Retailers Need To Protect Their Data, Even From Their Own Customers

Written by Evan Schuman
May 6th, 2010

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.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.