Brick and Mortar Data Breaches Show E-Commerce is Safer

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Total holiday sales are expected to reach  $863 billion in 2014, up from $822 billion last year. That is a staggering amount of money, and the weeks between Thanksgiving and Christmas make or break a sales year for large and small businesses alike.

However, 2014 could be different, as offline sales decline while online sales boom. The outbreak of major security breaches at brick-and-mortar retailers has people understandably concerned about using their credit cards in-store. Target’s security breach, where more than 110 million customers' data was stolen, happened just before Christmas last year.

The long-standing narrative of credit card security is that offline transactions are more secure than online, but the security breaches have shown this to be false. In addition to Target’s breach, Home Depot announced that 56 million cards were compromised in a five-month attack on its payment terminals. 1.1 million credit cards were exposed in a three-month hack on Neiman Marcus. Hackers also hit grocery chain Supervalu, which has thousands of locations, multiple times, and Asian bistro chain P.F. Chang's saw data stolen from eight of its locations over the course of eight months. In 2012 (before these hacks), retailers lost roughly $3.5 billion in e-commerce sales due to credit card fraud, according payment processor CyberSource.

These physical retail stores are vulnerable because they still run Windows PC old-school POS software, and operate using outdated guidelines. In stark contrast, most online retailers are deeply committed to offering the highest levels of security, because it is life or death for their business. Most online payment processors go to great length to keep ecommerce experiences safe, using encryption, security keys, SSL certificates, firewalls, passwords, and advanced anti-virus software.

Offline transactions are getting less secure as online transactions are getting more secure. These parallel trends will lead to a jump in ecommerce, as Americans increasingly choose the retail option that is more convenient, and safer—online. 

Physical retail was losing ground even before the security breaches, and this holiday season, we are already seeing the effects of the outbreak. In-store sales experienced  a major drop on Black Friday this year, while e-commerce retail hit record numbers. Total U.S. online retail spending in November and December 2014 will reach $61B, up 16% year-over-year, according to Comscore, and Q3 of 2014 was the 20th consecutive quarter of double-digit growth in desktop computer ecommerce sales. Forrester Research predicts e-commerce sales will grow by more than $400 billion in the next several years.

Online retail is growing faster than offline retail for a number of reasons. Online shopping offers increased convenience, better deals, and heightened security. The widespread consumer wariness about the security of offline retail will only fuel the growth of e-commerce.

 Shawn M. Budde is CEO of 2Checkout.

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