Report: Target CFO calls for chip-enabled smartcards

Minneapolis – John J. Mulligan, CFO and executive VP of Target, is publicly calling for U.S. businesses to adopt chip-enabled smartcards. In a column published in the Congressional blog of political site The Hill, Mulligan said the attack on Target exposed the sophistication of today’s hackers and that the retailer had already been striving toward adopting chip-enabled smartcards, used in most of the rest of the world, before the holiday 2013 data breach.



“At Target, we've been working for years towards adoption of this technology,” Mulligan said in the column. “Since the breach, we are accelerating our own $100 million investment to put chip-enabled technology in place. Our goal: implement this technology in our stores and on our proprietary REDcards by early 2015, more than six months ahead of our previous plan.”



Mulligan said that by storing encrypted customer data in embedded microprocessor chips, smartcards prevent thieves who manage to steal customer account numbers from using them. He also said four-digit PIN numbers can provide further security and Target supports their use, but there is no industry consensus on whether PIN numbers should be used in conjunction with chips. He said Target has adopted smartcards in Canada, where industry estimates show total retail losses from card skimming were reduced 72% between 2008 and 2012.



Mulligan said the inability of U.S. retailers, issuers, banks and payment networks to agree on how implementation costs should be shared has been a reason change from magnetic stripe cards has been slow. He also referenced Target’s 2004 pilot of chi—enabled smartcards.



“About 10 years ago, Target piloted an early generation of the chip-enabled technology on the Target VISA REDcard, with mixed results, said Mulligan. “Notably, the cards were much more expensive to produce and required the replacement of store card-readers. Also, the technology at that time would have only been usable in our stores, making for a confusing experience for customers, overall. After three years of going it alone, we discontinued the program.



He concluded by promising Target will meet its accelerated goal for getting chip-enabled technology in place in its stores, as well as invest in protections for mobile transactions and investigate e-commerce solutions.