Data Breaches Cause Problems for Banks and Consumers

by Mercator Advisory Group 0

“It’s clear the fraud problem is not going away, and major breaches are not slowing up like we were sort of hoping,” says, Mike Urban, director of financial crimes solutions at Fiserv, referring to a lull in major data breaches that appeared to be setting in during portions of 2010 and 2011.”

Consumers have embraced electronic payments, and even though data breaches seem to be a persistent problem, consumers are unlikely to start bringing their checkbooks to the mall again. Many consumers have already been reissued a credit card several times over the life of an account. Unfortunately the experience is becoming routine. And while it may shake consumers’ confidence in the ability to prevent data breaches, it may also increase their confidence that their issuer will fulfill fraud protection guarantees. In most cases, breaches of credit card data tend to cause more problems for the issuer than the consumer.

Financial institutions “generally take the brunt” of card-fraud losses”, Urban notes. “They will make their customers whole, but the very broad publicity about these breaches hurts reputations,” he says.

Recent data breaches may also impact future electronic payments innovation. While consumers are generally comfortable with the protection their payment cards offer, they may be skeptical of new technologies if they don’t fully understand how it’s security measures operate.

Read more at: http://www.americanbanker.com/issues…nopagination=1