As the TJX data scandal gets worse with each passing day, many in the industry are saying that no retail chain will be so carefree about security again, given what the $16 billion discount clothing chain is enduring.
There are two huge problems with that line of thought. First, the retail tech version of "Remember the Alamo" should be "Remember CardSystems."
CardSystems, if youll recall, had been the poster child for bad data procedures, including failure to encrypt and retaining data that should not have been retained. It was subjected to a theft of about 40 million accounts and earned the title of "largest known data security breach." (TJX is proudly on its way to stealing that title from CardSystems.)
What happened to CardSystems? Not much. It was sold and the execs moved on. No massive fines. No executive was hung out to dry. Just buyout checks, albeit discounted buyout checks.
The industry watched CardSystems closely, as it endured pummeling blows of, well, bad publicity.
The second problem with the theory that other retailers will learn from the TJX debacle is that TJX is, quite frankly, not being punished at all. This, despite strong indications that it engaged in the two identical PCI violations that befell CardSystems: apparent insufficient (or full absence of) encryption and retaining certain data that it was not supposed to retain.
As weve noted before, the only constituencies that TJX cares about are its customers and Wall Street. Although Wall Street was recently a bit miffed at TJXs statement that it would have to set aside a lot of money to pay for the data breach fallout (class-action lawsuits, congressional hearings and state attorney general probes can be so gosh-darn inconvenient), Wall Streets big concern is customer happiness.
Customers, as of this writing, seem to be slamming TJX with a constant barrage of sleepy yawns. With potentially millions of them exposed to identity theft and bogus credit/debit card transactions, why are they so apathetic? There are some things money cant buy. For consumer apathy, though, theres MasterCard. One more: What did the Visa exec say to the TJX exec whose data breach resulted in no reduced sales? "Enjoy lifes opportunities."
I submit that the much-beloved Visa and MasterCard (and American Express and others, for that matter) zero liability programs have delivered—as a wickedly unintended consequence—a much weaker retail security situation. Why? Because by taking the sting away from the consumer fraud victims, they have also removed any significant incentive for the retailers to pay the big bucks to handle their security properly.
The only reason retailers will properly invest in security is if they realistically fear plummeting sales if they are unlucky enough to be subject to a widely-reported breach. There is a bill supported by various banking organizations that wants to force retailers to pay for all cleanup costs associated with any data breach that they were responsible for.
Yes, the motives of those pushing such legislation are hardly altruistic, but those efforts make sense if only to give retailers convincing reasons to take security seriously.
Retail Center Editor Evan Schuman has tracked high-tech issues since 1987, has been opinionated long before that and doesnt plan to stop any time soon. He can be reached at Evan_Schuman@ziffdavis.com.
To read earlier retail technology opinion columns from Evan Schuman, please click here.