Jan 29, 2014 Dave King
In the modern world, electronics are proliferating at an incredible rate in a number of different formats and disciplines. However, few sectors have been as affected by the use of new technology as the retail industry. For decades, credit cards and electronic payment solutions have been used at increasingly high levels by consumers across the globe.
More recently, even more cutting-edge payment systems have started to gain popularity, such as mobile and online payments. These emerging sales portals have proven to be convenient for consumers, but there is a downside to the development and increased reliance on electronic payments: more cyberattacks.
With more money exchanging hands via digital channels than ever before, hackers are starting to target retailers in an effort to collect sensitive financial information. As a result, companies are struggling to implement proper security solutions that are agile enough to protect payment systems as electronic transactions advance.
In many cases, inadequate security has resulted in damaging cyberattacks that have cost organizations a significant amount of money due to compliance and financial loss. Also, retailers can take a serious reputational hit when hackers successfully attack their accounts, which can make consumers think twice about doing business with a hacking victim.
In order to combat the growing threat that cybercrime and electronic payment concerns present for businesses, the National Retail Federation (NRF) is calling for a change to the type of cards used by consumers in the United States. In a recent statement, NRF officials indicated that banking institutions and elected leaders need to ditch magnetic cards for the PIN and chip cards that are common in other regions.
"For years, banks have continued to issue fraud-prone magnetic stripe cards to U.S. customers, putting sensitive financial information at risk while simultaneously touting the security benefits of next-generation PIN and chip card technology for customers in Europe and dozens of other markets," NRF CEO Matthew Shay said.
Shay went on to note that the retail industry is eager to embrace PIN and chip solutions and is willing to work with banks to bring the technology to the U.S. The organization indicated that the payment system has proven so successful that it is used in more than 80 countries.
Cost could prove challenging
The biggest barrier to PIN and chip card adoption in the U.S. may be the price. According to MarketWatch, officials from the NRF told the news provider that the cards go for about $2, four times the price of a standard magnetic card. Also, the source reported that it costs around $1,000 to replace traditional payment portals with ones that can read PIN and chip cards.
While these solutions may be slightly more expensive to implement, businesses stand to lose much more if they avoid using more modern payment systems. For this reason, they should push financial outlets to embrace the PIN and chip system that has proven to be much more secure than other electronic payment technologies.
Target breach puts security in the news
The reason the NRF and retailers across the country are currently calling for the implementation of new technology is partly due to the data breach that took place at Target stores across the U.S. last year. Fox Business reported that more than 70 million consumers at Target locations in America may have had their credit and debit cards compromised between Nov. 27 and Dec. 15.
This was especially worrying for consumers in the U.S. because it took place during the middle of the holiday season, one of the most active spending periods of the year. If more instances of magnetic card-related breaches occur in the near future, the call for new electronic payment systems may only get louder.