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The High Cost Of Identity Theft, Part II

In the 21st century, the retail industry doesn't stand alone. Here's one approach to avoiding impending consumer-privacy disaster.

CIOs in all industries -- not just retail -- should take a long, hard look at John Soat's recent post on the cold, hard costs of identity theft. Because, while poster-child TJX is indeed a retailer, the 21st-century retail industry is now deeply interlaced with companies in manufacturing, transportation, distribution, logistics, warehousing, solutions providers, and other partners. And a recent study from Retail Systems Alert Group called "Protecting the Enterprise's Information: Retail Security Report 2007" outlines some valuable ways CIOs can avoid being frog-marched down the data-breach trail.

The major challenges include getting boardroom support, changing corporate culture, overhauling business processes, designing new IT architectures, isolating data sets while knocking down behavior-driven silos, and making data security -- or, to use the more-relevant descriptor, consumer privacy -- the responsibility of every single employee. While that surely sounds like a set of big, hairy, and audacious goals, consider the alternative outlined by the RSAG study: "Winning retailers can clearly articulate the risks inherent in a future of noncompliance -- the expense far outweighs that of proactive investment. Noncompliance and the threats it brings can damage a retailer's brand, almost irrevocably."

The RSAG report offers some useful charts as well as in-depth commentary from three leading retailers who are well on their way to reaching PCI (Payment Card Industry) compliance, describing the lessons they've learned, the approaches that work, and pitfalls to avoid.

And while just about everyone will look at this and say, "Sure, that makes a lot of sense," the RSAG study reveals that not many are actually doing something about it: "Last year, the Payment Card Industry predicted that by the advent of 2007 more than two-thirds of Level 1 merchants (those processing more than 6 million credit/debt card transactions annually) would be fully PCI compliant. THIS SIMPLY HASN'T HAPPENED [this sentence is boldface in original document]. While our quantitative benchmark research puts the level of fully compliant retailers at only 28% (regardless of transaction level), there is new reason to believe that even those numbers are overstated. PCI compliance is currently overwhelming retailers seeking to leverage value from customer-specific data."

In the final analysis, says one of the three profiled retailers, the big objective isn't PCI or some whiz-bang technology; rather, it's all about maintaining trust through relentlessly safeguarding consumer information and privacy: "It's really all about protecting customer information. This is the thing that keeps us up at night, making sure that we're doing all we can, because for our particular model in today's marketplace, it is prerequisite to staying in business. Making sure that the customer's personal data is kept confidential is the basis for our entire reputation."

Make sense? Let us know if you think PCI compliance is a strategic solution -- or a piffling pipe dream.

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