BOSTON—A new study released by the Federal Reserve Bank of Boston shows that while the Target breach lowered consumers’ perception of the security of debit cards following the late 2013 breach, it did not slow their usage of the plastic.
According to the survey that was conducted before and after the Target breach, there was a statistically significant difference in the perception of security of debit cards. Thirty-seven% of pre-breach respondents said that using their debit card was “secure” or “very secure,” but that number dropped significantly, down to 23% for post-breach respondents.
“Thus, the damage done by the breach definitely had an impact on cardholders’ perception of using their debit cards. A natural conclusion would be that some debit cardholders would switch to using credit cards, and some would switch to cash or checks,” stated CSCU its The Payments Review blog.
But the report found otherwise.
“Based on prior research on the impact of security assessments on payment instrument, we would expect a small (economically insignificant) decline in debit card use from this lower rating. However, we find no statistically or economically significant change in debit card use from 2013 to 2014. For credit cards, there was no difference in the ratings given by consumers who responded to the survey before the breach was reported and the ratings of those who responded after announcement of the breach,” the study stated.
CSCU proposed a number of reasons for debit usage not declining:
Response Bias: Some people answer a survey based on perception, current thoughts, or how they believe they should answer. But when faced with a situation in the real world, their actions are based on immediate needs. In other words, people don’t always do what they say they would do, CSCU said.
Muscle Memory: How a consumer pays for something is a habit that is ingrained early on, and changes very slowly.
Lack of Alternative:There are many debit cardholders who do not carry a credit card. Some do not want a credit card because of fears of getting into debt or just don’t feel comfortable with a credit card. Some do not qualify for a credit card, CSCU said.
Apathy: It is conceivable that despite responding on the survey that they feel that that their debit card is less secure, cardholders still aren’t concerned enough to do something about it, CSCU concluded.