Credit Cards to Smart Cards: How Technology May Be Shifting to Prevent Information Breaches

The Target breach in December 2013 affected 70 million credit card accounts, spurring a push for updated technology that better protects consumers’ personal information. In the wake of this event, Rockbridge examined consumer awareness and attitudes about the issue in the National Technology Readiness Survey (February 2014). The survey revealed that there was widespread awareness of the news and that a substantial share of consumers thought they or people they knew might have been affected. Consumers want retailers to address the underlying issues with better technology, and support the introduction of card technology that makes their transactions more secure. Rockbridge prepared a comprehensive whitepaper on the subject, but the following provides a synopsis of findings and implications.

Most consumers were aware of security issues at retailers. With just a few months having passed after the Target breach, 86% of consumers indicated they had heard some news concerning financial information being compromised by retailers, and 44% were “very familiar” with such news.

Retail Security BreachMany felt that might have been affected. Almost one in ten (9%) of consumers were certain they or a household member had some kind of financial information compromised over a period of a few months. More disconcerting, 28% believed there was at least a chance that they or a member of their household was affected.

Consumers want retailers to fix the problem. Among the courses of action consumers would expect from a retailer in the event that their information was compromised, the two most popular potential remedies are adopting new technologies that make it harder for information to be stolen in the future (70%) and paying for any losses that occur (68%). Many consumers would also consider an apology (53%), free credit monitoring (53%), and help with restoring credit (51%) and changing accounts (48%). Even though it is too late to undo a breach that already happened, taking steps to prevent another in the future seems an ideal course of action for a firm. Following its own problems last year, Target announced the acceleration of their new chip-and-PIN program for smart cards. Target executives are planning for the cards to be introduced in early 2015, six months ahead of schedule. Europe has already been using similar chip-and-PIN credit cards for years, which has led to decreased data theft.

Consumers support better technology (especially if somebody else pays for it). The survey asked consumers to weigh in on the idea of introducing more secure smart card technology with embedded chips to prevent fraud. Nearly two-thirds (65%) think this is a good idea in principle. When the idea is premised with the possibility that banks or retailers may have to pay the costs of new infrastructure, a majority of consumers (56%) still thinks smart cards are a good idea. However, the level of support drops to a minority (30%) if consumers must bear the cost of security improvements themselves.

Today, there is a renewed push for more secure technology. Banks are beginning to issue chip-and-PIN cards, and hope to complete the transition by the end of 2015. Retailers will then be liable if they do not have the appropriate card readers, which could provide an incentive for them to front the costs of updated credit card reader infrastructure.

About this Study:  the 2014 National Technology Readiness Survey is based on an online survey of 1230 U.S. adults sampled at random from a consumer research panel. The survey was conducted in February 2014, and results are weighted to match Census Bureau data. The margin of error for the study is +/-3 percentage points. The study is co-sponsored by Rockbridge Associates, Inc. and the Center for Excellence in Service at the Robert H. Smith School of Business, University of Maryland, College Park.

Written by: Charles Colby, Chief Methodologist