This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. Well we want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s term is:
Virtual Terminal
A Virtual Terminal is a form of secure online payment processing. Using these web-based applications to create a virtual terminal, a merchant can access over an interject connection all the needed credit card processing capabilities from any computer through a secure, password-protected login.
After logging into the environment, a merchant can manually enter credit card details and perform any credit card processing transaction that a Point-of-Sale Terminal would perform, including authorization, capture and refund.
The process looks a lot like going to a secure web site. It’s flexible and can be used from a variety of locations allowing a merchant to either replace their standard terminals or use this as an option for when they’re out in the field. Virtual Terminals are very easy to use, accessed via Secure Socket Layer Encryption (SSL), enable separate authorization and settlement transactions, connect to Address Verification System (AVS) and Card Verification Value (CVV) fraud tests and support multi-user access with multiple permissions. In short, you can run your entire payment processing protocol through a virtual terminal safely and securely.
For more information, you can review how the process works at this link.
You can also find out more about the virtual terminals Host Merchant Services offers at this link.
A payment processing related story setting the blogosphere on fire right now is this study by Pew from their PewInternet and American Life Project that suggests that mobile payments — and swiping your phone to pay for things when you shop — will be the standard by 2020.
There’s been a wide variety of takes throughout the media on this study. It interests us here at The Official Merchant Services Blog because the future of mobile payments and mobile payment processing are topics we’ve been focusing on since our very beginnings.
First there was our infographic sharing an expansive look at Mobile Payments for the next couple of years.
Then there was our article offering tips for dealing with Mobile Payments.
Then there was our breakdown of three separate research firms and their predictions for Mobile Payments over the course of the next couple of years.
Beyond the articles, we also covered Mobile Payments in the blog here. We took a look through theMagic 8-Ball to see what was in store for Mobile Payments on October 18, 2011. Then on October 25, 2011, we asked the question Are Smartphones the Credit Cards of the Future? On January 23, 2012, we once again tried to peer into the future with Mobile Payments: 2012 and Beyond. On February 7 we examined the impact that Visa’s commitment to EMV chip cards could have on Mobile Payments. And on February 15, with the advent of spring training in the air, we took a silly take on the future of Mobile Payments, comparing it to the movie A League of Their Own.
The recurring theme in each of our articles and blogs: The future. All of the commentary, all of the studies, all of the research, and all of the stories released about Mobile Payments focus on the rise of Mobile Payments in the future. Just like this latest media blitz. Though the big difference this time is instead of Mobile Payments by 2014 or 2015, it’s looking further ahead … to 2020.
The Study Itself
You can download a PDF of the Study Here.
According to PewInternet itself, “The survey results are based on a non-random, opt-in, online sample of 1,021 Internet experts and other Internet users, recruited via email invitation, Twitter or Facebook from the Pew Research Center’s Internet & American Life Project and the Imagining the Internet Center at Elon University. Since the data are based on a non-random sample, a margin of error cannot be computed, and the results are not projectable to any population other than the experts in this sample.”
The bottom line of the survey according to Pew is that within the next decade, smart-device swiping will have gained mainstream acceptance as a method of payment and could largely replace cash and credit cards for most online and in-store purchases by smartphone and tablet owners.
The media took that and ran with it …
Different Takes on the Same Story
One publication, Tech News World took the stance that Tech Leaders See Smartphones Replacing Credit Cards, Cash. The lead-in to their story reads: “Consumers may soon be able to leave home without pretty much anything but their smartphones and be confident they can pay their restaurant tabs or make purchases at stores without a hitch. There are still a few issues to resolve before mobile payments become ubiquitous, but a new survey suggests those hurdles will largely be cleared within the next eight years.”
Using the same source, though, Tricia Duryee wrote for AllThingsD that Mobile Payments Won’t Replace Cash or Credit for Another Decade, with a lead that reads: “It will take another eight years for cash and credit cards to be replaced almost completely by smartphones.”
Two different publications processing the exact same information from Pew and its survey, yet saying two very different things.
Venture Beat took a more straightforward approach, citing the statistics and headlining that 65% of Experts say Most People Will Adopt Mobile Payments by 2020. The story there focuses more on the numbers than the impact statement of replacing cash and credit. We particularly liked their lead as it asked an engaging question that sums up the whole Mobile Payments issue succinctly: “There’s no doubt that mobile payments are generating plenty of hype among the tech community, but how long will it be until they go mainstream?”
That’s essentially what the topic boils down to. Will it go mainstream? Predictions keep suggesting yes it will. Tech industry leaders keep pushing their companies toward this technology. And figures from this past holiday shopping season demonstrated a huge increase in mobile payment business. Seeking Alpha reported that mobile payment business increased 500% on Black Friday 2011 when compared to Black Friday 2010. There was definite movement in the industry, but the big number percentages cited by Seeking Alpha don’t tell the whole story. Mobile Payments are still a tiny piece of the consumer pie, nowhere near as big as online shopping or paying with credit cards, debit cards and even cash. The movement was big and noticeable but the percentages also act as a reminder that the totals are still very small compared to the other options.
Same Old Same Old
The study is fascinating, so if you have a chance definitely download the PDF linked above. And we’re happy to add it to our arsenal of indicators that the tech industry expects and wants big things from Mobile Payment Technology. But it’s still the same message that we covered with our Magic 8-Ball.
Mobile payments haven’t taken off as quickly as predictions suggest they should be. The Juniper study we covered in The Official Merchant Services Blog sets things in four years in the future. This Pew study sets things four years after that. So the boom is still very much capable of happening. But the same two things are holding Mobile Payments back in this country in 2012 that held them back in 2011:
The technology isn’t developed fully yet.
Security issues scare consumers.
The technology is sort of all over the place right now. You have a variety of different ways to process a mobile payment. And the biggest competitors in the industry (Google, PayPal, Amazon.com, MasterCard, Amex, Visa) are all still racing to outdevelop each other.Google Wallet is still not fully there yet. Near Field Communication (NFC) is still only being tested on a small scale in the United States. The phenomenon simply hasn’t taken root.
And there’s the security concerns. People are already worried about credit card hacks, phishing scams and the security of their transactions with plastic or with online transactions. PCI Compliance is a hot button issue, especially in light of Global’s security breach this year as well as a 2011 DigiNotar Hack. So technology like NFC where people just wave their cell phone at a scanner make people nervous about how secure the transaction really is. And of course it was already shown this year at a security conference that the Square device from Square Up could be hacked and used to steal credit card information.
Chips Versus the NFC
And finally, let’s not forget that while Visa is heavily invested in the future of Mobile Payments, Visa’s hoping that the added security that the chip technology provides will overcome that obstacle and finally tap them into the billions of dollars of revenue that Mobile Payments are predicted to have in the coming years. Stephanie Ericksen, head of authentication product integration at Visa Inc. told Credit.com, “Since announcing our roadmap last year, we have seen strong interest among U.S. issuers large and small to invest in chip technology, as today’s milestone shows.”
So EMV and smart-chip technology, which has the edge in security, could be realized long before 2020.
We’ve been working hard the past 7 months at The Official Merchant Services Blog to offer our readers a knowledge base — a place to come frequently to get clear and useful information about the payment processing industry. But we’re always looking to take things a step further. We want to offer more information and be even more helpful. I was recently inspired by this article over at UniBul’s Credit Card Blog which offers a definition of 21 confusing payment processing terms. Credit Card Processing has a lot of buzzwords that get used. This type of technical or industry language can sometimes make understanding statements very difficult for merchants.
Well we want to make these terms clear and remove the confusion. This is part of the ongoing service Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This is going to be an ongoing series where we define industry related terms and slowly build up a knowledge base. We’ll start with the same term that kicked off the UniBul blog. But our coverage is going to go a bit deeper than just a definition. We’ll provide a little extra context. And as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access.
Acquirer
An acquiring bank (or acquirer) is the bank or financial institution that processes credit and or debit card payments for products or services for a merchant. The term acquirer indicates that the financial institution accepts or acquires credit card transactions from the card-issuing banks within an association. The best known (credit) card Associations are Visa, MasterCard, American Express, Discover, Diners Club, JCB and China UnionPay.
An acquirer is contacted to authorize a credit card or debit purchase. The acquirer will either approve or decline the debit or credit card purchase amount. If approved the acquirer will then settle the transaction by placing the funds into the seller’s account.
Every time you use your credit or debit card you are using the services of an acquirer. An Acquirer will charge a monthly and/or a per transaction fee to the stores or merchants to facilitate transactions. Acquirers need to be licensed with credit card companies, such as Visa or MasterCard.
To get a better understanding of how payment processing works, you can view this infographic.
Host Merchant Services finally gets to make this announcement official: All mobile payment solutions the company offers now feature both iPhone and Android compatibility.
On February 28, 2012 Host Merchant Services teased through its Facebook Page that it would have big news regarding HMS and Mobile Payments in March. But technical difficulties with the full release of Payfox’s Android solution held the news back until today. In the Android Marketplace, Payfox is now listed and available for download. You can see the listing here.
The App has been on the Android Marketplace since March 21. But now the rest of the support is in place to get the app working. The final piece of the puzzle was the card reader — UniMag II, Two-Track Secure Mobile MagStripe Reader. The device is a two-track, encrypted magnetic stripe reader that works with a wide variety of mobile platforms, including Apple, HTC, LG, Motorola, and Samsung devices. Use your mobile device to read credit cards, signature debit cards, gift cards, loyalty cards, driver’s licenses, and ID badges. The UniMag reads up to 2 tracks of information with a single swipe in either direction, providing superior reading performance for your mobile device. A merchant account is required to accept credit card transactions.
You can download the specs from the UniMag II data sheet right here. These are the Android devices supported by the reader:
HTC Aria
HTC Desire Z
HTC Eris
HTC EVO 4G
HTC EVO Shift 4G
HTC G2
HTC Hero
HTC Incredible
HTC MyTouch 4G
HTC EVO 3D
HTC Nexus One
HTC Incredible 2
HTC MyTouch 3G Slide
HTC MyTouch 4G Slide
HTC Thunderbolt
HTC Merge
LG Optimus T
LG Revolution
Motorola Droid 2
Motorola Droid X
Motorola Droid Pro
Motorola Milestone
Motorola FlipSide
Motorola Atrix
Motorola Droid 2
Motorola Droid 2 Global
Motorola Droid Bionic
Motorola Droid 3
Samsung Captivate
Samsung Droid Charge 4G
Samsung Epic
Samsung Epic 4G
Samsung Fascinate
Samsung Nexus S
Samsung Replenish
Samsung Infuse 4G
Samsung Continuum
Samsung Galaxy SII
Please Note
When you go to the Google Play Market and search for PayFox using your Android/Droid phone, the PayFox application will only display for those devices for which the application itself is compatible.
Red 5 Standing By
Our friends at Transfirst also wanted to offer some clarification about the use and licensing around the word Droid:
“Android and Droid are often used interchangeably when referring to ever-growing & increasingly popular line of smartphones that run on Google technology. The difference, for most purposes, is one of legal definitions and intellectual property. Android simply refers to the operating system and software that powers phones built by any of number manufacturers, including HTC or Motorola, and that run on any of the major carriers.
Droid, on the other hand, is a term coined and owned by LucasFilm Ltd., the licensing rights for which Verizon had to purchase in order to brand their specific line of Android Smartphones.”
In short, Androids are phones, and you can now use them to swipe payments. Droids are what Jawas scavenge. Though I’m sure the Jawas will happily accept mobile payments from all you moisture farmers out there. Ootini!
Today The Official Merchant Services Blog has a quick follow up to its ongoing coverage of the Global Payments Data Breach. The past two entries in our blog have taken a sweeping look at the big picture of data breaches and PCI DSS and how effective those security standards are. PCI Compliance is a topic very near and dear to Host Merchant Services because the company pushes an aggressive initiative among its customers to keep them PCI Compliant.
PCI Compliance: The Foundation of Security
Past studies from Verizon and Gartner Research have suggested that business owners slack on their security needs, especially in terms of PCI DSS compliance. The most oft suggested reason for this lax outlook on security has to do with PCI itself not having a lot of traction with those business owners. The merchants tend to think any security issues are the responsibility of the third party processor or the bank or the credit card companies; they don’t see a direct link to their business because of the simple fact that their terminal that swipes cards wasn’t theirs to begin with. Other issues include Merchants getting lost in the complexities of the PCI DSS website and its many forms that need to be filled out, and the recent change to PCI version 2.0 in October 2010 changing the structure of the system. Merchants get distracted by their day to day responsibilities of the business and gloss over the minutiae of PCI compliance.
Host Merchant Services understands these problems. Part of their service mantra is that the company designs payment processing solutions that let their merchants focus on running their company. The general theme is to make payment processing seamless and easy for the merchants. This includes transaction security and was the catalyst that fueled the company’s PCI Compliance Initiative.
But as we’ve seen with the Global Payments Data Breach, security needs to go beyond just PCI Compliance.
An Extra Layer of Protection
This Article from The Data Center Journal suggests that better admin priveleges could have helped stave off The Global Payments Data Breach completely. From the article: “Avecto says that the possibility that the breach was caused by a compromised administrative account that was insufficiently protected shows that governance is a central requirement of modern IT security.”
The article maintains that multiple layers of security can go a long away to helping to prevent future data breaches of this type. Paul Kenyon, chief operating officer with Avecto, said in the article that “Our observations on this breach suggest that minimizing administrative privileges—an exercise in the principle of least privilege—would have gone a long way to preventing the breach.” It was suggested to Kenyon from another IT Security analyst that the privileged accounts that are reportedly at the heart of this breach need several layers of protection to properly insulate them from hackers.
Most articles looking at the aftermath of the data breach arrive at the consensus that security measures need to go beyond just PCI compliance. This article gives some very specific and clear advice on a step to take — a data breach solution.
Data Breach Penalties Stack Up
Yesterday’s blog also delved into the cost and fees companies face when they suffer a data breach.
And this article by Bank Info Security gives even more insight into the cost and impact of a data breach. It interviews Larry Ponemon, founder of the Ponemon Institute, which conducted this year’s Cost of a Data Breach study with sponsorship from Symantec. The study revealed that the average cost of a Data Breach has gone down this year. Which makes sense when you consider that even with the Global Payments Data Breach in the news right now, the scale is a lot smaller than the scale of the Heartland Data Breach.
In fact, this article, also from Bank Info Security, gives a side by side comparison between the much bigger Heartland Data Breach and the Global Payments Data Breach.
But back to Ponemon’s interview and his company’s study: “According to the annual report, the average per capita cost of a data breach has declined from $214 per record to $194 since 2011’s report.”
Ponemon suggests two reasons for the decline in average costs.
Complacency:“We think people in general may be becoming numb to the data breach notification process. Most people have received at least one data breach notice; they may not even be aware of it because they don’t open their mail. The may see it as junk mail.”
Topical Shift, or rather the rise of intellectual property breaches, which are not a part of the annual study: “We focus on one type of data breach – the type of data breach [of personal records] that requires notification in the United States and then other parts of the world – but in reality there are other, maybe more costly, data breaches that companies are experiencing every day.”
HMS Data Breach Security Program
The hackers that go after credit card information are a creative group of criminals who are constantly pushing technology forward and tying security systems in knots. Many times a discussion about data breaches ends up with the conclusion that “it’s not if a data breach is going to happen, it’s when a data breach is going to happen.”
Host Merchant Services offers a key resource in preparing a business to tackle that issue: Its Data Breach Security Program. This program protects a business and a merchant can get up to $100,000 in coverage per location for the most common forms of data breach:
Employee Dishonesty
Skimming
Theft of Credit Card Receipts
Theft of POS Terminals
Stolen Card Numbers
Theft of Computers
The Data Breach Security Program helps cover fees for any industry-mandated audit of a suspected breach, card replacement costs and related expenses, and industry fines and assessments. All of these fees come from non-compliance with PCI DSS and are fees and issues that any company even suspected of a breach can face as we described yesterday in our blog. The coverage would exceed even the penalties that Cisero’s faces as we saw in the article about their lawsuit targeting the PCI itself.
How Does It Work?
Host Merchant Services makes it easy to file claims once you’ve gotten on board with the Data Breach Security Program. A simple online form starts the process:
Step 1: Fill out the online claim form at www.merchantdatabreach.com
Step 2: Upload or fax the notice from the acquiring bank, which stipulates that there has been a breach or a suspected breach at your location and choose an authorized, qualified security assesor.
Step 3: When the forensic audit is complete, upload or fax a copy of the assessor’s report.
Step 4: HMS takes it from there. We process the claim for payment and if all documentation is in order you will receive a check for the expenses incurred from the audit and/or card replacement costs and/or fines incurred for a breach.
To recap
Data Breaches can and will occur. They are costly. The recent Global Payments Data Breach reminds us all how important transaction security is for all parties involved. Merchants need to understand how important PCI Compliance is for their business. And they also need to take more steps than just PCI Compliance. Host Merchant Services is committed to keeping its merchants safe and secure. The company takes the lead in the industry in terms of PCI Standards with its PCI Compliance Initiative. And the company offers added layers of protection to its merchants through its Data Breach Security Program.
TodayThe Official Merchant Services Blog continues looking at the bigger picture of the impact from the Global Payments Data Breach — specifically looking at the affect it’s going to have on PCI DSS as well as a little foray into State Security Breach Notification Laws.
You’ll remember yesterday we highlighted some of the criticisms found in the PCI DSS, specifically this article by Taylor Armerding which suggested that PCI compliance is not enough to protect data from the skilled and focused hackers who cause these data breaches.
We then focused on how PCI Compliance is still a great foundation for your transaction security. The standards and protocols set up by the council are the first step a merchant needs to take to protect their data. And Host Merchant Services offers a PCI Compliance Initiative that helps its merchants quickly and seamlessly take that step.
Still the idea that PCI DSS is not living up to its billing as security shows itself in this story from Wired about a small business filing suit against against its bank claiming that the financial institution, which used to process the restaurant’s credit and debit card transactions, wrongfully seized money from the business’ merchant bank account. In short, the business is suing the bank for taking funds as penalties for being non-compliant with PCI DSS.
Taking it to Court
The story explains that Stephen and Theodoara “Cissy” McComb, owners of Cisero’s Ristorante and Nightclub in Park City, Utah, racked up $90,000 in fines that Visa and MasterCard imposed after alleging that Cisero’s had failed to secure its network and suffered a data breach that resulted in fraudulent charges on customer bank cards. U.S. Bank seized about $10,000 from the McComb’s merchant account to cover those penalties and then sued the McCombs to obtain the remaining balance on the fines, saying a contract the McCombs signed with the bank makes them liable for such fines.
The McCombs struck back with a bold countersuit. The story explains: “But in their countersuit against U.S. Bank, the McCombs allege that the bank, and the payment card industry (PCI) in general, force merchants to sign one-sided contracts that are based on information that arbitrarily changes without notice, and that they impose random fines on merchants without providing proof of a breach or of fraudulent losses and without allowing merchants a meaningful opportunity to dispute claims before money is seized.”
This suit challenges the basic foundation of PCI security standards and opens up a lot of old wounds and criticisms about PCI DSS in context of the card issuers that make the call and form the council for PCI DSS. As the story says: “The controversial system, imposed on merchants by credit card companies like Visa and MasterCard, has been called a “near scam” by a spokesman for the National Retail Federation and others who say it’s designed less to secure card data than to profit credit card companies while giving them executive powers of punishment through a mandated compliance system that has no oversight.”
The linked article provides much of the details that led to the data breach with Cisero’s, as well as why the fines and penalties were applied according to PCI DSS standards. The McComb countersuit relies heavily on their assertion that PCI DSS oversteps its bounds in applying those penalties, offers no recourse for people to dispute the penalites, and levies penalties against businesses for violations even when no fraudulent transactions occur.
The Cost of a Data Breach
This case above and much of the criticism targeting PCI DSS deals with the fines banks, processors and subsequently merchants face when data gets breached. This article looks into the cost merchants face when the worst case scenario occurs. A lot of merchants feel that lack of compliance isn’t an issue because they feel they are not responsible of something goes awry. But this article sheds some light on that: “suppose you or your merchant is suspected of one of those inevitable human errors, or of being a victim of a hacker. As long as there isn’t actually a breach, it’s no big deal, right? Wrong.”
The article lists the costs of penalties:
Forensics Audit done by investigators when they suspect your business is susceptible to a breach: Between $8,000 and $20,000
$3 to $10 per card to replace all cards compromised in a breach that happens.
$5,000 to $50,000 in fines for lack of compliance.
And even further in fines specifically tied to any fraudulent transactions that do occur as a result of the breach.
The article states that the average cost comes to $36,000, a hefty sum that can cripple small businesses. The McComb data breach may seem high in comparison, but going over the huge variance in the fine structure, it’s pretty easy to see how the bank came to a $90,000 figure.
Back to Global Payments
Speaking of the fees and penalties, it’s interesting to note that the company faces many of the same problems that small businesses do now that Global has been breached and run afoul of Visa in terms of PCI Security and Compliance. However this story for ZDNet states that the company will likely absorb any costs from the data breach and not be affected as badly as some of the small businesses discussed above are affected by fees and penalties.
Global Payments continues to process, even after being dropped by Visa’s list of providers that meet security standards. The company is now working on being reinstated and once again being PCI Compliant. Working in their favor is their statements that they reported the breach to authorities the moment they found out it happened.
Which brings us to …
Security Breach Notification Laws
Security Breach notification laws were enacted in response to an escalating number of breaches of consumer databases containing personal information. The first such law was the California data security breach notification law, or SB 1386. It was enacted in 2002 and became effective on July 1, 2003. Currently 46 states, the District of Columbia, Puerto Rico and the Virgin Islands have enacted similar legislation requiring the notification of security breaches involving personal information. The only states that currently have no such law on their books are Alabama, Kentucky, New Mexico and South Dakota.
Host Merchant Services is located in Delaware. The Delaware Security Breach Notification Law can be reviewed in its entirety at This Link.
Global Payment Systems is located in Georgia. The Georgia Security Breach Notification Law can be reviewed in its entirety at This Link and its subsequent amendment can be found at This Link.
These laws tend to follow a similar basic structure to the one California passed first in 2002 — companies need to immediately disclose a data breach to customers, usually in writing. There have since been a number of bills that would establish a national standard for data security breach notification but none have been passed in Congress yet.
The Bottom Line
So what does this all mean? For now it appears that Global is weathering the storm brought on by the news of the data breach. They’ve minimized the impact of the bad news and are working to get their compliance situation straightened out. The data breach has put the spotlight onto the PCI DSS itself and we’ve seen that some small businesses and merchants are highly critical of the system. Comparing the crippling fines they can theoretically face for a breach that leads to no fraud against the impact that a large processor like Global faces for the same type of problem can leave some thinking the system needs more oversight. But PCI DSS does set the bar for security. It forces hackers to work harder than they would if it didn’t exist. It is a first step in terms of what merchants and processors need to do to protect transaction and data security.
The court case in Utah is very fascinating as it really takes the contract aspect of the PCI DSS to task. The Official Merchant Services Blog will continue to follow the news on that case. And we will keep you posted on the latest developments with this Global Payments Data Breach.
Today The Official Merchant Services Blog is going to delve into the bigger picture of the impact that the Global Payments Data Breach is going to have on the payment processing industry. Obviously this news is going to have a huge impact on Global Payments itself. The company faces a big penalty after Visa dropped it from its registry of compliant service providers due to “unauthorized access into a portion of (Global Payments’) processing system.”
Fees and penalties related to reacquiring its compliance status and getting back on the registry will add up. In fact an executive from Co3 Systems, a data loss management firm, estimated the potential liability for a merchant with 1 million cards compromised could top $1.6 million from compliance fines alone. With Global’s own official statements indicating that the number of cards that were compromised being less than 1.5 million, the Co3 estimate is probably right in the ballpark of what Global faces.
The company also will take a hit to its business simply because of the breach itself and being dropped by Visa. While they are off the list, some potential customers may not be able to sign with them due to the lack of compliance status. And if the process to be reinstated takes too long, it could affect some of their current customers.
But there’s a larger context that needs to be considered with this data breach: PCI DSS itslef.
We’ve covered PCI Compliance very extensively in the blog. We looked at a report from Verizon last year that suggested 79% of organizations Verizon surveyed were found to be non-compliant in their initial audit in 2010. The study from the previous year had 78% of organizations were non-compliant. A study by Gartner Research demonstrated that 18% of merchants they surveyed were not PCI Compliant at all.
What is PCI?
These studies just underscore the large problem payment processing faces with security. The acronym PCI DSS stands for Payment Card Industry Data Security Standards. PCI Compliance is essentially the process of adhering to the standards set forth by the Payment Card Industry Data Security Standards Council (PCI DSS). You can review those standards in greater detail here. Essentially the standards are a set of requirements designed to ensure that all companies that process, store or transmit credit card information maintain a secure environment.
What’s the Problem?
One of the biggest criticisms of the PCI DSS is that it is the minimum agreed upon set of security protocols. Because of its nature as a consensus set of standards put together by the council, PCI is often criticized for being behind the curve or not being thorough enough to deal with the hackers who are trying to get at the data and breach the security of the transactions. Combine that with the studies that keep showing merchants are not keeping their compliance current or not even becoming compliant in the first place and you open the door for a lot of criticism against the system designed to keep transactions safe and secure.
Taylor Armerding wrote a compelling article for CSO Online on the issue of PCI compliance in the aftermath of the latest data breach. The lead statement of the article underscores the issue simply and effectively: “The latest data security breach to strike MasterCard and VISA has security experts focusing anew on the good and bad of PCI DSS. On one hand, the standard offers a clear blueprint on how to handle such a breach. On the other hand, compliance is usually not the cure, as this latest incident demonstrates.”
To add emphasis, Armerding quotes Neil Roiter, research director at Corero Network Security, as saying: “The Payment Card Industry Data Security Standard (PCI DSS) is highly prescriptive in nature, but simply complying does not ensure credit card security. Companies that rely on PCI DSS to solely dictate their security measures will continue to remain vulnerable to attack.”
The Weak Link
Armerding’s article suggested that compliance isn’t the be-all-end-all for security and that humans were still weakest link in the system. Quoting Anup Ghosh, founder and CEO of Invincea, a developer of browser protection systems, the article says that too much of the security standards are stuck in the past. Ghosh also suggests that PCI is complacent and easy for hackers to circumvent. Ghosh says that the systems in place are more designed to tell you what happened after the fact, being a reactive solution rather than a proactive solution. Ghosh then suggests that the data that was compromised was likely encrypted, but the security standards are behind the curve where it really counts: The Human Layer of Security.
Ghosh explains: “If I target employees, which is how you target these days, it is not very hard in phishing campaigns, to get employees to open an email or click on a link, which then provides access to their desktop and the privileges that come with it. [And in that case] Encryption is worthless.”
He then suggests a more proactive step of creating a more secure virtual environment for employees to work in so that whatever an employee clicks doesn’t end up compromising any data in the system.
PCI is Still Very Important
What Armerding and Ghosh say about PCI is quite compelling. But they both still point out that PCI Compliance is very important for merchants and payment processors. The standards may be behind the curve with the ever-clever hackers going after credit card data, but they set a starting point for security. They set the bar high enough that hackers have to put in work to circumvent the systems. Having PCI is so much better than not having it — which demonstrates how scary the Verizon and Gartner studies are.
Host Merchant Services advocates and performs a very zealous crusade for PCI Compliance. The company takes data security and safe transactions seriously and makes PCI Compliance a part of its value-added service package. HMS began a PCI Compliance Initiative last year that started with an ad campaign that offered for a limited time free PCI Compliance fees for merchants who signed up during that time. It then extended into an initiative run through a partnership agreement with HostMySite.com that offered a free PCI and Security Analysis to any customer interested, and now that same offer is available to anyone interested in Host Merchant Services, partnership or no partnership. The company provides on-call assistance with PCI Compliance questions and problems and will help all of its merchants get through the process with tips and advice from Host Merchant Services’ own PCI Compliance experts.
Tomorrow The Official Merchant Services Blog will follow up with the latest developments from the data breach, as well as more information about PCI Compliance, and PCI DSS issues that the payments industry and the tech industry are discussing.
For More Information
For more information about PCI Compliance, Host Merchant Services offers these resources:
Following up on our continuing and extensive coverage of the Global Payments Data Breach, The Official Merchant Services Blog has some new tidbits to report from the man who initially broke the story — Brian Krebs.
Krebs felt he needed to respond to the Global Payments conference call delivered by company chairman and top executive Paul Garcia.
In that call Garcia said, “There’s a lot of rumor and innuendo out there which is not helpful to anyone, and most of it incredibly inaccurate. In terms of other timelines, I just cannot be specific further about that.”
Krebs took that ambiguous commentary as a specific reference to his own reporting of the incident — notably that Krebs’ reports offered a different timeline than the one Global had been offering, Krebs’ reports offered a culprit in the data breach (citing Dominican Street Gangs and a New York City cab company and garage), and Krebs’ reporting suggested that at least 876 fraudulent cards had already been discovered as having been in use as a result of the breach while Global stated no fraudulent transactions were linked to the breach.
So there were definitely some differences in what was being reported by Krebs and being discussed, however grudgingly and tight-lipped, by Global in its official statements. It had gotten to a point of such discrepancy that Krebs was entertaining the idea that the Global breachwasn’t the breach he had initially reported. Krebs believed there might be another breach, still unverified, that fit his reporting better. As Krebs wrote on his blog: “Indeed, given GPN’s statements thus far, I continue to be nagged by the possibility that my initial reporting may have been related to a separate, as-yet undisclosed breached at another processor.”
But until another breach actually surfaces, Krebs continues to treat the Global breach as the one he had heard about and reported.
The Number Skew
The first topic Krebs addressed in response to Global’s statements and commentary was the number of compromised cards that Global reported versus the number of compromised cards the Wall Street Journal initially suggested. Krebs notes that the language Global is using in reference to the numbers is distinct and different from the language other companies have used in the past in terms of previous data breaches.
security breach on Friday, said GPS is only stating how many accounts it believes were ‘exported,’ which focuses on the number of accounts or card numbers that a forensics expert could reasonably argue were offloaded or downloaded from the company’s systems. “What GPS has not said is how many transactions they processed — and potentially compromised — during the time between when they discovered the breach,” Krebs said, which was early March, according to Global Payments, “and when they ‘contained’ the breach [in late March].” Krebs said the number of transactions or card numbers potentially exposed while the company was actively compromised ‘is probably far larger than the 1.5 million number they are citing in their statements, because those statements appear to be based on a figure that the company can say with relative certainty were downloaded or copied from its systems.’ “
Change in Web Hosting
The next tidbit Krebs offered was that Global changed its web hosting company in February: “For the past two years, GlobalPaymentsInc.com has been hosted at MaximumASP, a hosting provider in Louisville, KY. On Feb. 20, 2012, the company moved its Web site toAmazon’s EC2 cloud hosting service. MaximumASP declined to answer questions about possible reasons for the switch, citing customer confidentiality policies.”
This change in hosting appears to take place in the timeline that Krebs has offered as when the breach happened, and just a short time prior to the time when Garcia says the company discovered they had been breached.
Data Breach Chart From Visa
The next tidbit Krebs offered was a chart detailing the anatomy of a data breach. Krebs felt it was significant to note that there is a time period that Visa calls the “window of vulnerable transactions.” And Krebs also notes that the chart shows that discovery of the breach may or may not happen after the start date of the breach. All of this is an attempt to further investigate the timeline that Krebs is trying to construct even in the face of Global’s vague commentary about said timeline.
Hacker Makes Bold Claims
The last tidbit Krebs pointed out was that there are reports that the breach was far more extensive than was being reported.
Krebs cites a New York Times article: “The New York Times in a story published Saturday cited unnamed sources saying that this was the second time in a year that Global Payments had experienced a breach.”
Krebs then backs that claim up with a source of his own: “I have heard likewise from an anonymous hacker who claims the company was breached just after the new year in 2011. The hacker said the company’s network was under full criminal control from that time until March 26, 2012.”
Krebs’ hacker source also claimed that hackers had been capturing data at regular monthly intervals from the company’s network for 13 months. They were gathering data on a total of 24 million unique transactions before they were shut out.
And Krebs tried to verify the authenticity of his source: “When asked if he had evidence that would back up his claims, the hacker produced a Microsoft Word document with Global Payments’s logo entitled “Disaster Recovery Plan TDS US: Loss of the Atlanta Data Center.” The document appears to have been created on May 6, 2010 by Raj Thiruvengadam, who according to LinkedIn.com was an Atlana-based Oracle database administrator for Global Payments from May 2006 through August 2011.”
What it all Means
Well at its most basic, there is a discrepancy between the information Global is releasing and the information that Krebs is uncovering. There very well may be a separate breach that Krebs was given the information on. As Krebs noted himself, in his initial report he did not mention Global at all. There also may be a separate or longer breach that happened to Global. Or it might be as Krebs suggested to ABC News, a purposely chosen metric for the numbers that doesn’t take into account something like “window of vulnerable transactions.”
Krebs and Global will most likely be advancing this story throughout the week and The Official Merchant Services Blog will keep you up to date on those details.
The Official Merchant Services Blog tackles the big news in the payment processing industry today: The Global Payments Data breach.
The news of this data breach hit on Friday and the weekend has seen some wild speculation tossed about. At first there were reports that a mere 50,000 cards were compromised. Then the media upped the number to 10,000,000. Today Global Payments and the media sources covering the story are reporting that the number is closer to 1.5 million cards.
The Story So Far …
The breach was first reported by blogger Brian Krebs at KrebsonSecurity.com. He said on Friday that Visa and MasterCard were alerting banks across the country about a recent major breach at a U.S.-based credit card processor. The first report cited as many as 10 million cards were compromised. By that afternoon Krebs revealed that the processor was Global Payments, and that the breach was discovered in early March 2012. Krebs cited the breach as occurring between January 21, 2012 and February 25, 2012. The alerts issued by Visa and MasterCard, according to Krebs, stated that Track 1 and Track 2 data was taken — which Krebs said meant that the information could be used to counterfeit new cards.
Then the media got more involved.
The Wall Street Journal followed up Krebs blogging with a story about the breach, making the news official. Global remained silent throughout the day, only confirming the report after the close of the markets and trading.
The rabid interest in the data breach sparked an interesting article by USAToday, which expanded on Krebs’ own reporting. Krebs stated that he had heard from his sources that investigators suspect Dominican street gangs were involved in the fraud, focusing mainly on commercial credit and debit card accounts. The article then cited Garnter banking security analyst Avivah Litan, who claimed that the breach involved a taxi and parking garage company in the New York City area. It was suggested that consumers who had paid for a NYC cab in the previous months using the new swipe technology might be victims of the breach and possible fraud. Litan also said she too had heard about a Central American gang connection.
Global’s Statements
Finally Global Payments started talking. The breach was verified by Global. Paul Garcia, Global’s chairman and chief executive, said in a statement that the breach was reported by the company to the FBI — suggesting that the company promptly identified the breach and reported it to the authorities. They’ve now called it a “self-reported” breach. However, media sources do note that the news about the breach still had to be dragged out into the spotlight by Krebs and his blog.
After confirming the breach Garcia stated that the breach was “absolutely contained” and stated that there had been no “fraudulent transactions” related to the breach.
However, the Green Sheet reported on Friday that Krebs had reported that PSCU Financial, a nonprofit cooperative credit union service organization, told its members 56,455 Visa and MasterCard accounts had been compromised, but fraud was found to have occurred in only 876 accounts so far.
Garcia stated that 1.5 million card numbers were compromised by the breach and re-affirmed that no fraud had taken place related to the compromised cards. “This is manageable,” Garcia said.
Visa Takes Action
In response to the data breach information hitting the spotlight, Visa took action against Global Payments. Visa removed Global Payments, an Atlanta company that helps the payment giant process transactions for merchants, from its list of “compliant service providers.”
Garcia in his statements to the press acknowledged thatVisahad removed Global Payments from its compliance list pending resolution and remediation of the breach and that it was working “as expeditiously as possible” to return to compliance. The process would take “not days, but we don’t think it’s months.” In other words, Global was not going to be able to fix their PCI status quickly. Global Payments continues to process Visa cards worldwide according to Garcia.
Both Visa and MasterCard say their own systems weren’t compromised. Both credit card issuers had said Friday that they notified their card holders of the potential for identity theft and illicit charges because of the breach.
The Consequences
Global has not yet identified the size of the charge it will take as a result of the breach. But it is interesting to note that Heartland Payment Systems racked up a cost of $12 million in penalties and legal fees when its data breach compromised more than 120 million credit cards.
The Official Merchant Services Blog will be devoting much of its coverage to this developing story. Tomorrow we’re going to take a look at any updates as well as how this issue fits into the ongoing news regarding PCI security and compliance. Data Breaches have been a topic this blog has covered before. Though we’ve focused more on the breaches that affected video game companies like Sony and Turbine last year, our coverage was written with an eye toward the big picture problem of data breaches in general and compromised credit card information. So expect us to try and tie it all together through our focus this week.
Also …
And one last thing to consider if you are a merchant and you are worried about data breaches affecting your bottom line: Host Merchant Services Data Breach Security Program. Click that link to download a PDF explaining the value-added service HMS provides its merchants that goes above and beyond just simple PCI Compliance and helps ensure a merchant’s peace of mind.
Host Merchant Services is stepping up its game in terms of E-Commerce, and The Official Merchant Services Blog has the scoop.
HMS, the premier provider of payment processing and e-commerce services for small and medium businesses has an edge in terms of E-Commerce. The company was founded by CEO Lou Honick, who previously spent 11 years running a web hosting company. Honick’s experience has translated into Host Merchant Services becoming E-Commerce specialists capable of combining service and savings to a variety of online merchants with customized packages and partnership programs.
Wisdom and Experience
The partnership program has been the anchor of Host Merchant Services’ E-Commerce initiative since the beginning.
“We don’t write a business off as high risk just because it sells its products or services online,” added Honick. “HMS understands the needs of e-commerce merchants and works tirelessly to provide them with the right services at the best possible rate.”
E-Commerce Industry Buzz
E-Commerce has been growing rapidly in the past few years, and HMS is positioned to offer its valuable services and customized partnership plans to the most profitable business sector in the country currently. Here’s an infographic detailing how much growth J.P. Morgan Bank has seen in E-Commerce through its surveys:
The Latest Initative
The latest from Host Merchant Services is a bold promotional offer — found here. The program, offered by internet services wholesaler OpenSRS specifically to their customers, gives those merchants an edge. The white label initiative lets resellers offer their online merchants a $75 promotional credit to customers who sign up for payment processing from HMS. This credit can be applied towards merchant services fees with HMS, and will be credited to their first full month’s statement. Any unused balance on this credit can be carried forward until the full value is exhausted, or the account has been open for six (6) months. The resellers receive a revenue share from processing fees generated by that customer.
Host Merchant Services understands these problems. Part of their service mantra is that the company designs payment processing solutions that let their merchants focus on running their company. The general theme is to make payment processing seamless and easy for the merchants. This includes transaction security and was the catalyst that fueled the company’s 
This Article from The Data Center Journal
This case above and much of the criticism targeting PCI DSS deals with the fines banks, processors and subsequently merchants face when data gets breached. This article looks into the cost merchants face when the worst case scenario occurs. A lot of merchants feel that lack of compliance isn’t an issue because they feel they are not responsible of something goes awry. But this article sheds some light on that: “suppose you or your merchant is suspected of one of those inevitable human errors, or of being a victim of a hacker. As long as there isn’t actually a breach, it’s no big deal, right? Wrong.”
Speaking of the fees and penalties, it’s interesting to note that the company faces many of the same problems that small businesses do now that Global has been breached and run afoul of Visa in terms of PCI Security and Compliance. However this story for ZDNet states that the company will likely absorb any costs from the data breach and not be affected as badly as some of the small businesses discussed above are affected by fees and penalties.
