Why payment processors skip SOC1 and go straight to PCI DSS?

Why payment processors skip SOC1 and go straight to PCI DSS?

Payment processors rarely pursue SOC 1 audits because, for them, the mandatory and industry-defining standard is PCI DSS. This framework determines whether they can legally process cardholder data, accept payments, and maintain the trust of both customers and financial institutions. In essence, PCI DSS forms the foundation of payment security, while SOC 1 focuses primarily on financial reporting controls rather than the technical safeguards that protect card data.

Why PCI DSS takes precedence over SOC 1?

The primary reason payment processors prioritize PCI DSS is its mandatory status. Any organization that stores, processes, or transmits cardholder data must comply with this standard, regardless of its size, transaction volume, or business model. By contrast, SOC 1 is a voluntary assurance report designed mainly for financial auditors and enterprise clients. PCI DSS, on the other hand, is both a contractual and operational requirement—without it, an organization simply cannot process card payments.

Another key distinction lies in the scope of assessment. SOC 1 evaluates financial reporting controls, focusing on processes that impact financial statements. PCI DSS, however, targets the technical and procedural controls that directly protect cardholder data—from encryption and tokenization to network monitoring and access management. For payment processors, these are the elements that directly influence security, compliance, and business continuity.

Compliance mechanisms and shared responsibility

PCI DSS introduces well-defined validation mechanisms that help both processors and merchants prove compliance. Level 1 organizations must undergo an annual Report on Compliance (ROC) conducted by a certified Qualified Security Assessor (QSA). Smaller merchants complete a Self-Assessment Questionnaire (SAQ), submit an Attestation of Compliance (AoC), and perform quarterly Approved Scanning Vendor (ASV) scans. This structure ensures transparency, consistency, and ongoing accountability.

Importantly, PCI DSS operates under a shared responsibility model. Even when a merchant uses an external payment processor, it remains responsible for its own environment. Technologies such as P2PE encryption, tokenization, or hosted payment pages can significantly reduce the compliance scope, but they do not eliminate responsibility. Merchants must still secure their local networks, payment terminals, and embedded scripts used in checkout pages.

Financial impact and risks of noncompliance

One of the strongest motivations for prioritizing PCI DSS is the financial risk of failing to comply. Penalties for noncompliance can range from $5,000 to $10,000 per month, and in severe cases, reach $100,000. Yet fines are only part of the story. The average cost of a data breach in 2024 exceeded $4.8 million, a figure that includes forensic investigations, reputational damage, and the potential suspension of card processing privileges.

Statistics highlight how challenging compliance remains. In 2020, only 43% of organizations were fully PCI DSS compliant. This demonstrates that PCI is not a one-time project but a continuous process that requires ongoing governance and oversight. Consequently, most processors invest in comprehensive PCI programs rather than SOC 1 audits, which do little to mitigate the specific risks associated with card data.

How processors reduce PCI DSS scope?

Payment processors do not avoid PCI DSS—they work strategically to minimize its scope and streamline compliance. Several technologies help achieve this goal.

Point-to-Point Encryption (P2PE) encrypts card data from the moment it is captured in the terminal until it reaches the authorization center. This can reduce the number of required controls from hundreds to a few dozen and allows merchants to use the simplified SAQ P2PE form. However, businesses must still manage terminal security, staff training, and periodic compliance reviews.

Tokenization replaces primary account numbers with unique tokens, significantly reducing exposure to sensitive data. However, poorly designed integrations can reintroduce risks. Similarly, hosted payment pages and EMV-based integrations move payment processing outside the merchant’s infrastructure but still require script monitoring. With PCI DSS version 4.0.1, organizations must now verify the integrity and authenticity of all external scripts involved in the payment process, adding another layer of control.

Myths about outsourcing compliance

A persistent misconception is that a merchant automatically becomes compliant if its payment provider is PCI DSS certified. In reality, compliance is not transferable. A provider’s Attestation of Compliance applies only to its own systems and services—it does not extend to how clients implement or integrate those services. Even with full outsourcing, a merchant must determine the appropriate SAQ type, conduct regular vulnerability scans, and maintain compliance within its own IT environment.

Moreover, many organizations overlook internal governance requirements such as documented security policies, employee training, and network segmentation. Ignoring these elements can expand the PCI DSS scope and increase audit complexity and cost. In short, outsourcing reduces risk but never removes it entirely.

The role of PCI DSS in processor security strategy

For payment processors, PCI DSS is more than a compliance checklist—it is a strategic risk management framework. Its requirements, from encryption and access control to incident monitoring, form a unified structure that grows with the organization. In contrast, SOC 1’s focus on financial reporting offers limited relevance to cybersecurity. As a result, payment processors typically begin with PCI DSS as a foundation and may later pursue SOC 1 to enhance financial transparency for partners and investors.

Conclusion

Payment processors don’t skip SOC 1 by accident—they intentionally focus on PCI DSS because it directly governs their ability to operate in the payment ecosystem. The standard is enforced by card brands and acquirer agreements, provides clear validation paths, and imposes tangible consequences for noncompliance. PCI DSS protects not only cardholder data but also business reputation and financial relationships. SOC 1 may complement internal control reporting, but it cannot replace the robust security framework required for card processing.

Ultimately, going “straight to PCI” is not a shortcut—it’s a survival strategy in a sector where trust and reliability are as critical as technology itself. By embracing PCI DSS, payment processors meet regulatory obligations while building a culture of security that becomes their lasting competitive advantage