Did the Target data breach change consumer assessments of payment card security?

Abstract

Previous research has found that perceptions of payment security affect consumers’ use of payment instruments. This study tests whether the Target data breach of 2013 had any impact on consumer perceptions of the security of credit and debit cards and/or any impact on consumers’ use of payment cards. Using data from the Survey of Consumer Payment Choice, the study finds that, controlling for possible confounding effects of demographic differences between the two groups, ratings by consumers who assessed the personal information security of debit cards shortly after the breach were lower than ratings by consumers who responded before the breach was reported. 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 the breach was reported. Based on prior research on the impact of security assessments on payment instrument use, one would expect a small (economically insignificant) decline in debit card use from this lower rating. However, the study finds no statistically or economically significant change in debit card use from 2013 to 2014.