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Breaches exposed 1 in 7 US debit cards in 2013

Breaches exposed 1 in 7 US debit cards in 2013

The Target breach could speed up the switch to chip-based EMV cards

Data breaches at retailers and financial services companies exposed 14 percent of all U.S. debit cards in 2013, according to a nationwide survey by a major ATM network operator.

The figure is three times that of 2012 and comes as consumers are using debit cards to make more purchases than ever before.

The survey, conducted by Discover Financial Services' Pulse ATM network, found that the majority of affected cards were exposed in a single event: the Target data breach that compromised some 70 million customer records in late 2013.

Around 10 percent of all U.S. debit cards were affected in the Target incident, and the majority of financial institutions affected were pushed to reissue cards.

The Target breach will likely encourage a faster switch to so-called "EMV" cards, which contain a microchip rather than a magnetic strip, and require a PIN for authorization rather than a signature.

While EMV is already standard in Europe, U.S. banks and credit unions dragged their feet on the technology, but the Target breach has pushed the industry to a tipping point, said Pulse. Two-thirds of financial institutions plan to begin issuing EMV cards in 2015.

They are also being pushed by an Oct. 1, 2015, change in the liability rules concerning card purchases. After that date, card issuers and retailers that have invested in EMV technology will be protected from liability for losses.

The change gives banks and retailers the incentive to use EMV because the cost of the new technology is offset against the amount of fraud it will deter.

In the case of PIN-based transactions and traditional debit cards with magnetic strips, the difference is an order of magnitude. The survey found banks carried a fraud loss of 2.2 cents per signature transaction in 2013, compared with just 0.3 cents on PIN-based transactions.

The survey found consumers are using their debit cards more -- the average card was used 20 times a month in 2013, up by one transaction from 2012. The average debit card was used for US$8,875 of purchases in 2013, up $122 from the previous year.

The Pulse survey covered large banks, credit unions and community banks that together account for 45 percent of all debit card transactions in the U.S.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

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