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MasterCard reported on Friday a major security breach through one of their third-party processors, Atlanta based CardSystems Solutions. MasterCard said 40 million credit card numbers as well as the 3-digit security code located on the back of credit and debit cards were compromised due to violations of MasterCard rules.
In a New York Times article this morning, John Perry, CEO of CardSystems Solutions reported that approximately 200,000 numbers were stolen out of the 40 million because they claimed they were doing research. The problem they run into is that they were holding onto the numbers and that's against the rules on MasterCard and Visa's terms of service for their processors.
 "We should not have been doing that," Mr. Perry said. "That, however, has been remediated." As for the sensitive data, he added, "We no longer store it on files."
CardSystems Solutions say they no longer store the data on files. Where exactly do they store it then? No report has quoted Perry as saying they will completely get rid of the information. The fact that they don't creates additional risk for all cardholders. DVDs can hold quite a few credit card numbers. In all honesty, no one has any reason to stop the process except for retailers.
Credit cards remain an integral part of the retail business and an essential part of ecommerce. The problem is MasterCard, Visa and others have no real reason to stop the process. The only ones who really pay for the fraudulent activity are the retailers. On average, credit card companies make a fee of 2% per transaction.
You pay 899 for a Dell computer ordered online. MasterCard will get 2% of that, roughly 18 Then 3 months later, the owner of the card calls in and said they never ordered the computer. The appropriate investigation and footwork are done by the actual card owner I might add, and Dell coughs the money back up. They credit the money back your credit card. Well, all this process takes 6 months to a year for everything. MasterCard will make 25 a transaction.
When one considers 200,000 card numbers were actually stolen, at 25 a transaction, that's a cool 5 million they make in addition to the 2% at just one transaction per card. Maybe much of this product was bought from small, startup online businesses. They've got to eat these transactions because in most cases these errors don't show up for days or months.
Now let's say your Wachovia MasterCard has an extra 2000 in charges on it to Joe Bob's Online AutoParts and Smut which shows you've bought 3 fuel injectors and "The Complete Works of Marilyn Chambers" on DVD. They were a small business. So they have to eat the 2000 and all the said fees involved but you don't notice this right away and Wachovia sends you the standard letter informing you your rates are now 29% instead of the sweet 0.0% rate you had before the summer was out. Is MasterCard going to fix that too? Maybe you spent a little too much on vacation and this extra money shows up too? The banks are supposed to fix it but they certainly don't do it promptly. The consumer is crushed once again.
 These may sound like extreme situations but they're not really. The big credit card companies have said time and again they don't want government intervention but they don't seem to want to fix the problem either.
"Hardly a week goes by without startling new examples of breaches of sensitive personal data, reminding us how important it is to pass a comprehensive identity theft prevention bill in Congress quickly," said Sen. Charles Schumer, D-N.Y., in an A.P. story from Friday.
After recent problems Citicorp and various other banks and the MasterCard issue, one can only hope Congress will start to seriously investigate the banking industry and the credit card companies because it seems they lack the ability to do it themselves. The odd thing about all this is MasterCard and Visa, financially, won't lose anything and their monopoly hold on the credit card industry will continue unabated.
About the Author:
John is a recent PR grad with a big interest in international security |
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