Target's chief executive is calling on retailers and banks to adopt chip-based credit card technology to prevent fraud, just one month after the company suffered a massive pre-holiday data breach
affecting as many as 70 million customers.
The move is notable, given the company piloted a similar project 10 years ago only to abandon it mainly for lack of industry support, among other reasons, The Wall Street Journal reports.
Chip-based credit cards are used extensively throughout Europe and Canada and involve a technology that limits the ability of hackers to replicate card information to create fraudulent cards.
In Britain alone, adoption of the cards has helped reduce fraud from counterfeit cards by 70 percent from 2007 to 2012, the Journal reports, whereas breaches in the U.S. have more than doubled since 2007.
Unlike America's swipe cards which are relatively easy to copy, chip cards take cardholder information and turn it into a unique code for each transaction. They often also require a pin number for customers to enter at the point of sale. Fraudsters are therefore less able to steal and reproduce cards.
The effects of the Target fraud are beginning to come to light after two Mexican citizens were arrested by police in Texas with fraudulent credit cards tied to the breach at Target, according to The Associated Press.
A federal official said there was no connection between the arrests and the ongoing investigation into the Target breach, but the two people in question had used cards containing the account information of South Texas Target customers to buy tens of thousands of dollars worth of merchandise.
Early attempts to introduce the chip technology, lead in part by Target, were balked at because the financial industry and retailers were at loggerheads over card-swipe fees, and also because neither side wanted to invest the billions of dollars necessary to implement the technology until there was a mutual agreement to move forward, according to the Journal.
Target abandoned a $40 million 3-year pilot of the chip technology in 2004, though it would have been the first U.S. retailer to launch the cards. Some executives at the time argued that the cards were slowing check-out speeds. The company had also hoped to gain some marketing benefits from the cards which ultimately did not deliver the dividends the company had hoped.
But in light of the most recent breach at Target, and the increasing vulnerability of the U.S. as a target for fraudsters, industry leaders are returning to the negotiating table and believe now may be the time to act.
"All of us have a common interest in being protected, so this might be a chance for retailers and banks to for once work together, as opposed to sue each other like we've been doing the last decade," Jamie Dimon, CEO of JPMorgan Chase & Co., said last week on an earning call, according to the Journal.
And in his first comments since the breach, Target CEO Gregg Steinhafel, who 10 years ago was against the chip credit card program, said in an interview with CNBC
on Jan. 13, "I think we're ready to move." He added that the effort 10 years ago couldn't be justified without broad industry support.
Target plans to have chip credit card technology up and running in all of its stores by 2015, the Journal reports.
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