As more consumers around the world embrace online buying and digital services, it’s never been more important for your company to protect its customer data, as well as its own internal data. Not only is a data breach expensive it can also lead to other consequences, such as revenue loss and irreparable damage to a brand’s reputation.
Safeguarding your company's reputation extends beyond protecting data — it’s also at risk if your data systems are not functioning properly. Guaranteeing system availability (such as uptime, accessibility, and accuracy) to customers should be a top priority, especially companies handling customer funds.
Luckily there are guidelines and certifications to ensure companies are protecting themselves and their customers: SOC compliance and PCI compliance. While unraveling the nuances of compliance and regulatory measures isn’t necessarily the most exciting topic, understanding how and why they work is crucial for any business collecting customer data.
We’ll dive into SOC and PCI compliance and why both are important for any company looking to use embedded finance to power growth and customer retention initiatives.
What is SOC compliance?
SOC, which stands for "Service Organization Control," is defined by the American Institute of Certified Public Accountants (AICPA) as “a suite of service offerings CPAs may provide in connection with system-level controls of a service organization or entity-level controls of other organizations."
Put more simply, SOC is a set of compliance standards built to protect companies that process and store customer and financial data.
SOC audits serve as risk assessments and can be an effective risk management tool. There are two types of SOC reports: SOC 1 and SOC 2, providing regulatory oversight as it relates to unauthorized access and the use of shared data with third parties.
SOC 1 Compliance
SOC 1 compliance involves auditing the framework of a company's financial reporting, system, and controls. Essentially, SOC 1 is an internal auditing process led by outside experts that ensures a company's systems and controls function as promised and that there are no holes in its financial records.
SOC 1 typically applies to service organizations that directly interact with financial information for customers or business partners. SOC 1 compliance relates to a company’s internal financial controls. It can be used by the company’s client if the client requires information about the company’s internal financial management.
SOC 2 Compliance
While SOC 1 audits are more of an internal look at a company’s financial reporting, SOC 2 compliance helps ensure a company’s customer data is secure and can’t be compromised.
A SOC 2 auditing process relies on five Trust Services Criteria:
- Security - such as network firewalls and intrusion detection
- Availability - performance monitoring, disaster recovery, security incident handling
- Privacy - encryption, two-factor authentication, and access control
- Processing integrity -process monitoring and quality assurance
- Confidentiality -encryption and access controls
Meeting these standards is an essential step in ensuring safety and security for your organization and your customer data.
PCI Compliance
Payment Card Industry (PCI) compliance is a set of regulations set forth by the PCI Security Standards Council and relates to credit and payment processing security. Simply put, PCI compliance refers to standards that businesses follow to ensure a customer’s cardholder data is maintained in an independent, safe, and secure environment, where it is protected from internal and external breaches or compromises.
PCI compliance is divided into four merchant levels to which businesses are delegated based on the annual card transaction volume.
- Level 1: Businesses processing over 6 million transactions per year
- Level 2: Businesses processing 1 million to 6 million transactions per year
- Level 3: Businesses processing 20,000 to 1 million transactions per year
- Level 4: Businesses processing less than 20,000 transactions per year
To be PCI compliant, companies must meet six objectives:
- Build and protect a secure network
- Protect cardholder data
- Create a vulnerability management program
- Apply strong access control measures
- Regularly monitor and test networks
- Create a policy regarding information technology security
Implementing these security practices ensures that your business meets compliance requirements and protects your customers' sensitive data.
Building trust with compliance
Because SOC and PCI certifications require annual audit reports by external auditors, it provides a transparent and clear understanding of how protected your business and customers are. There’s a reasonable expectation of trust that customers look for when they conduct business online. For instance, if they use a debit or prepaid card, customers expect that their sensitive information is safe. Failure to do so can erode customer trust, ultimately driving them to spend their money elsewhere and directly impacting your bottom line.
As more businesses turn toward embedded finance as a way to grow, it's essential for every brand to ensure their embedded finance partners meet these criteria. Failure to confirm your third-party providers meet regulatory requirements could pose problems for your business and potentially result in costly fines.
Fortunately, there are embedded finance partners that take these requirements seriously and proactively secure them. Doing so assures clients and customers their personal and financial information is maintained in a safe and secure environment. Alviere is one example of an embedded finance company that is a PCI and SOC 2 certified service provider. Alviere is also a regulated financial entity, holding money transmitter licenses (MTLS).
Not all embedded finance partners offer these certifications or meet the criteria to obtain them, so it's important to ask. With company funds and customer trust at risk, understanding the levels of compliance and regulatory standards are foundational to offering financial products to your customers. For these questions, read our Buyer's Guide: Key Considerations in Selecting an Embedded Finance Provider.
Implementing compliance standards into your business
The best way to implement compliance standards into your business practices is by vetting your third-party embedded finance provider. For example, if your company wants to offer its customers branded accounts, prepaid or debit cards, or better manage global transfers, you'll want to ensure that your provider meets SOC and PCI regulations.
Similarly, you can reduce your risk of non-compliance by selecting a provider that offers various financial services in a single platform. Working with multiple partners to provide services exposes a company to more compliance risk — with the company overseeing all regulatory requirements directly.
Ensuring compliance for long-term success
Protecting your company's internal data and customer data should be a top-of-mind concern for any brand or business looking to embed financial services.
The Alviere technology, regulatory status, dedication to compliance, and expertise ensures safety and security for financial programs. Alviere clients have the solid foundation necessary to deliver the best — and most trusted — financial solutions.
Ready to see what embedded finance can do for your brand? Reach out to us today.
