In today’s cybercrime era, a cliché has evolved: there are two types of companies, those that have been hacked (or don’t know it yet) and those that will be hacked. According to Verizon’s 2015 Data Breach Investigations Report, across all industries worldwide in 2014, there were 79,790 security incidents, with 2,122 breaches involving a confirmed data loss, and 700 million compromised records.
The theft of payment cards is a top target in data breaches. Recent data breaches involving theft of payment card records from merchants include Home Depot (2014, 56 million payment cards) and Target (2013, 40 million payment cards), among numerous other companies. Fueled by major data breaches, payment card fraud is escalating. In 2014, the total amount of direct payment card losses to criminals incurred by issuers, merchants, and acquirers was estimated to be $16.31 billion worldwide, an increase of 19 percent over 2013, according to the The Nilson Report, a payments industry newsletter. Meanwhile, the payment card landscape is changing rapidly, with new technologies designed to provide faster and safer transactions.
Sal Scanio’s recent article Payment Card Fraud, Data Breaches and Emerging Payment Technologies, XXI Fidelity L.J. 59 (2015) provides an overview of the evolving payment card system and nature of payment card fraud. The article discusses current and developing loss allocation under federal law and card network rules, and how, in the event of payment card theft as a result of a data breach, loss allocation is being shifted in several developing areas, including Payment Card Industry (PCI) Data Security Standards, consumer class action litigation, claims by issuing banks against merchants, and card network fines and assessments. The article also examines how emerging payment technologies in the form of EMV chip card technology, Near Field Communication, tokenization, and encryption are being implemented in varying degrees, and discusses their expected impact on payment card fraud.
For further information, contact Salvatore Scanio at sscanio@ludwigrobinson.com or 202-289-7605.