“It's that time of year,” writes James Wester, analyst, IDC, “when analysts look-back at the preceding 12 months and attempt to provide some context for the big stories that occurred.”
The usual format is a "top 10" list, wherein the happenings during the year are rated and ranked.
While 2014 was certainly eventful enough to populate such a list (e.g. Apple Pay, eBay/PayPal), according to Wester, there was one topic that dwarfed all others to the point where it became the context for almost everything else: security.
“The year 2014 began with the story of a security breach,” writes Wester, via his official IDC Blog.
“Target found itself the victim of a particularly large hack, one that included approximately 40 million consumer accounts, and shone a bright, harsh light on the vulnerabilities of the U.S. payment system.”
That hack was followed by breaches at Michael's, Neiman Marcus, Home Depot and dozens of others, varying in size, from hundreds of thousands to millions of records.
“But in aggregate,” Wester explains, “literally hundreds of millions of consumers were affected.
“Security has never been a particularly sexy attribute for payments; it's not something that consumers have ever found compelling.
“With fraud measured in basis points (i.e. pennies per thousand dollars spent) and near-zero liability for credit card fraud, consumers either assumed their payments were safe or that they would be covered in the rare case of fraud.
“That high level of consumer confidence played no small part in the rapid rise of plastic as a form of payment.”
But lack of costs in dollars hasn't meant that the infrequent credit card theft hasn't had a cost in inconvenicence, he adds.
“Addressing the problems caused by a stolen account number is a hassle to everyone involved, and the convenience of paying with plastic has been another reason for the rapid rise of paying with plastic,” he adds.
“Swiping a card isn't just easier for consumers at the point of sale, it's also easier in terms of funding and access.
“When security concerns negate that convenience, and at a scale that covers hundreds of millions of accounts, the whole system is thrown out of whack and even consumers will begin to pay attention.”
According to Wester, the irony of the timing of all these breaches is that they may have come at a good time (if there is such a thing as a good time for a breach).
“This year we will reach an important step in the U.S. market's transition to EMV,” he explains. “Additonally, mobile payment methods are promising to offer better security, a "feature" that wouldn't have been all that noteworthy just a few short years ago.”
So in the eyes of Wester, “2014 was the year of security.”
It was the year when issuers, acquirers, security providers, merchants and consumers were forced to accept the fact that payments haven't really kept up with the growing digital economy.
“The good news is that those same stakeholders are actively addressing the issues,” he adds.
“And given how much energy and investment is being put into new safeguards for consumer data--from EMV to tokenization and encryption--it's likely that 2015 will also be a year of security.
“Hopefully, the focus on security in 2015 will be about the good guys.”
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