Tokenization technology has been one of the key features of EPX payment processing for more than 10 years. The fact that other processors are starting to follow our lead is not surprising considering Visa recently published their tokenization best practices. With more consumers turning to non-cash payment forms, merchants will realize the importance of securing their data using the industry-leading methods provided by EPX’s tokenization technology.

The editors at TopTenReviews.com see absolute value in EPX’s tokenization technology.

“Overall, we are very impressed with the service to accept credit cards online with EPX. The innovative use of tokenization provides a level of security we didn’t see elsewhere, and we wouldn’t be surprised to see others follow their example.”

EPX provides significant cost savings to our clients when dealing with interchange fees. Other processors take the easy way out and charge flat fees regardless of what the interchange rate actually turns out to be. What they don’t take in to consideration is that interchange rates are freely available to merchants on the Visa and MasterCard websites, and a little research would show the massive price differences. Processors try to look good by offering Preferred tier rates, but they don’t tell merchants that most of their transactions will not qualify for the Preferred rate.

EPX passes the interchange rate through directly to our clients, with no hidden costs. In essence, all transactions get the rate they deserve, especially because EPX utilizes its interchange optimization technology on every client and every transaction to make sure all the savings are realized.

The editors at TopTenReviews.com also give high marks to our approach to pricing.

“But even better, they don’t use a traditional tiered discount rate system. While other merchant account providers simply dump every transaction into a pre-defined “bucket” or tier with an assigned rate, this company uses interchange optimization technology to match individual transactions to the best rate possible. You can be sure that you’re getting the lowest fee for each transaction, regardless of the specifics or individual exceptions.”

Chargebacks are a reality for any business and are usually a paper-intensive, time-consuming part of your operation. With EPX webSuite, your organization can receive and adjudicate chargebacks online — leading to time and cost savings. TopTenReviews.com addresses EPX’s superior approach to addressing chargebacks.

“While chargebacks are a part of online credit card processing, they don’t have to be a pain. You can eliminate the weeks of paperwork by taking care of chargeback adjudication online. Furthermore, the company will back you up and help you deal with rebuttals rather than leaving you to fend for yourself on chargebacks.”

Not only are chargebacks automatically linked to their respective transactions, but adding notes and attachments, and then accepting or representing the chargeback couldn’t get any easier with EPX webSuite. In some cases, our EPX Relationship Managers and Chargeback Specialists will even do the work for you. All of your chargebacks are centralized in one location and available for reporting on demand, and for those chargebacks that you do accept, they’re separated out on your billing statement so you don’t have to go digging for facts. EPX statements are easy to read and full of information.

Read the full review online at http://accept-credit-cards-online-review.toptenreviews.com/ and http://accept-credit-cards-online-review.toptenreviews.com/epx-review.html.

Job Summary:

Responsible for Point of Sale terminal integration and helpdesk support.? This includes software downloads, file changes and hardware troubleshooting.? Some travel to client locations may be required.

Essential Job Functions:

Helpdesk /? Technical Support

• Provide Point of Sale helpdesk support for inbound merchant calls
• Troubleshoot hardware issues
• Build terminal download files
• Initialize terminals
• Test hardware before releasing to client
• Add new equipment requests to existing merchant accounts
• Follow up on any open system tickets related to equipment issues
• Assist with installation and training of merchant equipment when necessary
• Maintain new merchant setup and deployment tracking within CRM system
• Assist Sales and other business areas with technical support for potential merchants and strategic alliances

Technical Documentation Assistance

• Work with Technical Publications to create, maintain and update any merchant, user or Quick Reference guides
• Assist in documenting department processes

Qualifying Experience:

• High school diploma required
• 5 years customer service experience
• Extensive terminal knowledge
• VeriCentre and Term Master Experience Required
• POS systems experience a plus (Micros, Aloha, Digital Dining, RMS)
• Knowledge of computers and Windows-based applications
• Customer service experience, including strong written and verbal communication skills
• Ability to work well individually and as a team member
• All other duties as assigned

Note: Job Description is not inclusive, and is subject to change with the growth of the position and the company.

To apply, submit your resume to hr@epx.com

Since January 1, 2010, nearly 2,000 different keywords and search phrases leading to www.epx.com have been entered into Google. Some high ranking search phrases are expected, like “EPX” and “tokenization,” but some others are surprising.

For example, “EIRF” is a frequent search term that leads to EPX.com (to this blog especially), but “bandwagon software music” is a strange one. Some other strange Google search terms that led to epx.com include “are electronic payments protected for death? ” and “4 letter word for a bank transaction.”

Take a look at the list below to see some of the most frequently used terms and phrases that direct people to epx.com via Google.

payment processing
merchant account
credit card processing
credit card processing online
eirf
epx credit card processing
epx processing
phoenix payment systems
ach processing
epx credit card
epx.
payment exchange
electronic payment
ep-x
credit card payment processing
epx payments
electronic payment processing
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epx tokenization
visa eirf
pinless debit rules
epx.co
secure payments
buyerwall
epx buyerwall
epx merchant services
epx vpost
the payment exchange
eirf visa
sign on epx
electronic payment exchange epx
.epx.com
epx wilmington
gartner epx
electronic payment process
electronic payments exchange
epx payment
paypage
epx electronic payment exchange
epx merchant
epx payment processing
epx.ocm
online payment processing
pinless debit
wwwepx.com
accept credit cards online
epx bric
epx phoenix
epx.cpm
shift4 epx tokenization
tokenization
vpost.epx.com
epx processor
web payments
www.epx.com.pl
eirf interchange
eirf transaction
epx credit
epx gateway
epx security
list of eft networks
pinless transaction
arizona ach payment processors
ecommerce credit card processing
electronics payment exchange
epx .com
epx ach
epx delaware
epx merchant processing
epx wilmington delaware
news in the payment industry
pay page
payment processor
pinless debit card
pinless debit rates
shift4
vpost
internet credit card payment processing”"
electronic payment exchange delaware
electronic payment exchange inc
electronic payments network affiliated banks
epx credit cards
epx shift4
exchange payment
heartland payment
matt ornce
site:epx.com pci participating organization
www.epx.cm
www.epx.xom
accepting credit cards

Electronic Payment Exchange (EPX), a full-service payment processing organization, announced today that their organization welcomes the recent third-party validations of cardholder data tokenization and payment processing outsourcing. Newly announced global industry best practices for tokenization from Visa Inc. validate EPX’s long-standing deployment of tokenization technology for securing cardholder data. Additionally, a June 2010 security brief from RSA supports EPX’s approach to tokenized payment processing outsourcing by referencing an EPX client case study that shows how tokenization and payment processing outsourcing reduce merchant costs and other burdens associated with securing cardholder data.

The recent release of Visa’s tokenization best practices provides valuable guidance to merchant organizations seeking to utilize tokenization solutions for securing cardholder data. As the first organization in the payments industry to engineer and deploy tokenization technology, EPX welcomes Visa’s focus on and validation of tokenization solutions.

In version 1.0 of the Visa Best Practices for Tokenization document, Visa establishes best practices related to four critical components of tokenization: token generation, token mapping, card data vault, and cryptographic key management. Visa provides further recommendations regarding tokenization system configuration, implementation, and management, and offers guidance on the management of historical data.

EPX, which has offered merchants tokenization technology since 2001, abides by one hundred percent of the best practices established by Visa and views the best practices as reinforcement of EPX’s approach to tokenization. According to EPX Chief Security Officer Matt Ornce, “Visa is now confirming what we have been saying and practicing for years. Merchants that properly implement a sound tokenization solution are able to limit cardholder data storage in their environments. In turn, this simplifies merchant PCI DSS assessments by reducing the scope of their compliance requirements, associated costs, and implementation. This makes merchants of any size more secure and brings them into compliance easier, faster, and with less expense.”

Further validating EPX’s approach to payment data security, a June 2010 security brief released by RSA provides insight into how tokenization can be combined with payment processing outsourcing to relieve merchants of the burden and potential costs associated with securing cardholder payment data. Using an EPX client who annually processes tens of thousands of ecommerce transactions as an example, RSA pointed out that the merchant organization substantially reduced its PCI compliance burden. The security brief also establishes that, over the next several years, many payment processing organizations will introduce outsourced payment services to manage cardholder data risks on behalf of merchants. The brief provides additional insight by stating that the most effective outsourced payment services will use a combination of tokenization and encryption.

EPX has provided payment card security outsourcing for ten years and was the first payment processor to actually market, sell, and implement a solution that uses both tokenization and encryption for securing card data from the card swipe through the entire transaction lifecycle. By processing through EPX, individual merchants have reduced their initial PCI compliance burden by millions of dollars and continue to realize significant annual savings.

EPX welcomes the third-party validation of payment processing outsourcing and the use of tokenization plus encryption technologies. “It is great to see that leaders in the payments and security industries are recognizing EPX’s accomplishments,” EPX Chief Executive Officer Ray Moyer said.

Back then, cardholder data security was not exactly the front-of the-forehead issue that it is today.  There had not been a notable card data breach in the 35 years since revolving credit cards had been used. The first relatively large and publicized incident came just after the Y2K ball dropped in Times Square in January 2000. Online retailer CD Universe exposed 300,000 customer card records.  (Of course nowadays a breach exposing a mere 300,000 records would be considered a lucky break.) Since that first major incident, ever more damaging breaches have occurred like clockwork. Two were of Guinness proportions: retailer TJX in 2007 and processor Heartland Payments in 2009, both of which reportedly exposed more than 90 million card numbers.

When EPX started tokenizing data, Visa had just begun to formulate the first generation of data security standards.  At first, Visa’s compliance targeted only e-commerce payment gateway operators, not merchants. MasterCard did not initially see the need for standards, so offered data security consulting services. The launching of the Payment Card Industry Security Standards Council was still five years away.

So, understandably, EPX’s breakthrough came with no public fan-fare and unknowable future significance. Our engineers simply were looking for a way to make transaction lifecycles and follow-on transactions more efficient, and our merchant customers more secure.  Being engineers, they didn’t call what they created ‘tokens.”  They called the codes card data “GUIDs” and “Replacement Values.” (Surprising, isn’t it, such a sexy name didn’t catch on?)  The generic catch-word for such codes, “tokens” did not come into vogue until 2005 when Las Vegas payment gateway operator and software licensor, Shift4, Inc. coined the term.  (Shift4’s process of code generation within the merchant’s environment, and their data flow is significantly different from EPX’s off-premises approach, but more or less aims at the same purpose.)

As EPX gained practical experience, naturally we kept evolving and perfecting our technology to make it more effective, practical and efficient.  As breaches kept hitting the headlines, we kept hearing loud and clear from merchants, particularly CTOs, that they would be delighted if they never had possession of the vulnerable cardholder data in the first place. And, they truly loathed having to spend so much time and IT budgets system major (non-ROI) system remediations to comply with new PCI Data Security standards.  With this guidance from the market, along came another set of EPX breakthroughs in 2005.  We invented a number of methods for at-risk card data to be securely captured and stored only by EPX and never routed to the merchant. Ever. We filed for a patent for the sophisticated processes that are now at the heart of EPX’s BuyerWall™ security suite.

As the number and scale of data breaches increased over the years and PCI compliance became mandatory and urgent, the IT Establishment naturally first turned to the familiar techniques they had been taught in schools and had been using for decades: encryption, firewalls and other data “hardening” techniques. Several front-end only gateway operators had been offering forms of tokenization.  There also were several companies providing software-as-service (SaaS) outsourced tokenization and still others selling do-it-yourself in situ tokenization hardware and software to merchants.  Yet, tokenization remained mostly marginalized as an emerging technology …and too-good-to-be-true… by Conventional Wisdom.

Then, a funny thing happened along the way to achieving cardholder security Nirvana:  Heartland.  Heartland Payments and others quickly became iconic in proving that Encryption Does Not Necessarily Equal Security.  Since Heartland, hard-pressed CTOs and cash-strapped CFOs have been gradually opening their minds and wallets to alternative security approaches like tokenization.

Yet, oddly, EPX stood alone for all these years as the ONLY full authorization / capture /clearing / settlement processor providing tokenization.   The giant end-to-end processors like Global Payments, TSYS, Elevon, Fifth Third, and First Data Corporation stayed on the sidelines, leaving it to their merchants to solve the card data security problem on their own. Finally, in 2009 Fifth Third Bank (which has its own in-house front and back-end processing) and then First Data (the world’s largest processor) respectively launched their versions tokenization. JPMorgan Chase’s Paymentech merchant acquiring company is not a self-contained end-to-end processor, but in the past few months has been sporadically promoting its Orbital gateway as having tokenization capabilities…although they appear to be using bolted-on functionality provided by a third-party vendor.

Tokenization is not only a solution for credit cards, but also for other forms of payment.  A few weeks ago, ProPay, a well-respected Salt Lake City-based payment ecommerce gateway company, made a nationwide announcement that it can now can encrypt and then tokenize electronic check routing and account holder data that is used in ACH transactions.  Likewise, on May 19^th, Sarasota, NY-based ACH Payments, Inc. said it now will tokenize checking account numbers used in its ACH processing.  ProPay’s COO was quoted as saying: “ProPay is leading the industry and applying the same technology for protecting payment card information to the protection of ACH data…”  We at EPX appreciate the executive’s exuberance; however, the “leading the industry” part was a bit over-stated considering that EPX started tokenizing ACH transaction data as well – more than nine years ago.

EPX always knew that what we innovated in 2001 would not suffice as the complete answer to data protection. Tokenization, for sure, is elegant and powerful…and is especially cost-effective for complex enterprises with lots of locations and transactions. It mitigates the vast majority of cardholder data risk – substituting codes for card numbers stored or “in motion.”  In the case e-commerce transactions, the vulnerable data can be directly captured, encrypted and tokenized from the moment a customer or clerk keys in the data.

However, things are a little more complicated for retail POS “swipe” transactions. The card data can be potentially vulnerable for what I call the “first inch” – i.e., the momentary transit between the magnetic stripe to the point the data reaches the POS terminal or the payment module within a POS retail management systems’ software.  Although only briefly exposed, the can be skimmed or otherwise criminally compromised.  Also, such exposed card data at the front end-point of a transaction remains ‘in scope’ and subject to more cumbersome PCI Data Security Standards reporting.

We at EPX knew this was a problem to be eventually solved.  We watched with particular interest last October as First Data Corporation and RSA (the security division of EMC Corp.) announced their solution: instant encryption as the data is captured by a POS terminal, then tokenization of the data once it is captured by First Data’s processing platform. They call their product (still being field tested) “TransArmor.”

We applaud First Data’s adoption of encryption+tokenization and expect the technology to be a game-changer in the industry due to the huge number of merchants FDC supports.  And we welcomed the recent announcement by TransFirst’s Payment Processing International subsidiary (an ISO with a gateway) of offering encryption+tokenization capability.   However, true-to-form, all this big news is déjà vu for EPX.   In July 2009, EPX already had become the first processor in the world to introduce just such a solution –encryption of data all the way from the mag stripe to EPX’s firewall, then tokenization of the data once it entered our processing environment.  EPX’s encryption + tokenization is functionally consistent with what First Data/RSA and PPI later announced.  EPX uses an encrypting swipe device to capture the vulnerable data.  We hold the only decryption key to the swiped data in our secure processing environment (i.e., neither the merchant nor any other party ever has access to the decryption key).  We and our merchants use EPX BRICs (tokens) exclusively as transaction reference codes for all operational reference purchases thereafter.

These days there are an increasing number of companies offering what might be broadly called “tokenization.”  The differences between approaches can be hard to discern.  The most important differentiator, however, is in the fundamental integrity of the token creation protocols.   From the beginning, EPX engineers had the foresight to not take the obvious short-cut of simply creating the token algorithms from credit card numbers and banking account numbers.  EPX codes, instead, are based upon the unique and very specific characteristics of each specific transaction and its place in time, among other characteristics.  In retrospect, as criminal rings have become so much more skilled at reverse-engineering financial account numbers, we now know how much more secure is the EPX approach than others.  If the card number, or checking account number is not in the merchants systems – or the source of the tokens – the data cannot be stolen and deciphered.  In other words, it has no “street value.”

In the 31 years EPX has been in payments business we have made many breakthroughs by simply pursuing what is most effective, what is most efficient and what serves our merchants best.  We never have waited for others to lead the way, nor will we in the future.

Posted by Charles S. Crawford
Executive Vice President
Strategic DevelopmentElectronic Payment Exchange

Electronic Payment Exchange (EPX), a full-service payment processing organization, has entered is tenth year of issuing tokens as a means of securing credit card and ACH transaction data.

In early 2001, EPX engineered and deployed the payment industry’s first tokenization technology, which has protected hundreds of millions of financial transactions and helped merchants eliminate the liabilities associated with storing unprotected payment data. EPX’s proprietary tokenization technology replaces the sensitive payment information with unique IDs, which the payments industry has since come to call “tokens.”

For each transaction processed by EPX, patent-pending EPX BuyerWall™ technology issues a BRIC (BuyerWall Recognized Identification Code) token to the merchant, which is meaningless to would-be thieves. The BRIC allows the merchant to maintain total control of the customer experience and realize all of the capabilities that previously required the storage of cardholder data including refunds, recurring transactions, and historical review.

“As an innovator of tokenization in the payment processing space, we have been helping merchants effectively secure their payment data for nearly a decade,” said EPX Chief Security Officer Matt Ornce. “The industry has recently seen a rash of new entrants to the tokenization space. I applaud their efforts to catch up to our tokenization technology. However, I would caution merchants against using unproven solutions.”

“All tokens are not the same. Some tokenization solutions that have recently come to market don’t provide optimal security, since their tokens can be reverse-engineered to reveal their corresponding card numbers,” explains Ornce. “EPX tokens provide ultimate security because they are not derived from card numbers, and therefore cannot be reverse-engineered into meaningful data.”

Ornce says that another key differentiator between EPX’s tokenization solution and those of competitors is that EPX tokenization technology is “built in, not bolted on” to its payment processing platform. EPX’s payment processing platform was built with tokenization as an inherent component, while other payment processors have modified their legacy systems by adding on tokenization modules.

In addition to using tokenization for protecting credit card data, EPX tokenization technology has also been securing electronic check (ACH) payments since 2001. Contrary to recent claims by competing payment processors who reported that they were the first to offer tokenization of ACH data, EPX stands alone as the first to apply tokenization technology to ACH payments.

EPX has been an innovator and active leader in the payment processing space since 1979, and its nearly 10 years of using tokenization to protect credit card and ACH payments is further evidence of EPX’s commitment to protecting merchants. According to EPX Executive Vice President Charles Crawford, “In the 31 years EPX has been in the payments business, we have made many breakthroughs by simply pursuing what is most effective, what is most efficient, and what serves our merchants best.  We’ve never waited for others to lead the way, nor will we in the future.”

EPX, a full-service payment processor that provides card data tokenization, enables organizations to comply with just a few questions on the PCI Self-Assessment Questionnaire A, rather than having to comply with the complete set of more than 200 questions required for firms that accept and store credit card data in their systems.

EPX Chief Executive Officer Ray Moyer welcomes the Gartner case study and believes it shows EPX’s dedication to assisting merchants in achieving PCI compliance. “While some organizations are busy generating hype for newly invented, unproven tokenization solutions, EPX has been busy actually implementing our tokenization solutions,” said Moyer. “2010 marks the tenth year that EPX has been issuing tokens for every transaction response. Our proven approach, coupled with our EPX BuyerWall platform, enables us to help merchants reach their PCI compliance requirements faster, with greater security, and with less merchant expense.”

The complete research note written April 9, 2010 by Avivah Litan, “Case Study: NCR Saves Substantial PCI Project Costs by Using Outsourcing and Tokenization,” is available for download from www.epx.com.

But the customer’s mode of choice has had a material impact on the cost of the transactions to merchants – at least until recently.  For those merchants that have “interchange-plus” agreements with their banks, allowing for pass-through debit network costs, PIN-debit transactions historically have cost far less than if the same transaction was processed as Signature-debit – i.e. with no PIN validation.  As recently as two years ago, the cost of PIN-debit was as little as half that of a Signature-debit transaction, depending upon the sale amount, merchant type and other factors.

The PIN advantage always was particularly pronounced for merchants selling higher-than-average priced goods and services, i.e. items priced above $40-$50 or so. That was because the debit networks charged more in transaction fees than, say, credit card transactions (about double), but at least they always “capped” the percentage assessed on the sale amount for most transactions. There was a maximum fee for the most common types of transactions no matter what the ticket size.  So, an average retail PIN-debit transaction often would cost no more than 60 or 70 cents all-in.

This was not so for a Signature-debit transaction, however.  Signature-debit was priced like credit card transactions, with fees more or less proportion to the price of the merchandise or services.

The gradual tectonic shift in debit card pricing strategy over the years turned into a tremor felt throughout the payments industry in 2009 when Discover’s PULSE network (the third largest) removed its fee cap on most types of PIN-debit transactions. The Pulse percentage fee now floats with the ticket size for standard transaction types. Since then, the other major EFT networks – Star (First Data Corp.), NYCE (Metavante), Accel/Exchange (FiServ) and CU-24 – have followed suit and have eliminated or moved-up the caps on the most common PIN-debit transactions.

The final and most influential change just occurred in April 2010.  As part of Visa’s semi-annual interchange modifications, Visa raised the Interlink interchange rate for PIN-debit pricing from 75 basis points and $.17 per transaction to 95 basis points and $0.20 for standard transactions.  Visa PIN and Signature pricing are now the same. Considering that Visa’s Interlink debit network has a 40%+ share of the debit card market and that it processes an estimated 73% share  of all Signature-debit transactions, the practical impact of Visa’s change to merchants is likely to be profound.

Rate strategies vary and the devil is in the comparative pricing details between networks and transaction or industry categories. So, there still can be found certain price advantages for PIN-debit for some industries and in some ticket-size scenarios.  However, there no longer is a noticeable safe haven price gap between PIN and Signature to be exploited. That is particularly counter-intuitive considering processing rates traditionally have had some relationship to transaction financial risk; PIN-validated transactions have been viewed as inherently less prone to repudiation, thus less risky to the account holders and banks involved than transactions with signature verification.

Many merchants are resigning themselves to the new reality in which Signature-debit reigns supreme. With little price advantage remaining between PIN and Signature, major industries like pay-at-the-pump fuel operations are seriously are debating whether to make the estimated $20,000 per location investment required to convert current PIN acceptance devices to a new generation of more secure PIN data devices as mandated by the PCI Security Standards Council Data Security Standards .  It even remains to be seen whether Cosco, Home Depot, Wal-Mart and other mega-merchants that, due to the price differential of Signature-debit, have not even offered Signature-debit as an option to POS debit customers, will soon do away with PIN-pads.

Major check card issuing banks have been actively promoting Signature-debit in promotional mailings to their cardholders. They have offered incentives on purchases that only apply when a Signature-debit transaction is made. JPMorganChase, according to news reports, has made the inaccurate inference to its cardholders that Signature-validated transactions are somehow more secure than PIN transactions.  Presumably they are promoting Signature over PIN debit because they make back more money, as card issuers, from the resulting Interchange fees being paid when a Signature-debit transaction is processed via the credit card networks, rather than when a PIN-debit transaction is processed by one of the Electronic Funds Networks (“EFT”) networks.  Now, that difference has been largely negated so there is little need to promote Signature-debit per se.

What is causing the major strategy shift by the EFT networks and Visa?   It is all part of the overarching competition between networks to woo financial institutions to issue cards processed by their networks. The networks make money on the transaction processing (“switch”) fees assessed to every transaction that occurs (from about 3¢ to as much as 8¢ for PIN-debit, depending on the network). The majority of the fees charged to the merchant – per transaction and per sales dollar – are paid to the card issuing bank. So what we have been seeing is essentially a bidding war among the networks to get their brand “bugs” printed on the back of the most cards issued.

Having said that, it is not at all obvious yet just how much of a shift in real fee income will come from all this market re-positioning and effective price parity between PIN and Signature-debit.  Debit cards have become more and more popular in recent years, especially during the recession.  Debit now surpasses credit as the preferred means of POS payment.  But debit cards, in whatever format, still are essentially plastic checks, with more or less the same consumer behavior patterns as cash.  As such, debit transactions might be more common than credit card transactions, but the dollar volume of debit is far from matching total credit card purchase volumes. Understandably, debit purchases are limited to bank account balances.  Higher value goods and services continue to be purchased on credit – although less credit is being extended during the recession.  According to a 2009 PULSE study, the average pin debit transaction in 2008 was about $42 for PIN-debit compared to $37 for Signature-debit. PULSE estimated more a quarter of all debit transactions in 2008 were for purchases of less than $10.  This compares to average retail credit card purchase amounts that are usually approximated to be about $70-$80.

Processing cost is the paramount issue to most merchants, yet there still are several soft reasons for reasons for a continue acceptance of PIN-debit transactions:

• Customers often are more comfortable with the security of PIN validation.  After all, the card is accessing their bank account. Presumably, only the card owner knows and uses the PIN.
• There are many consumers without credit cards, or who have reached their limits.  PIN and Signature-debit let the customer make a cash-less purchase with the funds they have in their bank account but happen not to have in their wallet.
• For the merchant, funds process through the EFT networks almost immediately.  By contrast, a Signature-debit transaction, run through the credit card networks, might take 2-3 days to be debited from the consumer’s account.  This can mean less chance of insufficient funds and sometimes faster credit of sale proceeds to merchants.
• PIN transactions typically can be completed faster in the check-out line and require less documentation and storage by the merchant.  A PIN-debit transaction has considerably less chance of being repudiated successfully.
• A PIN-debit transaction allows for cash-back to the cardholder at the POS; this is not possible with a Signature-debit transaction.

Even so, much the appeal of a PIN transaction is proves to be somewhat illusory:
?    While true that PIN-authentication is relatively fool-proof security for a specific transaction, the card remains vulnerable as long there is a Visa or MasterCard logo on the card and the card can be alternatively tendered for a Signature-debit transaction.  Signatures or IDs, obviously, are not always verified by store clerks.

• Both PIN-debit and Signature-debit cards benefit from consumer protection laws and practices, although the protections come from different laws.  If reported lost or stolen in a timely manner, the cards have a maximum of $50 liability to the account holder.
• PIN-debit transactions usually do not accrue rewards credits from the issuing banks, whereas Signature-debit cards do.  This feature, alone, is accelerating the shift from PIN to Signature.

There is little merchants can do to shape the system to their benefit.  Merchants are under contractual obligations by their acquiring bank sponsors to accept all cards with a Visa or MasterCard logo. They are prohibited from attempting to “steer” a customer card transaction from one mode of acceptance to another. Card company rules further require merchants with PIN-processing capability to proactively provide customers the choice of making a PIN-debit or Signature-debit transaction.  At best, merchants can only make the threshold decision to either enable acceptance of PIN-debit by making a PIN-pad available at the POS or to accept only Signature-debit transactions at the POS.

Written By: Charles S. Crawford, Executive Vice President for Strategic Development
Electronic Payment Exchange

Evolving Pragmatic Approaches to Payments Security – Part 2 of 2

What’s In Store for 2010 and Beyond

The key payment security events discussed above offer some direction for trends that are likely to continue into 2010 and indicate new areas that will gain prominence.

The well-publicized and continuous stream of data breaches that came to light in 2009 has forced merchants, solution providers, standards organizations, and the card brands themselves to begin taking a more pragmatic approach to payment security. Beyond the actual costs associated with fines, lawsuits, card replacements, and security upgrades, merchants are learning that damaged reputations, negative publicity, and loss of business also have deep and sometimes unsurvivable bottom-line impacts.

A growing recognition of these potential data breach costs has led merchants to challenge the status quo of slowly developing regulations and conventional technologies that together have not been enough to stem the data breach tide. As a result, increasing numbers of merchants are seeking new solutions that materially protect their data.

Increased Focus on Smaller Merchant Compliance

While the number of credit card numbers breached per month has generally been trending down in 2009, there’s no reason to suggest that the total number of breaches will subside any time soon. As larger entities have shored up their defenses, increasingly smaller entities are being directly targeted.

PCI compliance is required for all entities that store, process or transmit cardholder data, and regulatory and risk awareness continues to grow and roll downhill to smaller merchants, who, according to Visa statistics, make up 99% of the merchant base and account for roughly one-third of all transactions. Current PCI compliance deadlines, fines, and threats of loss of processing privileges focus on Level 1 and 2 merchants, but it’s natural to assume that the smaller Level 3 and 4 merchants are next. Several acquirers have already begun to fine their noncompliant Level 3 and 4 merchants in an effort to push them into compliance.

Increased Legislative Threats

Is 2010 the year for state level breach notification laws to be aggregated into federal law? Probably not, but it’s coming, and might actually be a welcome piece of legislation for those organizations who unfortunately need to struggle with the 46 different state laws. Such legislation could also help streamline the current time-sensitive notification process.

Beyond the financial fraud perpetrated for personal gain, the use of breached cardholder data as a funding source for terrorist activities has been clearly established by the Criminal Division of the Department of Justice, the FBI, the U.S. Secret Service and others, providing a clear impetus for federal regulation of cardholder data security.

Continued Challenges to PCI DSS

The PCI DSS will continue to see its share of challenges. As threats continue to evolve and new technologies surpass the standard’s effectiveness, the PCI DSS’s ability to keep pace will be questioned. Certainly, it’s a delicate balance between deploying new standards faster than the market can bear, and reacting slower than the threats evolve.

New technologies and new threats will always be ahead of the pace of regulation. The PCI Council’s investigation into technologies that help merchants achieve compliance and protect the payment system is certainly encouraging, but the codified results of the PWC study may not be seen for another 12 to 24 months. Meanwhile, the market will inevitably continue to evolve, maturing existing technologies and developing new. The council needs to find the means to distribute guidance faster, even if it’s through the use of best practice bulletins, like Visa’s, that can be issued quickly and eventually adopted into the DSS as requirements.

Until standards for the new technologies are sanctioned, there will be a greater reliance on merchants and QSAs to understand the differences in implementations and their implications on cardholder data security.

Mainstream Acceptance of New Technologies Currently Outside of PCI

With increased security risks and pressure to comply with PCI, merchants will flock to solutions that remove cardholder data from their environments in even greater numbers in 2010. Even though many of the technologies have existed for years, they were considered fringe players until only recently. Compounding the issue, especially with tokenization, has been a flood of new vendors to the space, which has created an impression that the entire field is populated with products that are only months old.

While planned product announcements by larger industry players like First Data, RSA, Hypercom and others may help legitimize these technologies, announcements won’t help merchants against current threats or regulation. Merchants will continue to seek the vendors already in the space and will now be able to gauge them by the guidance provided in the PWC Technology Review and Visa DFE-BP. The Visa DFE-BP especially helps merchants make more informed decisions about tokenization and E2E. Early adopters have already seen the benefits of each of the aforementioned technologies in reducing PCI DSS scope and improving cardholder data security.

Combining Technologies

The preliminary PWC findings suggest that E2E and tokenization can each reduce PCI scope when they are implemented independently of each other, and Visa’s best practices illustrate that they can be combined to even greater effect. As individual technologies become more mainstream, merchants will recognize even greater cardholder data protection from the hybrid solutions.

End-to-end encryption and tokenization are complementary technologies that provide protection for a different part of the transaction, as hinted at in the Visa DFE-BP. E2E, of course, protects the request portion of the POS transaction by encrypting track data from the swipe to the processor. Tokens provided in the response portion of the transaction provide protection “for business processes that requires the primary account number to be utilized after authorization, such as processing of recurring payments, customer loyalty programs or fraud management.” Used together, merchants dramatically reduce their risk without necessarily impacting their customers’ checkout experiences.

In ecommerce, outsourcing the page that takes cardholder data, in combination with using tokens, is another way technologies can be combined for even greater security. Merchants will reduce risk and PCI scope by eliminating card numbers in their processing systems with cardholder data being taken directly from the consumer and given directly to the PCI-compliant outsourced provider. Depending on the solution, they may still be able to maintain full control over their customer’s checkout experience without taking cardholder data.

Clarification of Technologies

The Visa DFE-BP provides an excellent starting point for best practices regarding E2E and tokenization implementations, but the PCI Council does not currently plan on providing definitive guidance on the topic until late 2010. To assist the PCI Council in establishing guidelines, I have submitted the following points as minimum goals for E2E and tokenization deployments:

• New methodologies must be vetted for security and practicality, which can take years to certify. However, the reapplication of existing standards, such as TDES and DUKPT, is a legitimate strategy to reduce or eliminate this delay.
• Encryption must start at the swipe reader. Anything beyond that point opens an area of vulnerability for the merchant.
• The endpoint, from the merchant’s perspective, must be at least the next upstream provider. The farther upstream the data can stay encrypted, the better it is for the security of the entire payment industry. At the very least, the data should be kept out of plaintext at the merchant’s location.
• Merchants cannot have access to E2E encryption keys. Granting them access to the keys would defeat the purpose and value of encryption within the merchant environment and would throw PCI key management requirements back to the merchant.
• Tokens should have no relationship to the card numbers they protect so that they cannot be reverse engineered. (Format-preserving encryption is in this category, and should therefore be avoided.)
• Merchants should allow providers to generate tokens. If tokens are generated in-house, then corresponding card data must also be kept in-house, which defeats much of the merchant benefit of tokenization. In such a scenario, merchants are still responsible for data protection and liable for data loss. They would see no regulatory relief or PCI scope reduction.

Conclusion

While the influential payment security events of 2009 have caused some instability and uncertainty in the payments industry, we need to view the events and the lessons learned from them as opportunities for solution providers to further define and shape the industry in 2010.

Discussions of best practices and PCI DSS revisions are constructive, but it’s not enough to merely talk about change. The marketplace needs solutions today. It is incumbent upon us to offer our support and guidance to the PCI Council and card organizations with hopes that we can bring about positive change in the near term.

Likewise, in 2010 we will see the true innovators in payment security continue to deliver powerful and proven solutions to the marketplace, while the announcements of planned products get lost in the shuffle. As merchants continue to gain knowledge about data breach risks and PCI compliance, they will become savvy in recognizing technologies that are nothing more than promises or vaporware, and they will move toward accepting solutions from providers with proven track records.

MATT ORNCE is the CSO of Electronic Payment Exchange, and has more than 20 years experience in IT, payments and security.

Evolving Pragmatic Approaches to Payments Security – Part 1 of 2

Reviewing the trends in 2009 to speculate on the payments landscape in 2010

Several interesting events have shaken the payment card industry from the status quo in 2009, and reactions to these events are influencing the industry’s future. We have witnessed changing views, maturation of guidelines, and security advances related to massive data breaches. Additionally, government legislation, end-to-end encryption, PCI standards, and best practices have been introduced, and we are beginning to see their effects.

Influential payment security events of 2009 – and some forward-looking views for 2010 – are discussed below.

Influential 2009 Payment Security Events

Data Breaches

Credit card and other payment-related data breaches have become widespread in the past decade, and recent technological advances by criminal hackers, identity thieves and terrorist organizations are putting the world–merchants, payment processors, card brands, governments, and consumers–on notice.

One could argue that data breach notification laws have improved incident reporting, artificially creating more news today from smaller breaches that once went unreported. No one can dispute, however, that in the same time hackers have become significantly better organized and their attacks continue to quickly evolve and have become much more sophisticated and effective. In 2009, data breaches continued to occur: from the largest breach ever, announced in January, to the victims whose data is available for sale today, but are still unaware they’ve even been breached.

PCI DSS Effectiveness Questioned

Some concern has been raised that the PCI Data Security Standard (DSS) has not been effective enough in reducing the number and severity of data breaches, especially when entities that appeared to be compliant were breached.

In March, a House subcommittee met to review the state of affairs. Dave Hogan, National Retail Federation CIO and vocal PCI DSS detractor, gave voice to merchant frustration by characterizing PCI as “an elaborate patch”. He further noted that “the ultimate solution is to stop requiring merchants to store card data in the first place.”

At the October 2009 PCI Participating Organization meeting, even Bob Russo, PCI Security Standards Council General Manager, admitted that, “Compliance doesn’t equal security.”

End-to-End Encryption

End-to-end encryption (E2E) was brought to the forefront in mid-2009 as one solution with the potential to significantly help merchants protect their data and even reduce their PCI compliance burdens. Unfortunately, with an overly-ambitious definition of “from the merchant to the issuer,” merchants are no better off today than before the initial hype.

Defining such a broad industry goal is admirable, but if PCI compliance levels are any indication, the effort will take years to develop the standards and re-tool the entire industry to pass encrypted card data from end to end. In the meantime, merchants still need protection against continuously evolving threats, and need solutions that don’t make them individually responsible for saving the entire payment industry.

PCI / PricewaterhouseCoopers Technology Review

During August 2009, the PCI Council directed PricewaterhouseCoopers (PWC) to perform market research on emerging technologies that can improve merchant compliance rates and reduce risks and costs associated with PCI compliance. PWC focused on E2E and tokenization, tacitly validating each approach by recognizing that “These solutions are designed to address some of the inherent risks in the current payment card processes and infrastructure.”

The PCI Council is currently reviewing the PWC data and is likely to incorporate guidance into future PCI DSS revisions, but probably not until late in 2010.

Visa Data Field Encryption Best Practice (DFE-BP)

In October, Visa quickly followed up PWC’s technology review with several key best practices for E2E, effectively filling the gap before the scheduled PCI DSS updates. Most notably, Visa defined in their best practices document the initial “ends” as “from the swipe to the acquirer processor,” which minimizes their own remediation requirements by reducing the proposed industry-wide E2E goals, but increases the immediacy in which merchants can benefit.

The document also recommends using, “an alternate account or transaction identifier [aka token] for business processes that requires the primary account number to be utilized after authorization, such as processing of recurring payments, customer loyalty programs or fraud management.” This guidance further validates E2E and tokenization technology implementations, especially those aligned with the best practices.