During the holiday season, the high-profile security breaches at Target and Neiman Marcus were covered extensively in the news. The Target breach alone affected up to 70 million Americans. There have been dozens of reported cyber-attacks in the last several years, but the sheer number of people affected in these events and the timing around Christmas put information security in the spotlight more than ever before. Last week, at a Senate Judiciary Committee hearing on consumer data security, Senator Richard Blumenthal of Connecticut noted that the US has about a quarter of the world’s credit card use but half of the fraud.
One key topic that came up at last week’s hearing was the so-called Europay, MasterCard, and Visa (EMV) technology, a reportedly more secure method for executing a payment transaction. Credit card magnetic strips will be replaced by an embedded chip, and a signature will be swapped for a personal identification code (PIN) authorizing the transaction. This technology may sound familiar to those of us who have traveled overseas as parts of Europe have been using the system for a decade. Visa and MasterCard have publicly stated that they will migrate to this technology in the US by October 2015 for point of sale transactions.
At this point, customer information and data security needs to move to the top of the priority list for credit card issuers and retailers. I applaud Visa, MasterCard, and other companies who are transforming their business to increase security and prevent fraud. If customers are losing confidence in the security of their current plastic credit cards, how will they have confidence in the more innovative products like contactless payments (tapping a card or fob against a reader) or payments made via a mobile phone?
Addressing security improvements should be a collaboration between IT, Marketing, and other impacted departments. Companies should ensure they have the appropriate insurance coverage and also put pressure on their vendors and partners to step up their security standards as well. This joint effort is a bigger investment up front, but could save the company from ruin in the long-run. Although this could be a large technological effort for many, from my perspective this is an even bigger customer experience and reputation issue for retailers and financial institutions.
Jordan Sternlieb is a leader in West Monroe Partners’ West Coast Banking and Credit Unions Practice and has collaborated on various financial services industry projects with the firm’s Customer Experience and Technology teams.