MINNEAPOLIS – The Star Tribune reports that several years before Target incurred its massive loss of credit card data last month, it was well aware that a theft risk existed and it had unsuccessfully pursued “innovative solutions” to counter such threats.
The news comes less than a month after a data breach was revealed that compromised the data from millions of customer credit cards used at Target stores over the recent holiday period.
In the early 2000s, Target had installed “smart card” technology at all of its U.S. stores, an effort to thwart the very theft that the retailer suffered. The company said it abandoned the three-year pilot because few other retailers adopted the technology, which put Target at a disadvantage because the emerging technology slowed checkout times.
“We went out on our own and did something innovative and ultimately the industry didn’t keep pace with Target,” said CFO John Mulligan. “So there wasn’t a lot of benefit outside Target for our guests. And the in-store experience was adversely impacted because it was a slower checkout process.”
Mulligan said for smart cards to work, everyone must use the technology. “The data breach hasn’t changed our viewpoint on this at all. We have been advocates for moving to such a system for quite some time.”
Target also wanted to experiment with the more secure chip-based smart card system, which makes cards unusable to anyone but the customer. The company had installed readers at its stores but ultimately cancelled the project because competitors stuck to the old system and the technology slowed checkout times.
But as Target’s Redcard program expanded over the past decade, the company knew customer data could be at risk, writes the newspaper.
“If we experience a significant data security breach or fail to detect and appropriately respond to a significant data security breach, our reputation could suffer and our guests could lose confidence in our ability to protect their personal information, which could cause them to discontinue usage of Redcards,” the company warned in its most recent annual report.
In the meantime, Target has been working on developing alternatives to magnetic stripe cards. It recently joined the Merchant Customer Exchange (MCE) that is developing a smartphone-based mobile wallet. The group includes Best Buy, Walmart, CVS and Sears.