Tens of millions of consumers have had their credit card information stolen. Should investors in credit card companies be worried as well?
Target (TGT), Neiman Marcus Hacked
The onslaught of credit card breaches has been one of the biggest stories on Wall Street of the last year. Target (TGT) , Neiman Marcus, and some others have had their networks hacked, losing the credit card information of millions of consumers to the hands of computer criminals.
The F.B.I. has estimated that approximately 20 credit card hacks have occurred over the previous twelve months, none of which were bigger than Target's. The hack resulted in the theft of over 40 million credit and debit card records, which naturally effected consumer habits during the critical holiday shopping season.
Most of the talk on Wall Street has been about the retailers. Investors and analysts are hard at work trying to figure out how these breaches will affect the bottom lines of the big retailers. Target decided to mark down every item in all of its stores for a brief period of time, which will surely hurt profits. This is combined with the inevitable reality that some customers will simply be too nervous to entrust Target, Neiman Marcus, and other hacked businesses with their credit card information.
Should Visa (V), MasterCard (MA), and American Express (AXP) be Worried As Well?
However, little has been discussed about how the credit card companies could be affected. After all, if consumers begin to incur charges that they did not authorize, the credit card issuer is typically on the hook to cover the charge and seek out the people responsible — a costly endeavor.
However, the reality of the situation is that credit card companies like Visa (V) , MasterCard (MA) , American Express (AXP) , Capital One (COF) , and others will likely be affected minimally thanks to prompt and effective reactions from consumers and banks.
JP Morgan (JPM) announced that it is already replacing 2 million cards directly affected by the hack, according to CNN. Bank of America (BAC) , Wells Fargo (WFC) , and others have also announced that at-risk credit card replacements have picked up dramatically, but did not release specific numbers.
Additionally, tens of millions of consumers who have opted to not order a new credit or debit card have changed their pin or reset their pins or account numbers. The card issuers have reportedly been very proactive in facilitating the protection of credit card info, so shareholders should breathe easy about huge potential losses.
FBI Watching Major Credit Card Companies
However, the situation is nonetheless one to monitor carefully. Even the FBI is unsure of the magnitude and severity of the previous hacks will be and hasn’t the faintest idea how many more hacks will occur in the coming months. Therefore, investors in the banks and credit card companies should keep a close eye on new developments, but should by no means dump their shares en masse. Perhaps online and information security companies could be ones to watch in the coming year.
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