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After retailer data thefts, companies look to boost security

10/02/2014 by


McAllen Police Chief Victor Rodriguez displays dozens of fraudulent credit cards that were confiscated by McAllen police after arresting a man and a woman on fraud charges tied to the December Target credit card breach, Monday Jan. 20, 2014 at the McAllen Police Department in McAllen, Texas.

VeriFone Systems, EMC’s RSA and Ingenico are poised for a gain in sales as U.S. retailers turn to makers of payment terminals and security software for help shoring up their anti-hacking defenses.

Ever since Target disclosed in December that hackers stole financial data from 40 million customer accounts, companies as disparate as casinos, grocers and luxury-goods stores have requested help to make customer data more secure, say payment technology executives. Interest surged anew when Neiman Marcus said it too had been hit and Michaels Stores also reported its customer data may have been compromised. Concerns over consumer data took center stage again this week as Target and Neiman Marcus executives began testifying before Congress.

VeriFone’s revenue from point-of-sale hardware bought by big retailers in North America will surge 15 percent this year starting in April, estimates Wayne Johnson, an analyst at Raymond James & Associates. By the end of 2013, as many as 50 percent of U.S. retailers will have installed terminals capable of handling more secure chip-based cards, Gil Luria, a Wedbush Securities analyst, said in a note.

“This will get retailers to spend more on security, which is good for VeriFone and Ingenico,” Luria said in an interview. “These hacks will encourage retailers to buy more new chip- enabled terminals.”

For retailers, options include beefing up efforts to stave off phishing attacks, accelerating a move to credit cards with chips embedded, rather than magnetic strips, and encrypting data as it moves from checkout terminals to remote servers.

Such purchases would indicate an increase in spending by U.S. chains, which for years have invested far less than other industries on data security, making them more vulnerable to attacks than retailers in Europe. The U.S. accounts for almost half of $12.42 billion in annual global fraud losses on payment cards, according to the Nilson Report, an industry newsletter in Carpinteria, Calif.

Constrained by thin margins, U.S. retailers traditionally have focused technology investments on building customer- friendly websites, among other priorities, said Greg Buzek, president of IHL Group, a retail-technology consulting firm based in Franklin, Tenn.

They also were aware that the impact of data breaches typically faded fast, including one at TJX Cos. that affected more than 100 million people last decade.

U.S. chains can shrug off data breaches no longer. Last month, the FBI warned some retailers that attacks are on the rise, said Jenny Shearer, a spokeswoman.

There is evidence that the attacks are spooking some consumers. While many retailers struggled to lure shoppers this holiday season, Target said sales at its U.S. unit were “meaningfully weaker” after disclosing the data theft.

John Mulligan, chief financial officer of the chain, apologized to U.S. lawmakers at the hearing Tuesday for the data breach and said security will be improved as Target speeds up implementation of chip-enabled card technology.

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