Analyst: Costs of Target data breach could top $1 billion


A Wall Street analyst says the fallout from Target's data breach will cost the company more than previously thought and could top $1 billion.

A security specialist said fraud is turning up on about 10 to 15 percent of accounts involved in the Target security breach.

The Pioneer Press reports based on that level of criminal activity Daniel Binder, an analyst at Jeffries, estimates 5 million of the 40 million stolen credit and debit accounts may have been used fraudulently.

The newspaper reports earlier estimates have varied wildly. Some security firms predict immense costs to Target, but much of Wall Street is expecting limited exposure.

The holiday breach at Target lasted from Nov. 27 to Dec. 15.

According to the newspaper, Binder estimates that 4.8 to 7.2 million accounts out, of the 40 million stolen, could see fraudulent activity. Based on an estimate of $300 in fraud losses per account, Binder estimates, "This would amount to roughly $1.4 to $2.2 billion in fraudulent charges.

The company itself isn't making projections right now. Target spokeswoman Molly Snyder told the Pioneer Press Thursday, "We are not speculating or estimating the potential financial impact of the breach at this time."

While banks are on the hook for most of the loss, the newspaper reports the banking industry will demand payment from Target to recover some of that loss. If Target pays 30 to 50 percent of any fraud losses the potential cost to the company could be between $400 million and $1.1 billion.

Other costs to Target could come from dozens of lawsuits that have already been filed.

Reuters reports that Fitch Ratings believes the breaches at Target and retailer Neiman Marcus along with future concerns about security issues will drive card issuers and retailers toward enhanced fraud prevention technology.

According to Reuters, Fitch said, "While it's unclear how the upgrade costs will be divided between banks, retailers and payment networks, we believe interests are aligned in the desire to reduce card fraud."

Fitch believes all parties will spend more on security technology to meet tougher card standards already established in Canada and Europe.

The breach has taken its toll on Target. The Pioneer Press says shares hit a 20-month low in Thursday trading, falling 22 cents to close at $56.67.

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