PCI Compliance Explained: Requirements and Best Practices

PCI compliance is how businesses prove they protect cardholder data according to the Payment Card Industry Data Security Standard (PCI DSS)—a set of security requirements that applies to any organization storing, processing, or transmitting credit card information.

Whether you’re a small e-commerce shop or a global enterprise, the card brands expect you to meet these standards. This guide covers what PCI compliance involves, who it applies to, the 12 core requirements, and practical steps to achieve and maintain compliance without the last-minute audit scramble.

What Is PCI Compliance

Payment Card Industry Data Security Standard (PCI DSS) compliance refers to meeting a set of security requirements that protect cardholder data whenever it’s stored, processed, or transmitted.

The standard applies to any organization that handles credit or debit card information, regardless of size or transaction volume. Its purpose is to prevent data breaches, reduce fraud, and protect customers who share their payment information.

The PCI Security Standards Council (PCI SSC) develops and maintains the standard, while the major card brands—Visa, Mastercard, American Express, Discover, and JCB—enforce compliance through acquiring banks and payment processors.

• Who created it: The major card brands formed the PCI SSC in 2006

• What it covers: Technical and operational security controls for cardholder data environments

• Why it exists: To protect businesses and consumers from payment card fraud and data breaches

Who Needs to Be PCI Compliant

PCI DSS applies more broadly than many organizations expect. If your business touches cardholder data at any point in the payment process, compliance applies to you.

Merchants That Accept Card Payments

Any business accepting credit or debit cards falls under PCI DSS requirements. Online stores, brick-and-mortar retailers, restaurants, healthcare providers, and service businesses all qualify.

Even if you process only a handful of transactions per year, the standard still applies—though validation requirements differ based on volume.

Service Providers That Handle Cardholder Data

Service providers—payment processors, managed security providers, hosting companies, and similar organizations—also fall within scope. If you store, process, or transmit cardholder data on behalf of merchants, you carry compliance obligations and typically face more rigorous validation requirements.

What Qualifies as Cardholder Data

Understanding what data falls under PCI DSS helps you define your compliance scope:

• Primary Account Number (PAN): The full card number, which is the key data element

• Cardholder name: When stored alongside the PAN

• Expiration date: When stored alongside the PAN

• Service code: The three- or four-digit code on the magnetic stripe

Sensitive Authentication Data (SAD)—including CVV codes, PINs, and full magnetic stripe data—carries even stricter rules. Organizations cannot store SAD after transaction authorization under any circumstances.

The 12 PCI DSS Requirements

PCI DSS organizes its requirements into six control objectives. Each requirement addresses a specific aspect of securing cardholder data environments.

1. Install and Maintain Network Security Controls

Firewalls and network security controls filter traffic and block unauthorized access to systems containing cardholder data.

2. Apply Secure Configurations to All System Components

Default passwords and settings create easy entry points for attackers. Changing vendor-supplied configurations eliminates common vulnerabilities.

3. Protect Stored Account Data

When you store cardholder data, encryption and data minimization reduce exposure. The less data you retain, the smaller your risk surface.

4. Protect Cardholder Data with Strong Cryptography

Data traveling across open networks—like the internet—requires encryption to prevent interception during transmission.

5. Protect Systems and Networks from Malicious Software

Anti-virus and anti-malware solutions defend against threats that could compromise cardholder data environments.

6. Develop and Maintain Secure Systems and Software

Timely security patches and secure development practices prevent attackers from exploiting known vulnerabilities in your systems.

7. Restrict Access to System Components and Cardholder Data

Need-to-know access controls ensure only authorized personnel can reach sensitive data.

8. Identify Users and Authenticate Access

Unique user IDs and strong authentication—including multi-factor authentication (MFA)—create accountability and prevent unauthorized access.

9. Restrict Physical Access to Cardholder Data

Physical security controls protect locations where cardholder data is stored or processed.

10. Log and Monitor All Access to System Components

Comprehensive logging enables detection of suspicious activity and supports forensic investigation if incidents occur.

11. Test Security of Systems and Networks Regularly

Vulnerability scans and penetration tests identify weaknesses before attackers can exploit them.

12. Support Information Security with Policies and Programs

Documented security policies and employee training ensure everyone understands their responsibilities around cardholder data protection.

The Four PCI DSS Merchant Levels

Card brands assign merchants to compliance levels based on annual transaction volume. Higher levels face more rigorous validation requirements.

Level 1 merchants require an on-site assessment by a Qualified Security Assessor (QSA) and quarterly network scans by an Approved Scanning Vendor (ASV). Level 2 and Level 3 merchants typically complete an SAQ and quarterly ASV scans, though acquiring banks may require additional validation based on risk.

The smallest merchants still carry compliance obligations, even if validation requirements are less intensive. Breaches at small businesses happen frequently, so a lower level does not mean lower risk.

How to Achieve PCI Compliance

Achieving PCI compliance follows a structured process. Treat it as an ongoing cycle rather than a one-time project.

1. Determine Your Merchant Level and Scope

First, identify your annual transaction volume and which SAQ type applies to your payment environment. Then define your cardholder data environment (CDE)—the systems, networks, and processes that store, process, or transmit cardholder data.

2. Complete a Gap Assessment

Compare your current security posture against PCI DSS requirements. A gap assessment reveals vulnerabilities that require remediation before validation.

3. Implement Required Security Controls

Address identified gaps by deploying technical controls, updating policies, and remediating vulnerabilities. Consider whether you can reduce scope by eliminating unnecessary cardholder data storage.

4. Complete Your Self-Assessment Questionnaire or Audit

Level 2–4 merchants complete the appropriate SAQ based on their payment environment. Level 1 merchants undergo a formal audit with a QSA.

5. Submit Your Attestation of Compliance

File your Attestation of Compliance (AOC) and supporting documentation with your acquiring bank. This validates your compliance status with the card brands.

Why PCI Compliance Matters for Your Business

Beyond avoiding penalties, PCI compliance delivers tangible business value. Customers increasingly expect businesses to protect their payment information, and they’ll take their business elsewhere if trust erodes.

Benefits include:

• Customer confidence: Demonstrating security builds trust with cardholders

• Reduced breach risk: Strong controls help prevent costly incidents

• Faster sales cycles: Enterprise customers often require proof of PCI compliance before signing contracts

• Competitive advantage: Compliance signals operational maturity to partners and customers

Risks and Penalties of PCI Non-Compliance

Non-compliance creates significant financial and operational exposure that extends beyond fines.

Financial Penalties and Fines

Card brands impose monthly fines on acquiring banks, who pass costs to non-compliant merchants. Fines escalate the longer non-compliance persists.

Loss of Payment Processing Privileges

Repeated non-compliance or a breach can result in losing the ability to accept card payments entirely. For most businesses, this outcome is catastrophic.

Data Breach Liability and Reputational Damage

Non-compliant organizations face greater liability during breach investigations. Costs include forensic investigations, customer notification, legal fees, regulatory penalties, and long-term reputation harm.

Best Practices for Maintaining PCI Compliance

Compliance is continuous, not a point-in-time checkbox — only 32% of organizations meet all PCI DSS requirements. The following practices help organizations stay audit-ready year-round.

Automate Evidence Collection and Control Monitoring

Manual evidence gathering consumes significant time and introduces errors. Automation platforms continuously collect evidence and monitor controls, reducing compliance drift between assessments.

Segment Your Cardholder Data Environment

Network segmentation isolates systems handling cardholder data from the rest of your network. This approach reduces scope and limits exposure if a breach occurs elsewhere.

Conduct Regular Vulnerability Scans and Penetration Tests

Quarterly ASV scans and annual penetration tests catch vulnerabilities before attackers exploit them.

Train Employees on Security Awareness

The human element is involved in 60% of data breaches. Regular training ensures employees recognize phishing attempts, social engineering tactics, and proper data-handling procedures.

Review and Update Security Policies Annually

Policies that don’t reflect current threats or business operations create gaps. Annual reviews keep documentation aligned with actual practices.

How Automation Simplifies PCI Compliance Management

Traditional PCI compliance requires significant manual effort—collecting screenshots, tracking control effectiveness, and preparing audit documentation. This creates compliance fatigue and gaps that grow between assessments.

Compliance automation platforms address these challenges by continuously monitoring controls, pulling evidence from integrated systems without manual effort, and providing real-time visibility into compliance status. When audit time arrives, evidence and documentation are already organized and ready for assessors.

Build Continuous PCI Compliance with Drata

Drata’s platform automates much of the manual work that makes PCI compliance burdensome. With integrations across your existing tools, Drata continuously monitors key PCI DSS controls, collects audit-ready evidence, and provides real-time dashboards showing your compliance posture.

For organizations managing multiple frameworks—such as PCI DSS alongside SOC 2, ISO 27001, or HIPAA—Drata maps controls across standards so you’re not duplicating effort in separate systems. You manage a single, unified program instead of juggling parallel checklists.

Compliance becomes something you maintain every day, not something you scramble to prove once a year.

Book a demo to see how Drata helps you achieve and maintain PCI compliance.

FAQs About PCI Compliance