First the good news: Most small retailers say they know about the Payment Card Industry's Data Security Standard (PCI DSS). But the bad news is they don't necessarily understand it, nor can many of them prove their compliance with it, a new study by the National Retail Federation (NRF) says.

The big surprise was the high number of small businesses that are aware of PCI -- 86 percent -- and those that say PCI compliance makes them more secure -- 80 percent, according to Heather Foster, vice president of marketing for ControlScan, a PCI compliance vendor that conducted the survey along with the NRF and the PCI Knowledge Base. "A year ago, most of the small businesses we were talking to had never heard of PCI," Foster says. "We were pleasantly surprised with the [level] of awareness out there now."

But there's a gap between small businesses' PCI awareness and their perception of risk, the study found: Among the small merchants who had never suffered a breach, 72 percent said they think their risk of data hack is "low" or "not possible." Small merchants that had experienced data breaches not surprisingly saw things much differently, with 67 percent saying they are at a high or medium risk of attack.

"My biggest concern is that while these merchants [who haven't been breached] are at least making progress thinking that PCI is a good thing to do, they're not thinking they're at risk. They think they're invulnerable," Foster says.

The study, which surveyed 220 small retailers in ecommerce, retail stores, and mail/order telephone order businesses, also found that many of these enterprises are perplexed about PCI when it comes to better understanding it, implementing it, and the cost complying with it. "Either make things easier to understand or offer more help for businesses to get compliant," one respondent commented in the survey. Another asked for PCI to have a "better understanding of how much small businesses can afford. Most solutions available are for large businesses and are expensive."

David Hogan, chief information officer for the NRF, says small retailers are understandably overwhelmed with compliance. "Until industry service providers and the PCI Security Standards Council make compliance easier to understand and less complex to implement, many small merchants will likely continue to be frustrated and bewildered, causing some of them to abandon the idea of compliance altogether," Hogan said in a statement.

The PCI Security Standards Council, meanwhile, is working on better educating small retailers about PCI and its implementation, says Troy Leach, technical director of the PCI Security Standards Council. Aside from working with the PCI vendor, payment, and small business community, the PCI Council also offers a priority approach framework, self-assessment questionnaires, and other PCI other resources.

"One of the first simple steps merchants can take on the road to card data security is to check that they are using a secure payment application or PED terminal that has been validated by an approved laboratory and is listed on our Website," Leach says. "Before the end of the year, the Council will also launch additional resources as part of our ongoing education program for SMBs that are based on specific feedback we have received from smaller merchant and expert focus groups."

Around 45 percent of the respondents in the study say they can't demonstrate that they are PCI-compliant with any documentation beyond their PCI self-assessment questionnaire. That suggests many small retailers basically see PCI as a "check box" requirement and not a continuous security assessment measure, the report says. Most types of merchants in the study ranked PCI as a high priority, but in retail-only outfits only 30 percent say PCI is a high priority. "This strongly suggests that 'mom and pop' dry cleaners, pizza parlors, and convenience stores still do not view data security, PCI, or hackers as things they need to be concerned about," the report says.

The NRF suggests that the payment industry give retailers the cold, hard facts that 85 percent of payment card breaches happen in small businesses, 81 percent of companies hit by a breach weren't PCI-compliant, and noncompliance fines range from $5,000 to $25,000 a month for serious breaches.

Today, many small businesses still store unnecessary card data, ControlScan's Foster notes. "The things we tend to see out there are folks storing card data they don't need to store, and ones who are using legacy systems and vulnerable applications to process credit cards," she says.

Around 57 percent of the respondents in the survey have one to 10 employees, and nearly half say they process less than 100,000 credit and debit card transactions a year. And 89 percent say their average transaction sale is between $10 and $1,000.

Have a comment on this story? Please click "Discuss" below. If you'd like to contact Dark Reading's editors directly, send us a message.