Today is the world Data Privacy Day.  A day on which the United States, Canada and the European Union all highlight the importance of data privacy.  I suggest, however, that today is not a day to be celebrated by the franchise community.

In the last few months, high stakes data privacy disasters have struck at major retailers like Target, Neiman Marcus and, potentially, Michaels.  These widespread, serious breaches have cost the retailers, the banking community, and the credit-issuing community untold millions, if not billions, of dollars.  And, while consumers are shielded from the direct costs of such fraud, fraudulent use of one’s card creates at a minimum, serious hassles.  This author, for example, was impacted by a recent data security breach.  I had to cancel the credit card at issue–which was my primary card, obtain a new one, and then reset all of the automatic payments being made directly to that card.  The hassle of it all was annoying to say the least.

The odd thing about this situation, at least to me, is that there is an easy, if expensive, solution. A solution that, according to NPR, everyone in the world but the United States and maybe a couple of countries in Africa already uses:  modern, chip equipped and enabled credit cards.  Ironically, Target was at the forefront of so-called “smart chip credit card” technology about a decade ago.  It abandoned the effort, which admittedly entails significant startup costs for new cards and card readers, when the rest of the retailing world did not follow suit.  If there is a lesson from the last month, it is that the magnetic strips used in US-issued credit cards are very vulnerable to hacking.  At the same time, because the rest of the world has moved on to better, more secure cards, the US credit card market has become the preferred venue for hackers.  An enlightening, if disturbing, piece on this issue, can be heard on the NPR Planet Money podcast: Inside the Credit Card Black Market.

No matter who ultimately bears the direct, monetary cost of data breaches, the ultimate cost (and aggravation) is shared by everyone.  I strongly recommend that the franchise community join the effort to bring smart, safe and secure chip credit card technology to the United States.  Any incremental, upfront costs will almost certainly be outweighed by the long-term benefits to banks, retailers and consumers.