I'm sure you've heard about the data breach at Target. Unfortunately, this data breach is just the tip of the iceberg according to experts.
The U.S. is an easy target to this type of breach due to it's outdated credit card technology. We are the only country that still uses magnetic strips which makes us very vulnerable to attack.
Most other countries are now using digital chips which generates a different code each time the card is used. That technology makes it very difficult for would be thieves to hack. Even though hackers can still steal the card holders information and use it to make purchases, they won't be able to use the information to create new cards, which is fairly easy to do with magnetic strip style cards.
Not surprisingly, the major obstacle to using the digital credit card format is money. And even though the total dollar amount of credit and debit card fraud is over 11 billion, it is still only a fraction of debit and credit card transactions, just 5.2 ¢ per every $100 worth of transactions.
Another, not surprising, issue is that everyone wants someone else to be responsible for the cost; retailers want the card companies to create more secure cards, card companies want stores to beef up their security and banks just want the status quo.
Despite all of this, credit card companies are planning to replace all outdated style cards with new, more secure, digital chip cards sometime in 2015.
A good start, but many still want more. Retailers would like to see the credit card companies get rid of the outdated, and ineffective, use of signatures and instead require a Personal Identification Number (PIN) for all transactions, not just debit card transactions.
Credit card companies want retailers to improve security on their end too; they want to see more robust fire walls and encryption technology that makes any card information that is hacked useless to thieves.
Of course, all of this is expensive to install and expensive to maintain. And until it becomes more cost effective to prevent the breaches, it probably won't happen anytime in the near future.
Even though consumers are usually not responsible for any fraudulent activity, it doesn't mean they don't pay the cost. These breaches cost money and at the end of the day the ones who will pay will be consumers.