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TheStreet Open House

Why Debit Cards Look Stronger Than Ever

NEW YORK (TheStreet) -- Last year's Target payment card breach, which went public in the heart of the busy holiday shopping season, had the potential to derail the popularity of bank debit cards.

But damage to the debit card brand wasn't even close to being a serious threat.

So says the Debit Issuer Study, which reports more robust use of debit cards, although card providers aren't just tightening card security measures, but sweetening the pot with ample rewards programs.

Also see: Why Your Credit Card Will Soon Be Useless

The Target data breach resulted in the theft of 40 million credit and debit cards, with the personal data of 70 million people exposed to security fraudsters. It also cost the job of Gregg Steinhafel, Target's chief executive, after 35 years in the retail business.

But if there was any backlash to the debacle, it proved either minimal or non-existent, according to Houston-based Pulse, which tracks the consumer and commercial business market and published the study.

One big reason? The card industry has had some success convincing consumers that a transition to "EuroPay Master Card and Visa" -- a global standard for chip-based credit or debit cards -- will offer better security for card users. 

According to Pulse, 86% of financial institutions say they will issue EMV-based cards by the end of next year, a big increase from 50% in 2012.

Also see: Hackers Got eBay User Data Months Ago, eBay Detected It 2 Weeks Ago

"In the wake of several high-profile data breaches, the industry has come together to look for solutions to increase security and advance EMV implementation," says Steve Sievert, executive vice president of marketing at Pulse. "While PIN debit remains the most secure payment method in the market, this year's study confirms the industry is reaching a tipping point toward EMV. The majority of financial institutions plan to issue EMV debit cards starting in 2015."

The proof is that the biggest increase in debit card usage is by active card users, who are most likely aware of the Target data breach or subsequent ones at other major retail brands including Michaels and Neiman Marcus

"Debit program performance continues to improve as active cardholders increase their usage of debit," states the Pulse report, with average card transactions moving from 19.4 per month last year to 20.1 per month this year.

Certainly, the payment card industry isn't safe yet. With 14% of all debit cards exposed in data breaches this year, compared with 5% in 2012, any more high-profile data breaches may fuel a huge backlash among card users.

In other words, the card industry were largely forgiven by consumers after the Target breach. But don't count on similar breaks if 70 million more card users find out their personal data has fallen into the hands of financial fraud artists.

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