your ability to conduct eCommerce, accept card payments, and online payments in the future.
Consequences of Non-Compliance to PCI DSS
Non-compliance with PCI DSS leads to several consequences, including:
PCI non-compliance can result in penalties ranging from $5,000 to $100,000 per month by credit card companies. The volume of clients and transactions determines the level of PCI DSS compliance for a company and its corresponding penalties.
Although PCI DSS compliance does not prevent data breaches, organizations that fulfill PCI DSS requirements would incur lower fines. Whereas a business that is not PCI DSS compliant will have to face significant financial damages in a data breach such as:
- The average cost of a breach is $150 per record
- Costs of card replacement or issuing are between $3 to $10 per card
- Increased rates charged by banks and or processors
- Termination of merchant relationship with the credit card brands
- The lawsuit by the clients whose information got breached
- Security costs related to mandatory credit monitoring for customers whose data was compromised, identity theft repair, and so on
- The cost of conducting forensic investigations to discover the cause of the data breach
You’ll likely face lawsuits in case any customer data gets compromised due to PCI DSS violations. There are many instances where organizations paid more than $40.9 million for a data breach for putting an estimated 100 million bank cards at risk.
Putting the bank card information of clients at risk can result in irreversible damage to a company’s reputation, in addition to other related expenses incurred by the business. Failing to provide a safe and secure PCI environment will result in a lack of trust in your organization.
Non-compliance with PCI can also indirectly lead to revenue loss. This can be due to the loss of customers as well as dealing with penalties and lawsuits that can impact the overall balance sheet.
11 Best Practices for PCI DSS Compliance
PCI compliance is an ongoing and dynamic process that necessitates regular review and updates. As highlighted under the goals of PCI DSS V4.0, organizations need to promote security as a continuous process and must ensure adherence to evolving security payment standards. Some of the best practices that organizations should follow with regard to PCI DSS compliance are:
Identify and categorize payment card information (PCI) data
Organizations should utilize a dedicated data classification solution to automatically scan repositories for payment card information, ensuring proper categorization at the point of creation or modification.
Encrypt PCI data
Organizations should employ encryption for PCI and consider adopting point-to-point encryption (P2PE) for secure data transmission. They should regularly scan repositories to ensure encryption of all PCI data.
Change default passwords
Organizations should promptly change default passwords on network devices, including servers, routers, modems, and POS systems and maintain an updated inventory of all network devices and enforce a robust password policy.
Role-based access restriction
Organizations should ensure that access to cardholder data is granted only to those who require it. They should document and monitor users, roles, and applications with access to PCI and update permissions as required.
Restrict physical access to PCI
Organizations should safeguard the physical storage of PCI documents with security measures such as locks, security alarms, and CCTV cameras. They should implement access controls, ideally using ID badges, even for electronic storage to protect servers and devices.
Unique IDs for users
Organizations should assign unique credentials to all employees with access to PCI, avoiding the use of shared credentials. This ensures accountability in the event of a security breach.
Use firewall and anti-virus software
Organizations should deploy firewalls and intrusion prevention solutions as the first line of defense. Additionally, they should install the latest anti-virus software on all devices storing PCI.
Monitor access to PCI
Organizations should continuously monitor access to stored payment card data and employ an auditing platform to deliver real-time alerts for any authorized or unauthorized changes to PCI.
Regularly check for vulnerabilities
Organizations should conduct regular scans for security vulnerabilities and consider penetration tests and mock phishing attacks. They should identify and promptly address any weaknesses identified to enhance overall security.
Implement security awareness training
Organizations should provide security awareness training to all their employees to enhance their ability to identify suspicious events, such as social engineering attacks. Further, they can ensure that their employees understand PCI-DSS compliance requirements and the consequences of non-compliance.
Document policies and incidents
Organizations should maintain up-to-date inventories of network devices and applications, along with documented policies, procedures, and risk assessments. Further, they should thoroughly document any security incidents, regardless of perceived relevance, to aid in analysis and future prevention efforts.
How HighRadius Can Help?
Back-office operations such Order to Cash (O2C) often access PCI data as they are a part of the cardholder data environment (CDE). PCI DSS compliance is hence crucial for ensuring O2C operational efficiency. The positive impact of PCI DSS compliance on O2C and related processes is significant. A secure handling of customer card information establishes trust and facilitates smoother payment processing for businesses. In the current business landscape, a secure CDE is essential for most enterprises, regardless of transaction volume.
1. What is the latest version of PCI compliance?
The PCI SSC introduced PCI DSS version 4.0 on March 31, 2022, replacing the prior version 3.2.1. A two-year transition period has been established until March 31, 2024, during which entities can choose between version 3.2.1 or version 4.0 to demonstrate PCI compliance. Following the retirement of version 3.2.1 on March 31, 2024, entities must adhere to version 4.0.
2. What are the 4 levels of PCI compliance?
PCI compliance levels are determined by the number of transactions a merchant processes annually. There are four levels: level 1: merchants processing over 6 million transactions annually, level 2: merchants processing 1 to 6 million transactions annually, level 3: merchants processing 20,000 to 1 million e-commerce transactions annually, level 4: merchants processing fewer than 20,000 e-commerce transactions annually.
3. Is PCI compliance mandatory in the USA?
Yes, PCI compliance is mandatory in the USA for organizations that handle credit card transactions. Compliance is required by the Payment Card Industry Data Security Standard (PCI DSS) to safeguard cardholder data and ensure secure payment processing.
4. How do I know if I am PCI compliant?
To assess your organization’s PCI compliance, you can complete the applicable self-assessment questionnaire (SAQ) based on your business type. Additionally, if relevant, conducting quarterly external vulnerability scans using an approved scanning vendor (ASV) is advisable. For larger enterprises, working with qualified security assessors (QSAs) to perform an on-site assessment is recommended to validate compliance.
It’s also important to check with your payment processor to confirm compliance requirements and any specific criteria they may have. Continuously reviewing PCI DSS standards and becoming familiar with these guidelines is crucial to ensure that your security measures align with the requirements. Regularly monitoring and updating security practices to adapt to evolving threats and compliance standards is essential.
5. Is PCI compliance legally required?
While PCI compliance itself is not a law, it is often contractually mandated by the major credit card companies (Visa, MasterCard, American Express, Discover, and JCB). Merchants and service providers that handle credit card transactions are typically required to comply with PCI DSS as part of their contractual agreements with these card brands. Non-compliance may result in fines, increased transaction fees, or even the termination of the ability to process credit card payments.
Additionally, some industries and regions may have specific regulations that incorporate PCI DSS compliance as a legal requirement. For instance, in certain U.S. states, specific laws may refer to PCI DSS compliance for handling payment card information.