US banks have re-issued 17.2 million cards following Target data breach

The Target data breach has so far cost US banks over $172 million in re-issued plastic cards, according to figures from the Consumer Bankers' Association.

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US banks have re-issued 17.2 million cards following Target data breach

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This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

The cost to replace each card comes to an average of $10.00, with a total of 17.2 million cards substituted so far by CBA members. According to data collected from CBA member banks, the average cost to replace a credit or debit card includes: the card itself, informing consumers of a card reissuement, shipping and activating the card, and often supplemental communication via call centres and the internet.

Richard Hunt, president and CEO of the CBA, says: "When retailers say this data breach come at no cost or liability to consumers they are right - because its banks and card issuers who are on the hook often at little or no cost to retailers like Target. Retailers should recognise the costs of data breaches snowball with time and they should take responsibility when they are at fault."

He says the numbers published by CBA do not take into account any fraudulent activity which may have occurred or may occur in the future. Fraudulent activity would push the cost of the Target data breach to the industry much higher, as consumers would not be held liable.

A recent analysis by Jefferies suggested that Target could be on the receiving end of a $1 billion breach bill from the payment cards industry, working on the assumption that 4.8 million to 7.2 million of the 40 million cards affected by the breach could see fraudulent activity.

CBA has joined fellow financial services trade associations in urging policymakers to enforce tougher standards, including the establishment of a national data security breach and notification standard, a shift in liability to retailers, and better sharing of threat information.

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Comments: (8)

A Finextra member 

With that budget and the right approach, one can populate the entire US retail with contactless EMV readers. Retailers are aware of the problem now and by striking that hot iron, it could be possible to bring EMV into the US by the end of this year.

A Finextra member 

It'd take a bit more cash than that. There's also the cost of issuing EMV cards unless you believe that the USA can go straight to mobile NFC.

A Finextra member 

I didn't count the card re-issue costs: once the retail infrastructure is in place, there are several ways to get card cost either greatly reduced (indeed using mobile phones - not necessarily with NFC - as part of the equation) or "absorbed" via an alternative business model (e.g. shared SE).

A Finextra member 

While EMV certainly helps greatly in the fight against fake cards, it should be noted that EMV would not have prevented the recent Target breach. The card details were stolen while travelling "in the clear" through Windows-based POS checkout counters and store servers by some nasty malware called "BlackPOS". It did not matter at all whether that card data originated from magstripe cards or chip cards.

End-to-end encryption between the card reader and the authorization system would have helped, but this may require some changes in the current POS processes. And of course, it would greatly help if Windows and/or Linux platforms did not have those thousands of vulnerabilites. Unfortunately, getting rid of those is a dream that probably will never come true ... 

A Finextra member 

Gerhard, the simplest way to solve the issue of card data is to (a) use EMV in physical retail and (b) use token-based payments online. That way any card data which can be intercepted in retail is useless to the attacker.

A Finextra member 

@Alexander: Fully agreed, doing both EMV and tokenized electronic payments with end-to-end encryption would solve the problem. I'm all for EMV - but some people seem to believe that issuing chip cards alone would help, and unfortunately this is not the case.

Nick Collin

Nick Collin Director at Collin Consulting Ltd

@Gerhard - the point of EMV chip is not to stop the data being stolen in the first place but to render the stolen data useless to the fraudster.  It's easy to use stolen data to produce a countefeit mag stripe card but very difficult to use that data to produce a chip card.  And every chip transaction generates a unique cryptogram so it's immediately obvious whether the card is genuine or fake as soon as it's used at an EMV terminal.  It's in that sense that the Target data breach would not have been a major problem if the US had completed its migration to EMV chip.

A Finextra member 

@Nick: Fully agreed, it is very hard to produce fake chip cards, so with EMV fully implemented worldwide the problem would be much smaller. But fraudsters are likely to move over to card-not-present situations (online shopping, buying via call centers etc.) where card data that has previously been transmitted "in the clear" via a POS network can still lead to significant fraud.

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