Did the Target Data Breach Change Consumer Assessments of Payment Card Security?

Previous research has found that perceptions of payment security affect consumers’ use of payment instruments. We test whether the Target data breach in 2013 was associated with a change in consumers’ perceptions of the security of credit cards and debit cards and with subsequent changes in consumers’ use of payment cards. Using data from the Survey of Consumer Payment Choice (SCPC), we find that, controlling for possible confounding effects of demographic differences between the two groups, ratings by consumers who assessed the security of personal information of debit cards shortly after the breach were lower than ratings by consumers who responded before the breach was reported. On average, the rating on the security of personal information of debit cards relative to the rating on the security of other payment instruments was 11.3 percent lower shortly after the Target breach. Based on prior research on the impact of security assessments on payment instrument use, 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 the breach was reported.