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Despite consumer—and even some IT executive—beliefs that e-commerce poses a much greater security risk than store-based point-of-sale systems, a new Gartner report concludes that the opposite is true.

Gartner is reporting that by 2008 most attacks will be on physical POS (point-of-sale) systems and that by 2009 only one out of three such systems will comply with current security standards.

“Device vulnerabilities are often overlooked by enterprises, who tend to focus on enterprise servers and systems when securing their environments,” wrote Gartner security analyst Avivah Litan, adding that data transmissions are also closely monitored and “typically ignored by many companies are the devices that hang off of corporate networks where data are either collected or output, particularly point-of-sale devices and printers located throughout enterprise systems.”

This disconnect has not been lost on thieves (neither the cyber nor the old-fashioned kind). “Criminals have discovered that some devices are ripe targets for committing financial fraud and other types of information theft. Particularly hard hit in the past year are point-of-sale systems exposed to the Internet which are storing magnetic stripe card data, and intelligent printer systems that store information as part of the paper print process,” the report said.

How lopsided are the figures? Overwhelming, according to Gartner’s statistics, which have 80 percent of all data breaches happening in-store. “I can’t think of one well-publicized successful e-commerce attack,” Litan said.

To be fair, many of the data breaches involve the Internet but are quite far removed from e-commerce. For example, many POS systems seek authorizations and pass information along an IP connection, which is frequently how they are accessed by the crooks.

“A lot of retailers have moved their POS from dial-up to IP, and they haven’t even thought about the security implications,” Litan said. “A lot of the passwords are still the default security passwords.”

Another confusion point is where and how the data is used to commit the fraud, as opposed to how the confidential data is stolen. It’s a lot more common—and easier—to steal the data from store systems, whether via the network, using someone in a physical storefront, or stealing a laptop from workers while they are commuting or by breaking into their homes. But after the data is captured, it’s indeed easier to commit the actual theft later on using the more anonymous Web site.

The reasons in-store systems are such attractive targets are numerous, but primarily because they typically are not as well-protected. Another reason is that there is simply a lot more data to be taken from in-store systems.

Gartner says $2 billion in e-commerce sales have been lost because of security fears. Click here to read more.

E-commerce sites and stores “might be equally secure, but brick and mortars have a lot more data and better data,” Litan said. “You can get millions of numbers instead of thousands, and you can get the magstripe data. That’s not supposed to be stored, but it is stored.”

The report said that many retailers are likely to be fined soon by credit card groups for storing that data, even though many of them are not knowingly saving the forbidden data.

” Many of the breaches investigated involved the theft of magnetic stripe data—the most sensitive security information attached to a card—that was stored on a merchant’s point-of-sale system,” the report said. “This is often done without the retailers’ knowledge since the data is stored as a function of application software, which retailers typically do not know how to decipher.

“Another forensic analyst firm that examines breaches involving major credit card brands found that a high percentage of data breaches can be traced to vulnerabilities with just a few terminal brands,” according to the report. “Of 71 breaches investigated by this firm, 59 percent were traced to just four terminal models. The criminals determined which companies to target by simply looking at the list of customers on the terminal manufacturer’s’ Web site.”

The security risks posed by various smart network peripherals—especially printers, but also fax machines, copiers and scanners—are not particularly new. As those multi-decade-old devices have gotten a lot smarter—with much faster CPUs, much more RAM, large hard disks and full two-way network and even Internet access—the potential for using the rarely secured devices as an easy means to enter a network and then internally access as many resources as desired has soared, and mainstream stories have detailed such issues.

But many retailers are using those smart printers to capture and print credit card information, which makes them very attractive physical targets. “The printers and multifunction products (MFPs) being deployed in enterprises today are all equipped with hard disk drives (HDD), and the latest generation of MFPs and printers (smartMFS) are deploying open architectures that incorporate or accommodate live applications accessible from the user interface (UI) or remotely,” the Gartner report said.

“In many cases, these Java applications reside on the machine and, in other cases, the applications reside on a network server that receives commands using traditional web-services communication protocols. These applications transform the MFPs into an information hub that can scan paper-based information into an on-line repository, automate routine functions and even download information from a web-server.”

Gartner recommends that printers—no matter how innocuous their history—be treated like any other information-rich part of the network.

“At a minimum, employ basic security practices when it comes to these devices such as changing default administrator passwords and installing firewalls in front of them. Don’t store sensitive data, such as magnetic stripe card data in a POS system or personal information on a printer hard drive,” the report suggested. “If such storage is due to a vendor’s system design, demand the vendor removes such capabilities or else switch to a new supplier.”

Retail Center Editor Evan Schuman can be reached at

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