Evan Schuman's StorefrontBacktalk

MasterCard’s Monday (Jan. 30) rollout of its roadmap for EMV in the U.S. set it on the opposite side of payment security from Visa, with MasterCard pushing for EMV with PIN and Visa arguing that PIN isn’t necessary. MasterCard is backing up its preference with some serious fraud-dollar forgiveness. Oddly enough, the much-smaller MasterCard has trumped—or, more precisely, nullified—Visa’s position, at least as far as retailers are concerned.

Given that greater-than-99-percent of Visa retailers in the U.S. also accept MasterCard, chains must go along with whichever brand has the more strict requirements. Typically, that’s been Visa, but not this time. On EMV-related PCI relaxations, however, the two brands opted to adopt identical policies.

For quite a few years now, the contactless payment world has enjoyed an endless-loop of defend-and-repel games when dealing with contactless security. The game starts with bank assurances that the data being transmitted wirelessly couldn’t possibly be enough for a thief to perform a transaction. Next is some public demo of a security researcher wirelessly grabbing data and completing a transaction. This is followed by industry refutations that the system demoed was either out-of-date or some part of the test was unrealistic.

Interestingly enough, there’s truth on both sides. But the dance of demo-and-explanation seems to never slow.

It was just past 10:30 PM on January 15 when police say a shoplifter walked into the Murrieta, Calif., Wal-Mart. But as part of a growing trend, she didn’t try and steal any merchandise. What she did was walk over to an unstaffed counter, pull out what seemed to be wire cutters and cut loose the store’s keys to its safer security devices.

Other thieves have opted for grabbing EAS tag detachers, but the point is the same. Beyond protecting products, retailers need to reinforce protections around the devices that protect their products. How are keys and tag detachers handled when not in use? Is there an explicit policy about ignoring EAS alarms?

As retailers embrace the cloud for its flexibility and convenience, they might want to also consider a very serious potential for loss of control. Legally, we’re talking three different types of control loss: Your loss of access to the data; your customers’ loss of the ability to access your services; and the potential for your confidential data to become public records and to then find its way to your competitors.

Paranoid? Not any more, pens Legal Columnist Mark Rasch. Recently, the U.S. Government took down the copyright pirate site “MegaUpload” and had its founder arrested and detained awaiting extradition.

PayPal’s expansion of its in-store payments trial at Home Depot (up from 400 PayPal employees to all PayPal users) marks a huge jump in the trial’s scope—and risk. On January 19, PayPal opened up the trial to include 51 stores (up from the initial 5) and said all PayPal users could now sign up for the system. That should give both PayPal and Home Depot much more useful information on who will use the system, and how.

But PayPal’s approach—which essentially reverses 50 years of payment-card advances by eliminating any physical authentication device—still presents a big challenge when it comes to security. The ability to check out with just a mobile phone number and PIN—no plastic card, NFC-enabled phone or other authentication hardware required—means anyone who can acquire that phone number plus PIN has a free shot at the legitimate customer’s account.

When a customer walks into a store and gives a payment card to an associate, who charges it on a store-branded mobile device, is that customer interacting with that retailer? If that device is using Square, the answer is “no,” but the customer won’t know that. If an E-mail address is requested, is it for Square or that retailer?

If a marketing opt-in question is posed, who is posing it? And how will customers react when they later learn they weren’t sharing with whom they thought they were sharing? Bad news: This is not hypothetical. There is a broader issue at play here. With any of the third-party mobile payment efforts—Google Wallet, PayPal, ISIS, maybe even Apple—there is the potential for this type of confusion.

Historic British retailer Fortnum & Mason—with roots dating back to 1704—is finding that PCI compliance doesn’t end with IT. The chain had to confess last week that a customer service rep was asking customers to E-mail their full credit-card data—including CVV—to process routine refunds.

Clearly, one errant employee is something every chain has. But this example brings up a too-often overlooked PCI fact: Compliance is an issue for every employee. Mobile payment, being a disruptive factor, will only make things worse, because it creates many more opportunities for payment-card data to be captured/retained against the rules.

In the power struggle between retail marketing and retail IT, IT is getting its server farms kicked. It started with E-Commerce and is now growing with mobile and social. What has to go? If it can go in the cloud, get rid of it. E-Mail? Gone. Web hosting? Out of here. CRM? Exit, stage right. If it can be easily outsourced by specialist firms or even done by people in the business unit, you need to let it go.

It’s time to evict Web and mobile app development, and pretty much any marketing initiative that isn’t core to your business. Heresy? Certainly, pens Retail Columnist Todd Michaud. But it’s necessary.

Given that PCI only applies to payment transactions for the five major card brands, PayPal transactions would not normally be in scope. But recent pilot programs by at least one major retailer and an announcement by a POS device vendor has PCI Columnist Walter Conway questioning the conclusion that PayPal transactions will remain out of PCI scope.

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? And if the PayPal account is in scope, is it a big deal?

With Visa’s clarification on January 13 that its U.S. EMV deployments will include Chip-and-no-PIN, retailers are trying to decide if this is a good thing or a bad thing. On the bad side, this forces retailers to immediately trust the chip technology perhaps a bit more than they want to.

“When I think about secondary validation, that gives me more of a warm fuzzy even though we have people saying that I have a more sophisticated chip and that my smart device has got some protection sitting in it,” said Bill Titus, the Loss Prevention VP at Sears.

When Amazon’s Zappos apparel unit announced on Sunday (Jan. 15) that more than 24 million customers had their information potentially stolen from its site, Zappos took the radical—but wise—move of wiping out all of its passwords. That caused massive disruptions to the company, shutting down customer service phone access and access to the site from outside the U.S., in addition to inconveniencing all customers.

But it was the unequivocal declaration that payment systems had not been touched that raised eyebrows. At this early stage of a breach investigation—knowing that cyberthieves tend to be quite good at hiding their tracks and creating misleading tracks—is such a blanket promise to customers reckless?

As retail rapidly moves to integrate mobile into almost every aspect of its customer interactions, many in IT and Loss Prevention are wisely scared about the security holes that will crop up during the rush. One such exec, William Titus, LP VP at Sears, said on Tuesday (Jan. 17) that one of his biggest fears involves mobile electronic receipts.

“The E-receipt problem is that the customer now has a valid receipt. I can’t bring it in. I’m not checking it off and signing off on it. So the ability to use that fraudulently increases unless you have a true returns management system,” Titus said.

If ever there was an argument where security trumped compliance, the debate about tokenization versus encryption is it. Readers have made that point abundantly clear following a recent column describing the PCI scope reduction benefits of tokenization versus encryption.

The shift in emphasis from compliance to being secure is not new, but PCI Columnist Walter Conway was struck by how pronounced a perspective change retailers are experiencing.

No retailer likes being fined by Visa or MasterCard for letting thieves steal payment-card data, and most grumble privately about how that process is arbitrary and rigged against merchants. But a lawsuit now unfolding in Utah has uncovered a remarkable level of detail about how arbitrary card brands can be.

The lawsuit is challenging everything from issuing banks’ contracts to Visa’s claims for counting up card fraud and pinpointing who’s to blame—in addition to $1.3 million in card fraud that Visa says the restaurant enabled via an alleged security breach for which there’s no concrete evidence.

Walk into one of about 25 Guess stores this week and you’ll see customer-accessible iPads in the men’s, women’s and accessories departments and even in the dressing rooms. “For the cost of a kiosk, I can put in four or five of these,” said Guess CIO Michael Relich. “This is the consumerization of IT.”

But the Guess iPad trial is hardly being done to save costs. The flexibility of the tablets and sharp, customer-friendly graphics make the devices a much more effective way to show demos and to locate merchandise, check inventory and do anything else that a kiosk would normally do.

The days of the classic botnet distributed denial-of-service attack may be numbered, and that isn’t necessarily good news for retail chains.On January 6, a cyberthief-friendly programmer made public a one-line attack that could enable a single attacker to bring multiple servers to their knees. That moves DDoS out of the realm of requiring a costly botnet for a high-bandwidth mass attack—and brings it into range for a single irritated teenager.

The vulnerability that attack uses is easily fixed. What’s really worrisome is what makes the attack practical: the new ability to target server weaknesses that have been known for years—but no one worried about.

In-aisle mobile payment isn’t merely a new payment method. It has the potential to force stores to rethink almost all aspects of operations—and few have seriously come to terms with how different environments are going to have to be. At the NRF show in New York City next week, a StorefrontBacktalk IT panel is going to map out the least-anticipated changes. And if you’re around on Tuesday 2–3 PM (1A 21/22 at the Javits Center), please drop by and tell us what we forgot to include. Ann Taylor CIO Mike Sajor, Sears VP/Loss Prevention Bill Titus and the NRF’s Joe Larocca—moderated by StorefrontBacktalk Editor Evan Schuman&mdashlwill look at the neglected items. As a Florida hobby shop discovered while serving as an NCR in-aisle mobile payment beta tester, this in-store mobile payment stuff is a lot harder than it looks.

“It’s really a change management problem,” Sajor said. “Literally everyone has to think through all of the possible change behaviors.” As Sears thinks through in-store mobile issues, it’s seeing how everything will need to change, from the supply chain to customer interactions to SKU-level integrity, inventory and dealing with new threats to the supply chain. “Some significant competitive advantages are going to be lost,” Titus said. The panel will be pure discussion, with no presentations and lots of audience interaction. So please argue with us there. Don’t make me come and find you.

The National Retail Federation’s Big Show is next week, and the exhibition floor will be crowded with vendors offering retailers all types of software applications. As a public service, following is a list of questions all merchants should ask their POS system supplier or reseller based on one QSA’s experience—namely the experience of PCI Columnist Walt Conway.

The good vendors will be able to address all these questions. The not-so-good ones will hand you a carrier bag or a pen instead.

With so many consumer devices using the same wireless frequencies, it was bound to happen: Just before Christmas, a U.K. family in a village 50 miles southwest of London lost the use of all wireless devices—everything from key fobs for unlocking vehicles to a wireless thermostat and a digital shower—until the problem cleared up without explanation several days later. The BBC reported that faulty wireless equipment had caused similar incidents in the past, including a street in northern England of homes whose wireless was jammed in 2010 by handheld wireless devices used to take orders at a nearby restaurant.

Retailers get understandably worried about customers who might intentionally or unintentionally block store Wi-Fi that’s used for POS, associates’ handheld devices or free customer wireless service. But there’s a risk the other way, too—the newest Wi-Fi access points have a range of more than 200 feet indoors and 800 feet outdoors. That’s easily enough to jam neighboring stores’ Wi-Fi in a mall or interfere with homes near a standalone store. Unfortunately, there’s no easy way to know whether a store’s Wi-Fi is causing problems in the neighborhood—at least not until the FCC shows up to investigate a complaint.

Twas the night before Christmas, and up in the sky, was a jolly old Santa, sans gifts from Best Buy. Consumers who had bought particularly popular items on the Best Buy Web site on Black Friday expecting a visit from Santa instead received a virtual lump of coal from the retailer in the form of an E-mail informing them that no gift was coming.

Legal Columnist Mark Rasch wants to call it a bait-and-switch coupled with a breach of contract. The Uniform Commercial Code Article 2 for the sale of goods says that if there is an offer (PlayStation for $150!), an acceptance (click here!) and consideration (here’s my credit card), then voila! A contract is formed.

If detecting a customer’s age is tricky when the customer is standing right in front of a kiosk, it’s an even bigger problem for E-Commerce—one with hard legal consequences. Just after Christmas, a California father discovered his 14-year-old son had successfully ordered a water pipe and tobacco through Amazon—both illegal for minors to buy in California.

Age verification is something mail-order vendors have struggled with for years, and mostly given up on. But E-tailers can no longer use impossibility as an excuse. A recent federal law requires age-verification for tobacco sold online—and other age-controlled items can’t be far behind.

When Kraft and Intel recently started showing off their age-detecting kiosk—a vending machine that dispenses Jell-O pudding and other desserts only to consumers it calculates are old enough to appreciate them—it was yet another in a long line of age-guessing systems. This one, though, has the potential to help retailers at least minimize some hassles from selling age-restricted products.

The age-detection part uses an optical sensor to consider the customer’s face shape, along with distance measurements between the eyes, nose and ears.

For many shoppers, the thief non-interference policy of many chains—especially when it involves firing a security guard who confronted a shoplifter—is baffling, even though it’s truly—albeit non-intuitively—the right thing to do. Apple’s approach to non-interference with thefts took on an especially surreal twist in Toronto late last month.

The store does have a policy: Don’t take sides. If the customer wants to call police, let the police handle it. If police aren’t called, treat everyone as a legitimate customer.

The PCI Council used its December 2011 newsletter to remind merchants and service providers to control physical access to their call centers with video cameras or other devices. This recommendation is both sound security and good advice, and merchants everywhere should take it to heart. But as a QSA, PCI Columnist Walt Conway wishes the Council had done more than highlight just one particular sub-requirement.

There is more to protecting sensitive areas than installing video cameras. The second, and possibly thornier, concern for small and midsize merchants is how effective the reminder is likely to be when many of them mistakenly think they won’t need to follow the advice.

The latest major retail data breach—involving 150 Subway locations and more than 50 other retailers, payment-card data from more than 80,000 shoppers and more than $3 million in bogus, but completed, transactions—is different than its predecessors for several reasons. Most notably, it appears to be the first major breach that was initially detected by a chain’s own IT team.

The essence of the attacks’ success leveraged two weaknesses: different unsecured remote-access packages used by various franchisees of Subway, which enabled easy Internet access to POS systems; and card swipes with minimal encryption. That meant key-capture software installed by the cyberthieves was able to grab data in the clear, as it was being swiped.