Payments by the numbers

Following are research highlights from recently released payments industry reports.

Data breach aftermath detailed

A study released Jan. 25, 2012, by Experian Data Breach Resolution, a division of Experian Information Solutions Inc., and the Ponemon Institute LLC offers lessons in best practices for companies that have experienced data breaches. The study, titled Aftermath of a Data Breach, surveyed 500 information technology (IT) professionals at companies victimized by fraudsters. The study found:

• 60 percent of respondents said the customer data lost or stolen was not encrypted
• 70 percent of participants reported email breaches, 45 percent said credit card or bank payment information was compromised, and 33 percent said social security numbers were hacked
• 34 percent of the companies said the cause of breaches turned out to be employee negligence, 19 percent said the beach occurred when data was outsourced to third parties, 15 percent said the breach was insider fraud related

Only half the respondents thought their companies adequately protected consumer information prior to the breach. Fifty-six percent of the respondents said hiring lawyers after breaches was critical to lessening the impact of the hacks on the companies.

Only 50 percent said the highest priority following the breach was determining how badly victims were damaged. Many of those surveyed (64 percent) said companies did not offer credit monitoring services to their customers following breaches and even more (73 percent) said companies did not offer customers any identity protection products or services.

Following the breach, 61 percent of the companies increased their security budget and 28 percent hired additional IT security staff.

The survey participants offered suggestions in four categories they believe will reduce the opportunity for data breaches in the future. Those categories are:

• Education: Train employees and contractors, and enforce security policies need to be prioritized
• Support: Organizations need to spend more money to enhance online security
• Hire: The impact of data breaches on companies can be reduced by hiring legal counsel, assessing the damage to the victims and carrying out complete forensic exams of the breached systems
• Learn: Limit the amount of personal data collected and stored, and decrease the number of outside people with access to the system

The report can be found at www.Experian.com/ponemonAftermathStudy .

Effects of Durbin remain uncertain

New debit card regulations have created a confusing environment where 70 percent of consumers believe the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 benefits banks and 30 percent think the new Durbin rules benefit merchants, Javelin Strategy & Research said in its 2011 Consumer Payments Behavior Report released Jan. 24, 2012.

"Consumers love their debit cards, but the majority would choose different payment options if they were charged a fee for using debit," said Beth Robinson, Javelin Director of Payments Research. "Our data shows that if [financial institutions] implemented debit card fees, 32 percent of consumers would choose cash as their payment option, 25 percent would pay with a credit card and 26 percent would switch to another bank that didn't charge for debit cards."

Javelin President James Van Dyke added, "The full effects of Durbin remain to be seen. The recession led many people to turn away from credit cards in favor of debit and prepaid cards as ways to control debt, but this trend seems to be slowing as the economy stabilizes."

A copy of the complete report may be purchased here: www.javelinstrategy.com/brochure/236 .

E-commerce channel growing in importance

Retailers are turning more and more to e-commerce platforms as the primary way to interact with customers online, according to a RSR Research LLC study released Jan., 26, 2012. The company surveyed 94 retailers and discovered many are investing in content management and product-level social media integration rather than spending on POS terminals and add-ons.

Steve Rowen, study co-author and RSR Research Managing Partner, said, "You really can't overemphasize the importance of having an exciting online shopping experience that understands the customer's lifestyle – and how the brand and products can engage and suit that lifestyle. This report shows how the best performers understand that, how they are thinking and acting differently, and as a result, offers up some valuable lessons for all retailers to consider."

For a copy of the report go to www.retailsystemsresearch.com/_document/summary/1390 .

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