Data security should be a top priority for any fintech company. The global average data breach cost reached $4.45 million in 2023.
Also, with consumer worries about data breaches at an all-time high (nearly six in ten worry about their data's security), fintech developers need to take proactive measures. PCI compliance is one thing that demonstrates a commitment to protecting customer data.
By adhering to PCI data security standards, you can prevent breaches, avoid substantial fines, and build lasting customer confidence and loyalty.
In this article, we’ll look at reasons why it’s important to be PCI compliant.
What Is PCI DSS?
Payment Card Industry Data Security Standard (PCI DSS) is a set of comprehensive requirements and security controls that companies must implement when storing, processing, or transmitting payment cardholder data.
The PCI Security Standards Council established the PCI DSS, a collaboration of major card brands, including Visa, Mastercard, American Express, Discover, and JCB International.
PCI DSS non-compliance can lead to hefty fines, loss of the ability to process card payments, and legal trouble.
While the PCI DSS has detailed requirements, they fall into six broad categories:
- Build and maintain a secure network and systems
- Protect cardholder data
- Maintain a vulnerability management program
- Implement strong access control measures
- Regularly monitor and test networks
- Maintain an information security policy
Why Does PCI Compliance Hold Such Importance for Fintech Developers and ISVs?
Fintech developers and ISVs are at the forefront of innovation. They create mobile banking apps, payment gateways, investment platforms, and countless other solutions that rely on handling sensitive financial data. This places them directly within the scope of PCI compliance.
Ignoring PCI compliance puts fintech developers and ISVs at a severe disadvantage. It leaves their customers' data vulnerable, their reputations tarnished, and invites the crippling financial penalties associated with non-compliance.
More reasons why PCI compliance is important for ISVs include:
1. Safeguarding Customer Trust
Fintech solutions thrive on trust. Customers need to believe that their financial and personal data is secure when using your software or services.
By demonstrating your commitment to the stringent security standards of the PCI DSS, you assure customers that you take the protection of their cardholder data seriously.
Think of it this way — customers are more likely to choose and stay loyal to a fintech company that has a proven track record of PCI compliance. It demonstrates a sense of responsibility and builds a strong foundation for lasting business relationships.
2. Reducing the Risk of Data Breaches
Data and security breaches in the fintech sector can be financially, reputationally, and legally devastating. Reports show that 60% of small firms leave business within six months of a data breach or cyber attack.
Also, research by SecurityMetrics showed that the PCI DSS explicitly covered weak points exploited by attackers in PCI compliance breaches.
Now, PCI compliance isn't a safeguard against every single cyberattack, but it significantly strengthens your security posture.
The comprehensive requirements mandated by PCI DSS forces ISVs and fintechs to implement multiple layers of protection, focusing on:
- Secure Network Infrastructure: Firewalls, system hardening, and network segmentation.
- Data Encryption: Encrypting cardholder information at rest and in transit, rendering it unusable to hackers, even if it's intercepted.
- Access Controls: Strict access controls, role-based permissions, and two-factor authentication to limit who can access sensitive data.
In addition, PCI compliance requires regular monitoring and testing of security systems. This proactive approach helps you identify weaknesses before they can be exploited.
3. Avoiding Costly Fines and Penalties
Failing to be PCI compliant leaves fintechs and ISVs open to substantial fines and penalties in the event of security incidents.
Card brands, banks, and regulatory bodies take security seriously and impose fines on businesses that fail to meet PCI DSS requirements. These fines range from $5,000 to $100,000 per month, potentially crippling your growing ISV.
Beyond direct fines, the indirect costs of non-compliance are often even more severe:
- Loss of Processing Privileges: Card brands may terminate relationships with you, making it impossible for your clients to process payments and disrupting business operations.
- Legal Costs: Data breaches often lead to costly lawsuits and legal expenses, which can far exceed the initial fines. For example, the Target data breach of 2013, where 40 million credit card numbers were stolen, cost the company $18.5 million in settlements and $202 million in legal expenses.
- Reputational Damage: News of a data breach spreads fast, harming your brand and making it harder to attract new customers.
4. Staying Ahead of the Curve
Lastly, compliance with PCI standards allows emerging fintechs and ISVs to stay ahead of the security curve rather than play catch-up.
New fraud tactics, emerging vulnerabilities, and updated regulations demand that Fintech ISVs remain agile.
Being continuously compliant means faster adaptation with new mandatory protections before incidents occur. It also shows your customers that you’re mindful of their security concerns.
How Can Fintech Companies Ensure PCI Compliance?
For new fintech startups, achieving full PCI compliance can feel overwhelming. There's so much to do:
- Setting up secure systems
- Changing how things are done
- Tracking who accesses data
- Adding extra protection layers
It can all seem like a huge task. However, the trick is to tackle PCI compliance step-by-step. Instead of seeing it as a last-minute hassle, build security into your product from the start. Key steps include:
1. Assess Your Environment
You can't protect what you don't know you have.
First, chart every step of the journey cardholder data takes — from when a customer enters their card information on your website or app to where it's processed, transmitted to payment gateways, and stored (even temporarily).
List all devices, networks, and software that may interact with cardholder data. This includes:
- Web servers and applications
- Databases
- Point-of-sale (POS) systems
- Employee computers and mobile devices
Incorporate this assessment into your initial product design. Building security from the beginning is much easier than retrofitting it later.
Don't overlook seemingly minor systems, like a development environment used for testing. Any point where cardholder data touches creates a potential vulnerability.
2. Implement Essential Security Controls
With the scope defined, start rolling out foundational protections aligned to major PCI requirements first:
- Encrypt sensitive cardholder data flows end-to-end to prevent interceptions
- Only collect minimum necessary data, excluding storage of CVV codes
- Develop isolated payment systems rather than shared networks
- Build in robust access controls across applications tied to the principle of least privilege
- Create formal incident response plans for managing any suspected breaches
3. Document, Train, and Maintain
PCI compliance is also about people and processes. This phase focuses on creating a culture of security and ensuring your efforts remain effective over time.
Develop a comprehensive document outlining your procedures for data handling, access controls, incident response, encryption standards, etc. This should align with PCI DSS requirements.
Also, include clear guidelines on password usage, safe data handling practices, and reporting security incidents. This should be in a way that's easy for all employees to understand.
4. Partner with a Payment Processor
One of the most effective ways to minimize your PCI compliance burden is to outsource as much cardholder data handling as possible to a trusted, PCI-compliant payment processor.
A payment processor is responsible for securely handling card transactions, encryption, fraud protection, and communication with card networks.
This reduces the number of systems and processes you need to secure directly within your environment.
Payment processors specialize in PCI compliance. They have the in-house security teams, technology, and continuous auditing needed to meet the stringent requirements. You benefit from their expertise without investing heavily in building your own.
For example, iCG Pay, formerly known as iCheckGateway.com, is a Level 1 PCI-compliant payment processor and a Nacha Preferred Partner for ACH and automation solutions. We offer solutions to streamline payment handling and reduce the compliance burden for ISVs.
Our solutions include:
- Tokenization
- ACH processing
- SMS payments
- Mobile payments
- Secure payment gateways and hosted payment portals
Our payment solutions let you offer merchants real-time data access for detailed metrics, reporting, and exception handling.
By partnering with iCG Pay, ISVs can also unlock new revenue opportunities. You can offer fee-based payment processing services as an add-on to your core software solutions.
The relationship you establish around payment processing paves the way for you to offer more of your business products and services to your existing client base.
Conclusion
PCI compliance is a strategic investment in the security, reputation, and long-term success of your fintech. By taking these proactive steps, you build customer trust, avoid costly disruptions, and position your business to thrive in a competitive marketplace.
To accelerate certified PCI DSS compliance, leverage solutions offered by industry-established payment processors like iCG Pay.
Our payment platform and compliance expertise will minimize your compliance burden, allowing you to focus on creating innovative solutions.
Become a partner and use our solutions to add value to your software offerings.
