Last week, debit and credit card payments processor Global Payments Inc. announced that its systems had been breached by hackers and perhaps as many as 3 million credit and debit card numbers had been stolen. Global Payments processes transactions for Visa and MasterCard for retailers and card issuers.
In a statement released Sunday, Global Payments revised downard the number of stolen cards:
"... it identified and self-reported unauthorized access into its processing system. The company believes that the affected portion of its processing system is confined to North America and less than 1,500,000 card numbers may have been exported. The investigation to date has revealed that Track 2 card data may have been stolen, but that cardholder names, addresses and social security numbers were not obtained..."
The company has not disclosed how hackers breached its systems, nor the duration of the breach. The company's Monday-morning conference call focused on earnings and left little time for questions about the breach details.
The term "Track 2" refers to certain data elements stored in the magnetic strip on the back of debit and credit cards. Also on Sunday, Visa removed Global Payments from its list of "compliant service providers." Forbes magazine reported that the company expects to quickly correct the Visa compliance issue:
"Global Payments chief executive Paul Garcia is quoted in the company’s statement as saying that “We are making rapid progress toward bringing this issue to a close,” and emphasized that all major brands of cards still allow Global Payments to act as a payment processor."
After a breach like this, card issuers (e.g., banks, credit unions, retailers) will usually notify directly those cardholders with stolen account information, and whether replacement cards and accounts will be issued. And the card issuers usually seek reimbursement from the payments processor to cover the costs of issuing replacement cards to consumers.
Another payments processor, Heartland Payment Systems, experienced a much larger breach in 2008, after which multiple lawsuits resulted as card issuers provided replacement cards and accounts. With a reported 800,000 merchants and 3.5% market share, Global Payments is a smaller payments processor, when compared to First Data Corporation's 22.6% market share.
The largest banks, like Bank of America, have subsidiaries with joint venture arrangement with processor First Data to process card transactions. It seems to me that hackers have smartly figured out a way to steal valid credit/debit card information is to attack the transaction processors instead of retailers, like T.J.Maxx, or banks directly.
I called Global Payments to see how many retailers they may have lost already due to the breach and their inability to process Visa transactions. The public relations rep referred inquiries to the company's data breach site: www.2012securityupdate.com, which includes this statement to its merchants/retail clients:
"We are still processing all of your transactions, including Visa transactions, and will continue to work with the card associations in response to this incident."
Time will tell if and how long that continues. The company's breach web site also advises affected cardholders who suspect fraud to monitor their accounts, contact their card issuer, and place a Fraud Alert on their credit reports.
The Global Payments breach highlights the fact that several companies are involved in debit/credit card transaction flow, from the time yo swipe your card until when payment is completed. And, the security of that transaction flow is only as strong as the weakest link, or company, in the flow.