PCI Update Paves Way For Expanding Point-to-Point Encryption

The PCI Security Standards Council, which administers the payment card industry data security standard, has made it easier for large merchants to implement point-to-point encryption (P2PE) for protecting cardholder data.

The Council this week updated its requirements to give merchants more choice and flexibility in the components they use for point-to point encryption. One of the key features in the Council’s new P2PE Version 2.0 is a provision that allows covered entities to implement and manage their own encryption tools at their point of sale systems so long as the tools are compliant with PCI requirements.

Another update gives encryption vendors and service providers more leeway in the components that they use to deploy P2PE at customer locations. Going forward, the Council will also list approved encryption components and services that organizations can use to encrypt their data.

The updates are deigned to help organizations better protect cardholder data against compromise at the point of sale, PCI Council chief technology officer Troy Leach in a statement announcing the update. “Malware that captures and steals data at the point-of-sale continues to threaten businesses and their ability to protect consumers’ payment information,” Leach said. Encrypting the data makes it valueless for attackers, he said.

The goal with P2PE is to protect cardholder data from the instant it is swiped at a POS terminal all the way through to the card processing company’s network. Unlike end-to-end encryption, P2PE works by encrypting data right at the point of acceptance. The goal is to make it harder for attackers to steal card data using POS malware tools like BlackPOS, Dexter, vSkimmer, and Backoff. Such tools typically work by capturing card data from the retail terminal, before it can be encrypted.

Version 2.0 of the PCI Council’s P2PE requirements should simply the steps that large merchants need to work through to encrypt cardholder data at the POS terminals, says Jim Huguelet, principal at The Huguelet Group LLC.

“Many merchants have come to realize that the EMV standard does not involve encrypting cardholder data, leaving that data as much at risk to theft as it is today,” Huguelet said.

EMV cards, or cards that are based on the Europay MasterCard Visa standard, store cardholder data in a tiny microchip embedded in the card and not on magnetic stripes like most cards in the U.S. currently do. The major credit card associations require all organizations that accept credit card transactions to implement point of sale terminals that are capable of accepting EMV card transaction. The deadline for that migration is this October of this year, but many believe that a vast majority of companies won’t be ready in time for the deadline.

With various reports now estimating that only 60 percent of US credit and debit cards will be reissued with EMV chips and less than 10 percent of merchants will be able to accept them by the October 2015 deadline, organizations are coming to terms with the fact that widespread EMV adoption will easily go into 2017 and perhaps longer, Huguelet says.

“With the many delays the US is encountering in deploying EMV, merchants are looking to make their payment processing environments more secure as quickly as they can and deploying encryption is the clear way to do so,” he says.

Gartner analyst Avivah Litan says the Council’s move to update its encryption requirements appears designed mostly at very large organizations.

“My initial reaction is that this is intended to benefit large merchants who want to implement their own P2PE systems,” Litan says. “I’m guessing this update is a result of some special lobbying by a handful of large big box retailers who have their own in-house capabilities."