PCI DSS Compliance: Requirements, Tips, & More
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As someone who has sold products, I didnât initially learn about PCI DSS requirements. Thatâs why Iâm diving into it now â to help you avoid the same mistake I made.
Iâll cover what PCI DSS is, its requirements, compliance levels, and other key details.
Letâs start with the basics.
Key Takeaways
- PCI DSS protects payment card data with 12 requirements grouped into six objectives.
- Compliance costs range from $1,000 to $100,000 annually, depending on business size.
- 79% of breached retailers were noncompliant with PCI DSS, highlighting its importance.
- Businesses validate compliance through SAQs, ASV scans, or QSA audits.
- Non-compliance results in fines, fraud risks, and potential inclusion on the MATCH list.
- PCI DSS has 4 compliance levels, based on annual transaction volume and validation.
PCI DSS helps merchants combat fraudulent chargebacks. But. It's less effective against friendly fraud or merchant error disputes. Thatâs where chargeback alerts come in.
Chargeback alerts let you address disputes before they escalate.
Want to know more? Learn here.
What is PCI DSS?
PCI DSS is a set of security rules that protect payment card data during transactions. It applies to all businesses that handle cardholder information.
The Payment Card Industry Security Standards Council (PCI SSC) introduced this in 2004 to combat fraud. It standardizes security practices for any organization handling credit or debit card transactions. Creating consistent protection against breaches.
These rules apply to all participants in the payment ecosystem:
- Merchants: Retailers or eCommerce businesses processing card payments.
- Payment processors: Companies connecting merchants to banks for transactions.
- Service providers: Vendors offering payment gateways, storage, or IT services.
How much does PCI DSS compliance cost? Letâs dive into that next.
Summary: Protects cardholder data with mandatory global security rules.
PCI DSS Certification Cost
PCI DSS certification costs vary by business size, transaction volume, and compliance needs. Typically ranging from $1,000 to $100,000 annually.
Hereâs how costs break down [1, 2]:
- Assessment fees:
- Small businesses: Can complete a SAQ for $50 â $300.
- Larger businesses: Often hire a QSA for audits, costing $15,000 â $40,000.
- Technology investments:
- Security measures (e.g., firewalls): $2,000 â $5,000 annually.
- External experts to manage these systems: Around $2,400 annually.
- Ongoing maintenance:
- Vulnerability scanning: $100 â $200 per IP address.
- Employee training: About $70 per employee.
For small retailers processing fewer than 20,000 annual transactions, compliance costs range from $5,000 to $20,000.
Enterprises may face compliance expenses between $50,000 and $200,000 annually.
Non-compliance with PCI DSS can lead to fines of up to $100,000 per month, depending on how long the business remains non-compliant. Card providers may also impose higher transaction fees.
Sometimes reaching $90 per transaction.
What are all the PCI DSS requirements? Letâs dive into that next.
Glossary:
- SAQ (Self-Assessment Questionnaire): A tool for merchants to self-evaluate PCI DSS compliance.
- QSA (Qualified Security Assessor): A certified professional authorized to assess PCI DSS compliance.
Summary: PCI DSS certification costs vary, typically from $1,000 to $100,000.
Requirements of PCI DSS
PCI DSS defines 12 security requirements that are:
- Install and maintain a firewall to protect cardholder data.
- Avoid vendor-supplied defaults for system passwords and security settings.
- Protect stored cardholder data.
- Encrypt cardholder data during transmission over public networks.
- Protect systems against malware and regularly update anti-virus software.
- Develop and maintain secure systems and applications.
- Restrict access to cardholder data to those who need it.
- Identify and authenticate anyone accessing system components.
- Restrict physical access to cardholder data.
- Track and monitor access to network resources and cardholder data.
- Regularly test security systems and processes.
- Maintain a security policy for all personnel.
These requirements fall under 6 principles, which weâll break down in the following sections.
1. Build and Maintain a Secure Network and Systems
Requirements covered:
- Firewalls: Set up firewalls to separate trusted networks from untrusted ones. Customize firewall rules to block unauthorized traffic, and test configurations to ensure security.
- No vendor defaults: Replace all default credentials on systems and applications (e.g., "admin123"). Default settings are easy targets for hackers.
Example: A retail chain secures its POS systems by assigning unique credentials to each device. Placing them behind properly configured firewalls. This setup prevents unauthorized access and protects sensitive payment data.
2. Protect Cardholder Data
Requirements covered:
- Protect stored data: Only store cardholder data when necessary. Also encrypt it with strong algorithms like AES-256 to ensure security.
- Encrypt transmissions: Use secure protocols like TLS to protect payment data.
Example: An e-commerce site replaces credit card numbers with tokenized data. These secure tokens reduce the risk of fraud, even if the system is breached.
3. Maintain a Vulnerability Management Program
Requirements covered:
- Anti-virus software: Install malware protection on all devices and keep it updated.
- Secure systems: Develop secure code. Also conduct regular scanning and penetration testing to identify and fix vulnerabilities.
Example: Use automated scanning to detect and fix vulnerabilities before releasing products.Â
4. Implement Strong Access Control Measures
Requirements covered:
- Access restrictions: Limit access to sensitive data based on job roles and responsibilities.
- Authentication: Implement multi-factor authentication (MFA) to verify user identities.
Example: An IT support firm restricts employees to only the databases they need and requires MFA for secure logins.
5. Monitor and Test Networks Regularly
Requirements covered:
- Physical access: Restricts physical access to data centers or devices.
- Tracking and monitoring: Log all access to systems containing sensitive data for accountability.
- Security testing: Perform regular vulnerability scans and penetration tests to identify risks.
Example: A hosting provider locks server rooms and logs all access to servers.
6. Maintain an Information Security Policy
Requirements covered:
- Security policy: Create and share a documented security policy that addresses PCI DSS compliance. Regularly train employees on security best practices.
Example: Host quarterly security training sessions to keep staff updated on evolving threats.
How do you know whether you meet these requirements? Letâs dive into that next.
How Do I Verify Whether Iâm PCI DSS Compliant?
Hereâs how PCI DSS verification will work:
- Determine your PCI DSS level: Compliance levels depend on your annual transaction volume.
- Complete the right validation method: Based on your level, youâll verify compliance through one or more of the following:
- SAQ: Answer yes/no questions about your security measures.
- External vulnerability scans: ASVs conduct quarterly scans to check for security weaknesses.
- On-Site audit by a QSA: A professional performs an in-depth review.
- Submit documentation to your acquirer: Send proof of compliance to your acquirer.
- Maintain compliance: Regularly update security measures, train employees, and address vulnerabilities.
What happens if youâre not compliant? Letâs explore that next.
Glossary:
- ASV (Approved Scanning Vendor): A certified organization that performs PCI DSS-required vulnerability scans.
- Acquirer: An institution that processes payments on behalf of a merchant.
Summary: Verify PCI DSS compliance with SAQs, scans, or QSA audits.
Consequences of Not Being Compliant
PCI DSS non-compliance can result in these consequences [3]:
- Financial: Payment card networks fine businesses $5,000 to $100,000 per month for non-compliance.
- Acquiring banks typically pass these fines down to merchants.
- Increased liability: Businesses must cover the full cost of fraud, chargebacks, and investigations.Â
- Expenses often exceed hundreds of thousands of dollars.
- Higher transaction fees: Acquirers may impose higher interchange fees, reducing profit margins.
- Reputation: Breaches erode customer trust and harm your brand.
- Studies show 60% of small businesses close within 6 months of a data breach.
- Legal action: Non-compliance can lead to lawsuits from customers, partners, or regulators.
While PCI DSS certification can cost a lot, the cost of non-compliance often exceeds it.
Letâs move on to the different levels of PCI DSS.
Glossary:
- Interchange fees: Fees paid by merchants to process card transactions.
- Chargebacks: The cardholderâs bank initiates reversals of card payments.
Summary: Non-compliance leads to fines, fraud risk, lawsuits, and reputational damage.
Levels of PCI DSS
PCI DSS levels categorize businesses based on their annual transaction volume. Each level has specific compliance requirements to match the associated risk.
These levels determine the depth of compliance validation needed for a business. Higher levels signify larger transaction volumes and stricter security requirements.
Hereâs an overview of the 4 levels:
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Note: The transaction volumes mentioned apply to Visa, Mastercard, and Discover. Unless specified otherwise for American Express.
PCI DSS compliance levels and requirements can vary between credit card brands. Each brand may set unique criteria and validation processes.
For instance, Visa only requires level 2 and 3 merchants to submit an SAQ [4]. Mastercard requires an SAQ and AOC.
Thatâs nice and all. But whatâs an audit?
Glossary:
- ASV (Approved Scanning Vendor): A provider of vulnerability scans to identify security risks.
- ROC (Report on Compliance): A formal document completed by a QSA detailing a businessâs adherence to PCI DSS requirements.
Summary: PCI DSS levels determine compliance depth based on transaction volume.
What is a PCI DSS Audit?
A PCI DSS audit is a formal review that verifies a businessâs compliance with PCI DSS requirements. Businesses can complete audits internally using a SAQ or hire a QSA for an external review.
The types of audits include:
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Level 1 merchants usually require audits by QSAs, while Levels 2 through 4 typically perform SAQs. However. Requirements can vary depending on the card network.
Refer to the previous section for more information.
Hereâs whatâll typically happen during an audit:
- Scope definition: The auditor identifies the systems, applications, and networks.
- Evidence collection: The business submits documentation, such as security logs.
- Testing: The auditor tests controls, including firewall configurations, encryption methods, and access controls.
- Reporting: The auditor prepares an ROC or helps complete an SAQ.
Now, letâs move on to the pros and cons of PCI DSS.
Summary: A PCI DSS audit verifies compliance through SAQs or QSA reviews.
Pros & Cons of PCI DSS
Pros:
- Better security: Reduces breaches and fraud with encryption and regular system monitoring.
- Customer trust: Shows commitment to protecting data, boosting loyalty and confidence.
- Legal protection: Avoids fines, lawsuits, and penalties from non-compliance or breaches.
- Streamlined operations: Adopting structured security practices reduces risks.
- Global consistency: Ensures data protection standards across industries and regions.
Cons:
- High costs: Audits, upgrades, and maintenance can strain small businesses.
- Implementation challenges: Meeting requirements is tough for businesses with limited IT.
- Time-consuming: Audits, scans, and updates demand effort.
- No guarantees: Compliance minimizes risk but doesnât eliminate evolving threats.
- Varied requirements: Credit card brands or acquirers may have inconsistent rules.
Are there any benefits to becoming compliant?
Best Practices to Become PCI DSS Compliant
Follow these best practices to become PCI DSS compliant:
- Understand your scope: Identify systems and processes handling cardholder data.
- Use encryption and tokenization: Encrypt sensitive data during storage and transmission.
- Implement network segmentation: Separate CDEs from other systems.
- Conduct regular scans and penetration tests: Use ASVs for quarterly scans.
- Maintain strong access controls: Restrict data access to specific roles.
- Train employees: Educate staff on PCI DSS requirements.
- Keep systems updated: Apply patches and updates quickly.
- Document and monitor activities: Keep logs of system activities and compliance efforts.
- Test your incident response plan: Create and test a plan for breaches to mitigate damage.
So, whatâs the connection between PCI DSS compliance and chargebacks?
Glossary:
- Tokenization: Replacing sensitive data with a non-sensitive equivalent, reducing storage risks.
- CDE (Cardholder Data Environment): Processes involved in storing, processing, or transmitting cardholder data.
PCI DSS & Chargebacks: Whatâs the Correlation?
A 2010 Verizon study revealed that 79% of breached retailers werenât PCI DSS compliant [5]. This highlights how compliance reduces fraud, which, in turn, lowers fraud-related chargebacks.
Chargebacks happen when customers dispute transactions due to unauthorized charges or dissatisfaction.
Here's how else the two are connected:
- Fraud prevention: PCI DSS enforces encryption and other measures to reduce unauthorized transactions.
- Improved data security: By securing cardholder data, PCI DSS lowers the risk of breaches. Preventing hackers from using stolen card details.
- Reduced merchant error: Compliance ensures accurate processing systems. Reducing errors that can result in chargebacks.
Also:
Excessive chargebacks and PCI DSS violations can place businesses on the MATCH list. It's a Mastercard database shared across card networks.
This list flags high-risk businesses for issues like:
- High chargeback ratios (Code #4): Frequent disputes signal liability.
- PCI DSS non-compliance (Code #12): Failing to protect cardholder data increases breach risks.
Businesses on the MATCH list face higher fees and difficulty securing payment processors. Staying PCI DSS compliant and managing chargebacks helps businesses avoid this designation.
We have a detailed guide on what being on the MATCH list means and how to get off it. And see this guide to know what defines a âhigh chargeback rate.â
Hopefully, you found this guide helpful.
Glossary:
- MATCH list (Member Alert to Control High-Risk Merchants): A merchant blacklist.
- Chargeback ratio: The percentage of chargebacks compared to total transactions.
Summary: PCI DSS reduces chargebacks by preventing fraud and protecting data. Non-compliance risks MATCH list inclusion.
Wrapping Up
PCI DSS isnât legally required, but non-compliance can cause trouble with payment processors. It could even land you on a merchant blacklist. High chargeback rates can also put your business at risk of blacklisting.
If your chargeback rate is around 1%, itâs time to consider chargeback prevention tools. One effective option is chargeback alerts, which notify you before disputes escalate.
We provide these tools. Try it out today.
Sources
- [1] PCI Cost. Security Metrics.Â
- [2] Certification Cost. Zluri. 11/08/2024.
- [3] Cyber Attack Statistics. Station X. 4/10/2024.
- [4] PCI. Visa.
- [5] Preventing fraud. Softjourn. 9/13/2019.