 |
 |
|
|
 |
Will The Recession Kill PCI Or Bring Needed Rationality?
Written by David Taylor
July 18, 2008
Guest Columnist David Taylor is the Founder of the PCI Knowledge Base, Research Director of the PCI Alliance and a former E-Commerce and Security analyst with Gartner.
With the economic prospects for the next year or more so dour, it's not obvious that PCI compliance should be immune from cutbacks. The big issue is whether there is room in the PCI process for more rationality in light of these economics?
Over the last few years, PCI compliance has consistently generated larger security budgets, with little or no requirement for justifying them, other than "our bank told us we have to do it." But with some acquirers being no better off financially than many retailers, it's time to ask some hard questions: Is the risk of a security breach great enough to risk the financial health of our company?
Even as a certified security professional (CISSP), I find it hard to justify some of the things merchants are being told to do by their acquirers. Just last week, a PCI project manager told me his Level 1 retail employer had spent more than $4 million so far to achieve PCI compliance and they were anxiously awaiting a decision from their 28-year-old assessor (and their bank) as to whether this would be satisfactory. After discussing this retailer's situation for more than 45 minutes, with multiple thwarted project plans and conflicting standards interpretations, and going through three different assessors (but staying with the same "leading" assessment firm), the whole process began to sound so convoluted that I was nearly left speechless (which, anyone who knows me will tell you, is pretty darn rare).
I think it's time to fight to bring some more rationality to the PCI compliance process. The rumor mill says that PCI 1.2 (coming in October) will only bring minor "tweaks" to the standards because the card brands are reportedly pretty pleased with them and seek only to "clarify" some of the interpretations and eliminate some redundancies between standards. All these changes are good, of course. I'm a huge fan of PCI DSS as providing a level of detail that is needed in security standards. No, the problem isn't with the standards; it's with the process, which largely ignores the established concept of "risk acceptance" and which allows all parties (except the merchant) to avoid assuming any liability.
Make the switch to rationality. More than 80 percent of the merchants we've interviewed for the PCI Knowledge Base have stayed with the same PCI assessor for more than a year, even though less than half of them are happy with that assessor. More than 90 percent have stayed with the same acquirer, but many of them find their acquirer to be less than helpful when it comes to PCI.
Of course, switching acquirers involves many more issues than PCI, and there is no reason to let the tail wag the dog just to ease the path to compliance. That said, too many merchants simply sign up with the assessor recommended by their acquirer without doing a thorough interview process and ensuring that the assessor (the person and the company) is comfortable with both the industry and the specific "idiosyncrasies" of the merchant that may require compensating controls. A much more thorough assessor evaluation is needed, as is a willingness to switch more often.
Actively negotiate with your acquirer. I've talked to many merchants who feel that non-compliance with PCI puts them in an uncomfortable, disadvantageous position vis-à-vis their acquirer. As a result, they stop acting like the customers they are and sometimes neglect or refuse to exercise their market power when dealing with their acquirer. I would suggest to all retailers and other merchants that it is worthwhile to do some analysis of the monthly bank statement, focusing on downgrades, service fees and fines.
The goal is simple: Understand the revenue and profit that your company generates for your acquirer, so if there are additional fees, fines and interchange rate changes related to PCI, you can both identify these items and be prepared to discuss and even negotiate them with your acquirer. I have talked to several acquirers who have "subsidized" their most profitable merchant customers, simply because they want to keep their business. These same acquirers tend to be the most likely to listen to reason when it comes to helping merchants manage their risk, rather than dogmatically insisting on a "100 percent checklist completion" approach to PCI.
******
Finally, our "PCI Best Practices" study for the National Retail Federation continues. If you're a retailer, we would like to do a 100 percent anonymous interview with you for this NRF study. If you'd like to participate, just register at www.KnowPCI.com, or send me an E-mail at David.Taylor@KnowPCI.com.
|
|
 |
Advertisement 
 
|
Evan Schuman is the former retail technology editor for eWEEK.com, PCMagazine, CIOInsight and retail reporter for RISNews and Consumer Goods Technology. Having covered IT issues for 21 years - and other stuff like legal affairs, politics, Wall Street and the environment for about eight years before that - Schuman is in a good position to gripe about technology trends and sometimes accidentally make a good point.
|
|
 |
 |
|
Over the last month, I've been struck by an unusually large number of reader E-mails that fundamentally question whether E-Commerce will ever truly work: Whether it will consistently make money, be profitable and be, well, worth all of the effort.
If the slip of a lip can sink a ship, perhaps a retailer's flick of the click can kill a prestigious campaign mighty quick. The best way for a retail chain to make a customer happy is to offer him/her a program that few others can get. And the best way to undermine that—as Best Buy discovered on Wed. (Sept. 3)—is to then accidentally make that offer to every single reward customer you have.
It looks like Amazon is no longer backing up its pricing, putting an end to its Post-Order Price Guarantee — a policy that allowed customers to recover the difference from an Amazon price drop within 30 days of a purchase. As of Monday (Sept. 1), customers who place orders on Amazon.com are not offered the 30-day guarantee, a customer service representative confirmed.
Security is nothing if not filled with seeming contradictions, and the latest version of PCI—slated to be officially unveiled next month (October)—is highlighting a beauty: To most effectively protect payment-card-related systems, protection must be focused on anything that is not related to payment card data.
Quite a few retailers have been involved in site changes to make the Web more accessible to those with vision difficulties, but Target has been the most aggressive in fighting such efforts. As such, Target's settlement has an especially strong chance of pressuring retailers to aggressively embrace such changes.
Wal-Mart on Wednesday (Sept. 3) launched what it dubbed the Walmart Smart Network—a series of next-generation digital-ad systems—to 2,700 stores. The funky aspect of this rollout is that all 27,000 screens will be centrally controlled via an Internet Protocol Television connection.
Site navigation problems and unpleasant booking engines are driving customers away from online travel sites and pushing them through the doors of traditional, more personable travel agencies. Even though sales for online travel sites are growing, fewer travelers are actually booking their trips online.
A TJX senior executive is apparently trying to push chip-and-PIN, arguing that cyberthieves are focused on the United States partly because we haven't adopted it. "Criminals, I believe, are focusing on the countries that haven't added that higher level of security," TJX Vice Chairman Donald G. Campbell said.
Calvin Klein finally gave its HTML blessing to E-Commerce, offering its first for-sale items on its Web site, although the E-Commerce launch is U.S.-only. Anyone visiting from outside the United States will be routed to the existing corporate brochure site.
It seems clear that most retailers are adopting one of two distinctly different strategies when it comes to data security and compliance. Let's label them Cost-Effective Compliance (CEC) and Compliance-Driven Security (CDS). Both approaches are based on best practices and solid risk management principles. But, GuestView Columnist David Taylor argues, they lead to quite different spending patterns, technology decisions and business cultures.
A retail IT lesson from the world of politics? Maybe. Web tracking firm Keynote was studied the text message blast sent by the U.S. presidential campaign of Barack Obama, the one in which his campaign promised to tell supporters his VP selection before it was broadly announced.
Has Amazon decided what it wants to be when it grows up? More to the point, are there indications that it has now decided that one thing it does not want to be is yet another thin-margined retailer?
The IT chief at Netflix has pointed the finger of blame for its site problems last month at "a database corruption event in our shipping system." The problem prevented customers from receiving their DVDs for about three days.
Almost a year after TJX settled with banks and bank associations impacted by the worst data breach in credit card history, another bank has come forward with its own lawsuit against the retailer, claiming the incident compromised some 4,000 of its customer accounts.
The number of data breaches reported as of Aug. 22 of this year has already surpassed the total number in all of 2007, including a new one from Macy's impacting some 4,100 customers.
On the best-paid list of CIOs at publicly held companies, Best Buy's Bob Willett ($4.7 million), Home Depot's Bob DeRodes ($4.3 million) and Kohl's Thomas Kingsbury ($2.5 million) stand at the top, doing the pocket-protector crowd proud.
With the frequent product changes executed by any large e-tailer's site, the tech hurdles of launching a mirror site in another language can be daunting. But this challenge has created a small industry of companies that are trying to facilitate rapid globalization for e-tailers.
JCPenney is testing the Australian waters a bit with an online push. The retailer has a local URL and an Australian company handling all operations, but it's still shipping merchandise from the States and asking Australian shoppers to wait "12 to 14 working days. This "request" prompted one Australian publication to ask "whether Australians would be prepared to wait two weeks to receive something purchased online."
In an overall down market where the 150-store Nordstrom chain is seeing a 4.3 percent sales drop, online operations are accounting for 15 percent, hitting almost 8 percent of all sales. Company execs there now project online to soon top 10 percent.
The new version of PCI due out in October will let the outdated WEP wireless security standard stick around for almost two more years, while also reducing the required frequency of firewall rule reviews.
It's late on a Friday night and as Jane Smith walks into her local grocery frozen food aisle, she notices a neighbor walking away carrying a frozen pizza, right near a digital advertisement for 20 percent off of a Budweiser six-pack. Jane reaches into the freezer to grab her favorite Häagen-Dazs vanilla ice cream but notices that the digital ad instantly changes to hawk 40 percent off fresh apple pie in the bakery section.
It's generally accepted that any key economic issue—whether it's a housing slump, rising gas prices or tax refund checks—can have a sharp impact on business spending. But the IHL Group is floating an interesting theory that recent gas price hikes are going to have a very specific and direct impact on IT spending next year.
After years of trials with only the rarest evidence of CFO-friendly RFID ROI, shelf stock monitoring is quickly emerging as "the first major application of RFID in retail with a strong business case," according to a new report from London-based RFID analyst firm IDTechEx.
While North American retail execs are planning for trivial—if any—IT investment increases this year, with "more than one-quarter of retailers expecting lower IT spending," more than half of their Asian Pacific counterparts are preparing for significantly higher IT spending, according to new Forrester numbers released this week. A bit of the Tortoise and the Hare perhaps?
A gang of data thieves in Ireland has well learned the lesson that the best place to hide is in plain sight. The group hit a large number of retailers throughout Ireland and grabbed more than 20,000 payment cards by placing skimmers on card-swipes by wearing what appeared to be maintenance uniforms and saying that they were performing bank repairs.
These days, when U.S. government officials want to ask questions about privacy and data security, it's never clear if they want to protect consumers' privacy or learn the best way to violate it themselves. But retail execs who want hints can drop by a Sept. 22 hearing at the U.S. Federal Trade Commission's Washington, D.C., headquarters.
Retailers who are worried about RFID security problems will have more details available to them now that a federal judge has killed a gag order on MIT students who had identified flaws in Boston's contactless RFID subway cards.
Based on the PCI Standards Committee's official hints about what will be in the 1.2 release, it appears that clarifying when and how virtualized servers can be PCI compliant didn't make the cut. But before the server and security geeks start lighting their torches and getting all "vigilante" on the card brands, let GuestView Columnist David Taylor make his case for why it won't matter in the slightest.
As major chains are doubling up their focus on computer-savvy young consumers, some are finding their aversion to avatars giving in to their adoration of avarice.
A "persistent and mysterious technical glitch" has severely disrupted business operations at the massive online film rental site Netflix, "potentially affecting millions of its customers."