Could Chip Credit Cards Be Active Sooner Due To Target Cyber Attack

North American credit card holders are still reeling from the massive data breach that compromised Target retail locations over the holidays.  The investigation into the breach continues, with other retailers also hinting their points of sale terminals were similarly hacked.

One of the US financial institutions leading the data breach investigation is the Consumer Financial Protection Bureau.  The CFPB confirmed that the cyber attack was launched by Eastern European hackers, who penetrated Target’s network due to firewalls that fail to meet the standards of fellow retailers, banks, and other financial institutions.

In response to the attack, Citibank and fellow bankers intend to replace debit and credit cards of victims.  But the CFPB is receiving complaints from Americans, as well as financial security experts that replacing compromised cards will not prevent future data breaches.

Despite being one of the strongest developed nations in the world, the US is far behind other countries in terms of credit card security.  This lapse has allowed credit card fraud rates to double in the past 10 years, while fraud in Canada and Europe is on the decline.  Banks are beginning to roll out chip and PIN credit cards, but converting the entire country to the new cards will take years, and cost an estimated $8 billion.

The Target cyber attack reportedly cost banks and credit unions as much as $30 million to date, though credit card accountholders have not been informed if those costs will be passed on through higher fees or surcharges in the future.  In the meantime, the CFPB is fielding ongoing complaints from accountholders about the lack of security.

Interestingly, Target ran a trial chip credit card program in the early 2000s.  Supporters of chip credit card technology were optimistic that other retailers would follow suit, leading to stronger credit card security across the country.

But Target President Gregg Steinhafel chose to cancel the program after three years.  The company reportedly spent $40 million investing in chip technology, and Steinhafel at the time, refused to commit more money to the program.  However, in the aftermath of the cyber attack, Steinhafel is encouraging all US retailers, banks, and credit unions to move forward with chip credit cards immediately.

The Target cyber attack investigation will continue.