E-Trust Hurdle

Since December, the fallout from Target’s massive electronic security breach has continued to grow. Last week’s news about Trustmark, Target’s hired security vendor, is that the firm is being named in a lawsuit that claims it failed to detect the security breach. As a result of such continuing negative news e-commerce, an increasing number of consumers are concerned about privacy relative to the collection of customer information by retailers, as they worry that the data may not be properly safeguarded and fall into the wrong hands, resulting in identity theft. While recent events, such as the hacked credit card information from Targets and other retailers, have increased concerns at the store level, worries about the safety of shopping online are even more pronounced.

Consumers have varying levels of understanding regarding what personal information is collected when using electronic retail channels, as with the use of cookies. For most retailers, the objective of utilizing cookies is to collect customer information that can be enhance their customer relationship management (CRM) environment – enabling the retailer to actually provide better customer service. However, hackers can also utilize cookies to find private information about consumers, including highly sensitive financial and account login information that can lead to data theft – resulting in damages to personal finances and credit.

Without security standards at the retail level and supportive privacy laws, consumers are indeed more dependent of the varying levels of retail security and therefore vulnerable, relative to online transactions. Currently, the United States appears to be lagging behind some other countries, in terms of consumer privacy and protection laws. However, due to the costly PR nightmares associated with recent retail identity theft, there now appears to be new interest in formalizing in-store and online security, as well as the political will to increase standards in the U.S.

In order for CRM programs and online retail channels to continue successfully, retailers must be able to assure their customers that the information collected about them will be securely guarded and not provided to others with lower security standards. Otherwise, the lack of trust relative to electronic exchanges will continue to be a hurdle that limits consumer confidence and growth.