As consumers increasingly move toward online and digital purchases, it’s now more important that businesses do everything they can to protect both their own private data, as well as their customers'.
We’ve all heard the horror stories of data breaches and ransom attacks, so it's critical to understand and implement data protection strategies and processes, including industry standard guidelines. These include SOC compliance, as well as PCI compliance.
Of course, learning the nuances of compliance and regulatory measures isn’t at the top of a must-read list, but understanding how they work, and why they are essential is imperative for any large business collecting customer data.
To illustrate our point, since 2008, traditional banks have spent $321 billion on enforcement actions, fines, and settlements against businesses that do not follow specific rules and regulations. Whether these companies are intentionally breaking the rule, or are just negligent, is up for debate, however, it’s clear that not all companies do what it takes to keep their customer’s private information safe.
So how do SOC compliance and PCI compliance help, exactly? Here are some of the ways businesses can protect themselves as they look to fintech and embedded finance to help them grow their business and drive higher customer retention.
What is SOC Compliance?
SOC stands for "Service Organization Control." As the American Institute of Certified Public Accountants (AICPA) website defines, SOC "is 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." That’s a mouthful, so let’s break it down in simpler terms.
Essentially, SOC is a set of compliance standards built to protect companies that process and store customer data. Operationally, SOC audits serve as risk assessments and can be an effective risk management tool to ensure a company's data security is top-notch.
There are two types of SOC reports: SOC 1 and SOC 2. And while both have their own specific roles, both SOC 1 and SOC 2 provide regulatory oversight specifically as it relates to unauthorized access and the use of shared data with third parties.
SOC 1 Compliance
SOC 1 compliance relates to a company’s internal financial controls. SOC 1 audits can be used by the company’s client if the client requires information about the company’s internal financial management. SOC 1 typically applies to service organizations that directly interact with financial information for customers or business partners.
Given it's internal nature, businesses cannot be fined for a lack of SOC 1 compliance.
SOC 2 Compliance
Where SOC 1 audits are an internal look at a company’s financial reporting, SOC 2 compliance helps ensure their customers’ data is secure and can’t be compromised.
A SOC 2 auditing procedure relies on five trust service principles/trust services criteria:
- Privacy - measures including encryption, two-factor authentication, and access control
- Security - systems and protocols like network firewalls and intrusion detection
- Availability - ensuring uptime via performance monitoring, disaster recovery, and security incident handling
- Processing integrity - monitoring processes and quality assurance
- Confidentiality - managing ongoing data diligence, including encryption and access controls
While no fines can be levied against an organization for not being SOC 2 compliant, meeting these standards ensures your customer’s data is protected, and is an essential step in keeping your business safe.
PCI Compliance
Another type of compliance measure is Payment Card Industry (PCI), a set of standards set forth by the PCI Security Standards Council. PCI Compliance specifically addresses credit card and payment processing security, meaning cardholders' personal ID and data will not be breached or compromised.
As digital risk and cybersecurity become an increasingly prevalent issue across all industries, this compliance measure is of the utmost importance.
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 not only ensures that your business meets compliance requirements, but that it also protects your customer's sensitive data.
Why businesses must adhere to SOC and PCI requirements
Meeting compliance requirements is vital for a few reasons.
First, because both SOC and PCI compliance requires annual audit reports by external auditors, it provides a transparent and clear understanding of how protected your business and customers are.
Furthermore, there’s a reasonable expectation of trust that customers expect when they conduct business online. For instance, when using a debit, gift, 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, directly impacting your revenue.
As more and more businesses offer financial products to their customers with embedded finance, it’s important for any large business to ensure their embedded finance partners meet these criteria. Failure to ensure your third-party providers meet regulatory requirements could pose problems for your business and potentially result in costly fines.
Work with an embedded finance partner that has already secured SOC and PCI compliance to remove the burden from your business, allowing your organization to focus on revenue growth and customer retention.
Not all embedded finance partners comply with SOC and PCI standards, so ask before starting any projects that include financial programs. For a complete list of what to know before you engage an embedded finance provider, read the Buyer's Guide: Key considerations in selecting an embedded finance provider.
How to implement compliance standards into your business practices
If your company wants to offer your customers branded bank accounts, debit cards, or make global money transfers, you'll want to ensure that your provider meets SOC and PCI regulations.
Similarly, you can reduce your risk of non-compliance by making sure that you only work with a full-suite provider offering a variety of financial products.
For example, if a company decides to add financial services a la carte and picks one provider that does payment processing, and another that issues branded smart cards, they’d be exposing their business, and customer information, to more risk. Especially if those providers don’t have the proper audits and regulatory compliance.
Working across multiple providers not only requires more work and operational oversight, it also increases the risk of software vulnerabilities when these different programs interact with one another. And what happens if one of those companies doesn’t have the proper compliance?
With a singular provider, you guarantee the services are integrated properly, and can more readily ensure SOC and PCI compliance.
Ensure your business is SOC and PCI compliant
If you’re a large, enterprise company that processes and stores customer data, it’s essential to ask any potential embedded finance provider if they are SOC and PCI compliant.
The best embedded finance providers have all the compliance and regulatory licenses in place. If they don’t, you might want to think twice about entrusting them with your financial and customer data.
Alviere is a licensed financial institution, and compliant with SOC 2, and a PCI-DSS Level 1 service provider. Alviere provides comprehensive compliance, risk management, and security. This means full compliance and support for FDIC-insured bank accounts and strict Know Your Business (KYB) and Anti-Money Laundering (AML) standards and processes. Additionally, Alviere assures robust fraud and identity management protocols and PCI & SOC 2 certifications to safeguard your business, allowing your customers to operate with confidence and peace of mind.
Alviere Accounts are covered by the Federal Deposit Insurance Corporation (FDIC) on a pass-through basis by Alviere's bank partners.
Contact us today to learn how we protect large, enterprise companies when offering their customers financial products.
