Guest Column
By John R.D. Celock
(Dec. 2014) There is no place like New York City during the holidays. Lights glistening, snow falling, people shopping. From Fifth Avenue to the West Village to 34th Street to the Internet, New Yorkers will be out this holiday season, and if predictions hold true, shopping in record numbers.
Retail analysts have projected $600 billion in holiday shopping this year. The marketers over at comScore report that nearly $27 billion has already been spent online this season. With tens of billions already spent, and hundreds of billions more expected, protection of consumer data and credit card information has never been more important.
But with every swipe and signature at the credit card terminal and in each online transaction, consumer personal and financial information is often put at risk by credit cards using antiquated technology.
Relying on technology introduced more than 40 years ago, today’s credit cards are issued with a magnetic stripe that only requires easily forged and less secure signature verification. Banks and credit card companies are beginning to offer new chip-enabled cards that replace the magnetic stripe, but the signature verification will remain – and that is a problem.
In fact, without the two-step authentication process, like requiring a PIN in lieu of a signature, consumer protection is hardly stronger.
For the banks and credit card companies distributing these cards, it’s more about transaction fee profits than consumer protection. Rather than transitioning to a new technology proven to protect consumers around the world, banks are deferring responsibility at our expense. The New York Times reported that since the introduction of chip and PIN cards in Britain in 2004, “British counterfeit and stolen card fraud has fallen roughly 60 percent.”
Recent cyber-attacks reinforce the need for new technology, and New Yorkers have not been immune to these breaches. A July 2014 report, issued by the office of New York State Attorney General (NYAG) Eric Schneiderman, found that nearly 5,000 data security breaches between 2006 and 2013 exposed 22.8 million “personal records of New Yorkers.” More than 40 percent of these breaches were caused by hackers, further emphasizing the importance of the additional protection a two-step authentication system like chip and PIN technology provides.
More worrisome, these attacks continually increase in frequency. According to the same Attorney General report, the “number of data security breaches reported annually to the NYAG” has “more than tripled,” with 7.3 million records exposed in 2013 alone, costing “organizations doing business in New York State” nearly $1.4 billion.
Two months ago, President Obama issued an executive order requiring government credit cards to be issued with chip and PIN technology, recognizing the safety and security offered by the technology. A replacement program will begin January 1, 2015, and more than one million new government cards will be issued by the end of next year. Additionally, relevant Federal agencies will replace point of sale terminals to support chip and PIN technology.
While the President’s order is an essential first step to equipping some Americans with more advanced payment methods, the private sector must follow suit to ensure all consumers can enjoy the protection of 21st century security measures. Only then will we have the level of security we deserve, whether we’re shopping across town or on the web.
John R.D. Celock is an award-winning journalist and Executive Director of 21st Century Consumers.