Evan Schuman's StorefrontBacktalk

The credit card brands used to have a much simpler reality. Merchants used the card data to do transactions to get paid for their goods and services. They knew with whom they worked and could get those firms—to a certain degree—to abide by their rules. Today, companies like Blippy and Offermatic are changing the dynamics. They’re making a business out of leveraging card data, but they have no direct relationship with the card brands.

As we discussed last week when dissecting Blippy’s recent data breach problems, this is new territory and few are certain what—if anything—should be done about it.

Two distinct issues are at play here: security protection against fraudulent transactions (essentially PCI) and privacy/identify-theft concerns involving companies that leverage consumer transaction histories. Making this scenario much more delicate is the fact that consumers themselves are often giving these third-party vendors permission to share their data.

In the Blippy data breach case, some credit and debit card numbers leaked out. But that data was apparently given to Blippy by consumers. As such, do the card brands have any responsibility for that breach? How can they? Not only were none of the brands a party to the incident, but neither were their contractees (merchants, processors, etc.).

The impact on the affected consumers is even more interesting. At a glance, they would seem to be protected by zero-liability programs, but those programs are footnote-crazed. And one of those footnotes doesn’t promise protection if consumers are reckless with their data. If a consumer gets a card and then stands on a podium in New York City’s Central Park on a sunny Saturday afternoon and uses a megaphone to repeatedly shout his card number, name, address, expiration data and CVV to anyone within earshot, is it reasonable to give that consumer zero-liability protection if some thief rips him off?

Is sharing information with a site such as Blippy—which freely shares your transactions with anyone who wants to know what you’ve been buying—comparable to the Central Park megaphone incident? In this day of sharing everything via YouTube, Twitter and Facebook, what constitutes reasonable caution and responsible data protection?

Whatever that answer turns out to be, do consumers have a clue? Should retailers, the brands and other payment players educate consumers on what’s safe and what isn’t, in addition to pointing out the potential consequences, such as the loss of zero-liability protection, of their actions?

Or is the inverse more true? Given today’s constantly changing payment methods—with PayPal in this corner and Apple-fueled bank-less mobile payments in that corner—is it wiser for the brands to silently sit back and watch while assuring customers that they’re protected no matter what?

There’s another concern. If we set aside issues of fairness, justice and reasonableness, we need to look at practical reality. If consumers’ data—lifted from their Visa cards issued by Chase, for example—gets out there and fraudulent transactions or embarrassing revelations happen (in its anti-state-tax arguments, Amazon made a powerful “embarrassing revelation” case), who do you think is going to get blamed? If you were an attorney with such a consumer client, who would be in your gunsight, Blippy or Visa and Chase? Better yet, if the data involved purchases at Wal-Mart, wouldn’t its deep pockets attract your attention?

But, wait, you say. How in the world could the retailer be dragged into this problem? The more famous the brand name and the deeper its pockets, the greater the chance that it will get dragged in. Retailers need to get behind rules to control and protect card data, regardless of who is trying to use it. It’s not prudent to say, “If the consumer approves, we’re clearly off the hook” or, “We have nothing to do with this.”

In the world of litigation and—potentially more important—consumer perception, retailers are assumed to control all that data. Yes, it’s not fair; nor is it just. But trust me: It will happen.