Using a credit card at a petrol station could pose more of a risk of data theft than shopping online, as point-of-sale (POS) terminals have emerged as a weak link in the security chain, analyst firm Gartner has warned.
When a card is swiped, POS terminals often collect and store the data held in the magnetic stripe on the back of a credit card, said Avivah Litan, a Gartner vice president and distinguished analyst. Retailers are often unaware that their POS applications collect so much information.
In the hands of sophisticated hackers and counterfeiters, the data collected from the magnetic stripe is enough to create a replica card. "It's almost more dangerous to go to the gas station than it is online," Litan told Gartner's identity and access management summit in London.
"The data is just sitting there. No one even thought about what data is on a POS controller."
Retailers' network configurations are partly to blame. Many are using the internet to transmit data in place of dial-up networks, and many have incorporated wireless access points into their networks using wired equivalent privacy (WEP), which is not considered a strong form of encryption, Litan said.
Hackers lurk in parking lots looking for weak networks to penetrate. Since the POS terminals are linked via IP, once a hacker has accessed a network they can try out neighbouring IP addresses until they locate a store of data, Litan said.
Data breaches that occur offline are common. Of 160 breaches investigated for one major credit card brand, 128 took place in the brick and mortar world where the card was physically present for the transaction, rather than being used online or over the telephone, according to Gartner.
To strengthen security, card brands such as Visa and Mastercard are pressuring retailers to comply with the Payment Card Industry (PCI) Data Security Standard, a code of best practices created by the card industry. The standard forbids the storing of magnetic stripe data on POS terminals, and Visa plans to start fining retailers in the coming months if they do not comply, according to Gartner.
Implementing security is cheaper in the long run than having a data breach, which can be expensive and hurt a company's reputation. Gartner calculates that a data breach costs companies around $300 (£150) per exposed account because of investigations, fines and lawsuits.
Beefing up security costs just $16 (£8) per account for the first year, and that cost falls over time, Litan said.
The short-term forecast for POS security does not look great, however. Gartner predicts that by next year, most attacks against retailers will be directed at their POS terminals, and only 30% of POS software will be compliant with the prevailing security standards by 2009.
"The thieves always find the path of least resistance," Litan said.