Target credit card breach still hurts small businesses

Rocky Arbitell says his gym's membership scanner rejects about 30 percent of people coming to work out at his Orlando, Fl. business, The Gym Downtown. Many just haven't updated their credit card numbers on file.

In his office at The Gym Downtown in Orlando, Fl., Rocky Arbitell looks at a computer screen. "That's all the credit cards that were dishonored, declined and invalid since January," he says, "and it's $57,000 worth of cards."

After the Target breach, banks gave millions of customers new credit cards.  That's a big problem for businesses that rely on subscriptions and monthly memberships. Some are losing significant revenue while scrambling to update customer information.

Rocky Arbitell hates the sound of his gym's scanner rejecting a membership card.  Unfortunately, it's what greets about 30 percent of people coming to work out at his Orlando, Florida business, The Gym Downtown.  Many just haven't updated their credit card numbers on file.

In his office, Arbitell points to a computer screen.  "That is the decline list," he says.  "That's all the credit cards that were dishonored, declined and invalid since January, and it's $57,000 worth of cards."

Arbitell's income hit is double that for the past year.  He says if his business hadn't been stable before this, it might not have survived.

A solution already exists

At an eCommerce expo across town, payment experts focus on what made customers change credit cards in the first place: fraud.  They discuss preventing it – and dealing with it when it happens.  

Dan Burkhart is CEO of Recurly, a subscription processor.  He says when customers get new credit cards, they can sign up to automatically give those numbers to any businesses they use.  Banks and credit card companies just put the information in a database, and merchants check it. 

"And, for any match that occurs, this service will provide the replacement card and then transaction is processed with the new replacement card," Burkhart says.  "The end customer isn't bothered.  They don't know nor care that their card has been updated."

Here's the catch: To use the database, businesses have to pay to work with specific credit card processors.  Some big companies don't do that, let alone the corner gym.  

Competitive cooperation

Steven Casco says limiting access slows innovation for everybody.  He's CEO of Cardnotpresent.comthe company that set up the e-commerce expo.  His solution to the subscription problem is competitive cooperation.  

"We, in America, invented the very idea of e-commerce," says Casco. "So, I would say, do we have problems with what's going on right now? Absolutely. Are we best suited to solve it and have the rest of the world look to us as the model? You better believe it."

Beyond Credit Cards

Casco says it's even time to look beyond credit cards themselves.  He flips through the expo schedule – and points to a name of someone doing just that.  Shaunt Sarkissian is the founder and CEO of Cortex MCP, a company that offers a "mobile wallet." 

Here's how it works: people put a specific amount of money on their phones. From there, Sarkissian demonstrates on his own mobile: "When I'm ready to make a payment, I just go in. I select the one I want to use, click 'use now,' enter my pin, hit 'pay,' and I can either show that QR code.  Boop, merchant scans it, and that's it.  Or, I can activate NFC, and I just tap my phone."  

A thief can steal only that amount – not drain an entire account.  

Other ideas include Bitcoin, biometric identification, and chip and pin machines.  In the end, Casco says, merchants from the cable company to the corner gym will have to try something.  

After all, he says, "Actually getting paid is the core of that business.  So, there's no way around it, you have to become educated."

And, this subscription problem isn't over yet.  The largest banks have replaced about 21.8 million cards since the Target security breach.  That's only about half the cards affected.

In his office at The Gym Downtown in Orlando, Fl., Rocky Arbitell looks at a computer screen. "That's all the credit cards that were dishonored, declined and invalid since January," he says, "and it's $57,000 worth of cards."

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