retail news in context, analysis with attitude

The Associated Press reports that "Target and MasterCard say they've agreed to settle lawsuits over the discounter's pre-Christmas 2013 massive data breach." And the Wall Street Journal writes that the settlement is designed to cover "costs that banks incurred to reissue credit cards and debit cards as a result of the breach, as well as some of the fraud that resulted from the exposure of customer information."

Target has said that it has put aside $19 million "for banks and credit unions issuing MasterCards that were caught in the data breach that compromised 40 million credit and debit card accounts between Nov. 27 and Dec. 15, 2013," the AP reports. "MasterCard Inc. said the money will be available to banks and credit unions for operating costs and fraud-related losses on cards believed to have been affected. The settlement will go into effect if at least 90 percent of eligible issuers accept the offer by May 20."

According to the , "Minneapolis-based Target is likely to be on the hook for more payments in the future. The company is holding similar negotiations with Visa Inc., which is larger than MasterCard, according to people familiar with the talks. In March, Target agreed to pay $10 million to settle a consumer class-action suit tied to the breach."

The AP piece quotes Scott Kennedy, president, financial and retail services at Target, as saying that the company is "hopeful that Target's agreement to pay up to $19 million to settle the claims of MasterCard and its issuers will result in a high level of issuer acceptance. Target intends to continue to defend itself vigorously against any assessments made by MasterCard on behalf of MasterCard issuers that do not accept their offers."
KC's View:
The question is whether the cost of the data breach to Target was greatest in terms of reputation/trust, or the cost to its bottom line. I have to think that long term, the bigger problem is the creation of unease about the financial system.