There’s No Loyalty Without Data Security

As technology becomes more sophisticated, so, too, must retailers’ abilities to use it to grow their brands and deepen their relationships with customers. When managed and safeguarded effectively, consumer data can be a powerful tool in creating custom shopping experiences and growing customer loyalty. When data security is breached, on the other hand, it can undermine loyalty efforts and negatively impact a brand’s relationship with consumers — just ask Home Depot.

How retail businesses, large and small, will respond to growing customer concerns around data security is a question very much in debate — as some of the top retail security stories from the week mete out.

EMV Goes to Washington (And Small Businesses Make Their Case for “Common Sense”)

Those who thought that Oct. 1 would mark a decline in “EMV fever” were disappointed as data security took center stage this week in Washington, D.C. The largest and most dominating story in retail security news this week, without question, was the ongoing hearings being held by the U.S. House Small Business Committee.

This series of hearings that began on Oct. 21 has retail industry experts, lobbying groups, financial and banking institutions, and credit card companies taking the stand to deliver testimony around the recent rollout of new EMV protocols and the impact they have had on retailers large and small.

Stark contrasts arose between the testimonies of different factions, with disparities between the cost of the EMV rollout and the long-term security benefits it promises remaining as yet unseen. Small businesses argued that the new procedures and mandates in place to be in compliance had overwhelmingly benefited large retailers, leaving independent operators carrying a heavy financial and operational burden.

The matter of how best to guarantee consumer data safety was also heavily called into question. Several retail industry professionals testified that PIN technology, which larger retailers and card networks are lobbying for at the potential expense of their smaller independent retail counterparts, is an ineffective security measure. EPC spokesperson Sam Fabens echoed those sentiments stating that a PIN would have done nothing to prevent the much publicized security breaches at Target and Home Depot for example.

Additionally, multiple witnesses offered testimony around the high cost of the changeover for small retail businesses, including the cost of equipment, training and payment system downtime.

Consumer Faith in Data Security is Wavering

In a recent report released by Capgemini Consulting, “Privacy Please: Why Retailers Need to Rethink Personalization,” 93 percent of roughly 220,000 consumers surveyed expressed serious doubt over retailers’ abilities to protect consumer data in the event of a cyber attack.

Consumers’ hyper-attention to the issue of privacy and personal data protection may be shining too bright of a spotlight on retailers as they rush to use customer data to create personalized online experiences for shoppers. The resulting negative impact of even the smallest breach in security may outweigh the benefits to brands at the moment.

“The deluge of hacks on retailers’ data and misdirected personalization initiatives are having a dramatic effect on consumers’ trust,” Kees Jacobs, global consumer products and retail consumer engagement lead at Capgemini Group, told Retail Times. “The advent of digital shopping and big data analytics promised a golden age for retailers, but many of the world’s largest brands are finding the reality of safeguarding and properly utilizing this precious information very challenging.”

The race is on for retailers to outpace hackers in mining and protecting customer data so that they can use it to improve the online and in-store shopping experience while maintaining customer confidence.

Apple’s $1M Employee Problem

It seems even employee theft is going high-tech these days. On Friday (Oct. 16) an Apple employee in NY was arraigned for allegedly using tampered credit cards to purchase Apple gift cards and sell them at a fraction of face value.

Originally hired in December 2013, Ruben Profit, the alleged suspect and a Queens resident, recoded Visa and American Express prepaid credit and debit cards to then purchase the gift cards at no cost to him. He would then sell cards worth approximately $2,000 each for roughly $200. The total value of illicitly purchased cards is estimated to be $997,000.

Employee theft, a long-time concern for brick-and-mortar retailers, may contribute to the overall issue deteriorating consumer confidence if brands like Apple can’t effectively police themselves.

Will Retailers be the Banks of the Future?

For German startup and financial app developer Number26, the bank of the future looks a lot like your corner grocery, drug store or clothing outlet. Oh no, wait, it is all of those! In its latest approach to disrupt the banking industry, Number26 has partnered with Barzahlen to turn retail locations shops into banking hubs.

Shoppers in Germany will soon be able to use any MasterCard associated with their Number26 account, to not only withdraw funds (as they can do now), but also deposit funds directly into their account at nearly 3,000+ drugstores, grocery stores and other retail chains dotting the German landscape.

To use the service, customers must use their phone to access the Cash26 feature while at a checkout area with their phone. After typing in the amount of cash to be deposited (or withdrawn) and scanning a barcode, users enter a PIN and hand over the deposit. Cash deposits appear immediately in their account.

The security of retailers’ payments data will undoubtedly play a huge role in whether consumers have the confidence to trust them with their banking. If the concept does take off, we may very well see more retailers launching competing services in the months ahead.

Does this portend a trend? Who knows? Stranger things have happened – at least one bank (Cap One) has experimented with turning its branches into coffee shops. But turning retailers into bank branches may be a whole lot harder for customers to embrace than buying coffee at the place they trust to keep their money – and their data – safe.