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4/12/2007
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Three Of Four Say They Will Stop Shopping At Stores That Suffer Data Breaches

Most of those surveyed blame a merchant when they hear about a data breach.

Ever wonder how a security breach could affect your business? If you're a merchant, it means you can probably say good-bye to the majority of your customers, according to a new survey of consumers.

A report out Thursday from Javelin Strategy & Research shows that 77% of 2,750 consumers polled said they would stop shopping at stores that suffer data breaches. The Pleasanton, Calif.-based research company found that 63% of consumers see retailers as the least secure companies when it comes to protecting consumers' data, compared with the 5% who distrust credit card companies like Visa or MasterCard.

The study also showed that 46% of consumers rated banks as the most secure in terms of protecting their account information.

Additionally, when little is known about a data breach, half of all consumers polled said they automatically consider the stores where they shop to be at fault, according to Javelin. However, 85% will reward merchants that are perceived as security leaders by giving them more of their business.

The study comes on the heels of TJX Co. admitting late last month in a Securities and Exchange Commission filing that more than 45 million credit and debit card numbers have been stolen from its IT systems. TJX is the parent company of T.J. Maxx and other retailers. There is an ongoing investigation of the data breach.

The company has been under siege, recording a fourth-quarter charge of about $5 million to cover the costs of containing and investigating the breach, as well as improving the security of its IT systems, communicating with customers, and paying legal fee.

Javelin president and founder James Van Dyke noted in the report that the Payment Card Industry data security standard is a way for companies to avoid becoming a target of data theft.

PCI standards require banks and merchants to build and maintain secure networks that include firewalls and don't use vendor-supplied defaults for system passwords and other security parameters. It also requires the encryption of cardholder data and sensitive information that travels across open public networks like the Internet. Updated antivirus software is a must, as is the tracking and monitoring of all access to network resources and cardholder data.

"Consumer are jumpy, and have served notice that they will steer profits to companies they perceive as security leaders," Van Dyke said, in a written statement. "Merchants, payment companies and technology vendors should view PCI differently, from its ability to affect relationships and purchases and not just fines or fraud losses."

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