Here's a quick scenario: a customer swipes their card at checkout, thinking nothing of it. Days later, they notice fraudulent charges on their account—turns out, the retailer’s POS system was hacked.
The problem? This isn't just a made-up example: it happens more frequently then you think. In 2022, it was discovered that cybercriminals used POS systems to take data and information from over 165,000 credit cards.
For CFOs, understanding how these attacks happen—and how to prevent them—isn’t optional. It’s a vital part of protecting revenue and maintaining trust.
Using my 17+ years in accounting and financial reporting, I created this guide to help you break down the basics of POS hacking and provide actionable insights on POS hacking and prevention strategies.
Whether you’re managing risk, overseeing compliance, or optimizing security investments, this guide will help you make informed decisions that protect both your revenue and your reputation
What Is POS Hacking?
POS hacking refers to malicious attempts by bad actors to gain unauthorized access to these systems. They steal sensitive financial data, customer information, and other valuable assets, exploiting companies for monetary gain.
IBM estimates data breaches to cost USD 4.9 million globally on average in 2024, a 10% increase over last year and the highest total ever, and POS systems are not immune.
Hackers know point-of-sale (POS) systems contain valuable data from your business, credit card processing companies, and customers, including credit card data, cardholder names, and transaction details, which they can access through POS security vulnerabilities.
Mitigating these risks requires finding the best POS solutions, which build threat management directly into their systems.
POS Hacking: Common Hacking Methods
To access your data, attackers might target the POS system's software, hardware, or users, using various techniques to gain access and compromise the system. Here are some of the most common ways your POS systems can be compromised.
Remote Hacking
A primary vulnerability in POS systems is the potential for remote hacking. Many POS systems connect to the internet, directly or through a network, for online transactions and data synchronization.
This connectivity is necessary for business operations but presents an opportunity for cybercriminals to infiltrate the system remotely through network attacks, brute force attacks, or access through unsecured IP addresses.
Additional weaknesses in system security protocols, like outdated encryption algorithms or poorly configured firewalls, can also allow unauthorized access to sensitive information.
Physical Endpoint Hacking
Another vulnerability lies in the POS system's endpoints. These endpoints are susceptible to malware installation and physical data theft through payment systems, POS terminals, and mobile POS devices.
In this type of hack, hackers attempt to tamper with these components physically by installing card skimming devices or malware-infected hardware to capture payment card data and other sensitive information.
This attack is insidious, often going undetected until damage is done, as most replacement hardware looks identical to real thing.
Outdated Software
You might not think it, but outdated software and operating systems pose a significant risk to POS systems. As technology evolves, new vulnerabilities are discovered, and vendors release updates and patches to address these concerns.
If businesses fail to ensure continued security support for their POS systems, they expose themselves to known exploits and attack vectors. Oftentimes, cybercriminals quickly exploit these vulnerabilities, deploying POS malware that can infiltrate and compromise outdated systems.
Different POS Hacking Tactics
It's not just where cybercriminals can access your POS data; it's also how. Here are the top ways hackers may enter your POS system.
Malware
Malware is a common method hackers use to access POS systems. They’ve developed memory scrapers and network sniffers that can be remotely or physically installed on POS terminals to capture and transmit sensitive data. This malware monitors and logs payment card information, keystrokes, and other sensitive data, turning the POS system into a conduit for data theft.
Phishing
Hackers can use social engineering tactics like phishing to access POS systems. They may send employees fraudulent emails or messages to trick them into divulging login credentials or installing malware-infected software.
By exploiting the human element of the POS system, attackers can bypass your company’s security measures and infiltrate the network, often undetected until the damage is done.
Skimming
Hackers use physical skimming, where they install devices on in-store or mobile POS terminals or payment card readers to capture payment card data.
Skimming devices blend in with POS hardware, making them hard to detect. When a customer inserts their card into the compromised reader, the skimmer captures the card's data for fraudulent transactions or black market sales.
Notable POS Hacking Incidents
Subway POS Breach
In 2014, Subway, the popular fast-food chain, faced a high-profile POS security breach when a massive data breach compromised the payment card information of thousands of customers. LockBit ransomware claimed responsibility, exploiting a vulnerability in Subway's POS system.
The breach allowed hackers to access the network and extract sensitive data, resulting in significant financial losses, damage to Subway's brand reputation, and a heightened focus on POS security.
When Cybernews reported 66 active ransomware groups in 2023, LockBit topped the list for the second consecutive year.
Target Data Breach
Another major POS hacking incident was the 2013 Target breach. Target, a major US retail chain, was hacked, and its POS system was infiltrated, installing malware that extracted the payment card information of millions of customers.
The breach had a financial impact of over $200 million. It sparked a discussion about POS system vulnerabilities and the need for stronger security measures to protect businesses and customers.
These incidents remind us of the real-world consequences of POS hacking: extensive financial losses and an erosion of customer trust.
As technology evolves, businesses must stay vigilant and proactively address vulnerabilities in old or new POS systems to prevent breaches.
How To Protect Your POS System
Leveraging combined security measures in your POS implementation helps your business create a robust defense against POS hacking. This involves prioritizing encryption, staying updated on software updates, training employees on cybersecurity best practices, and implementing multifactor authentication (MFA) for system access.
These security measures significantly reduce the risk of data breaches and protect your business and customers from the consequences of POS hacking.
1. Encryption and Tokenization
Encryption and tokenization effectively protect your POS system.
- Encryption ensures sensitive data, like payment card information, is scrambled and unreadable to unauthorized parties, even if they access the system. Near-field communication (NFC) technology encrypts data on Android, Apple, or Microsoft devices for sharing with other mobile devices.
- Tokenization replaces sensitive data with unique identifiers, or tokens, that have no intrinsic value, rendering the stolen data useless to hackers.
2. Regular Software Updates
Companies must keep POS system software up-to-date to mitigate vulnerabilities. Vendors regularly provide hardware upgrades and security patches to address emerging security issues.
Once available, businesses must apply these hardware and software updates or security patches immediately to block bad actors seeking exploitable weaknesses. Security providers aim to deploy autonomous patching to stay ahead of hackers.
3. Employee Training
Your employees are the first line of defense against POS hacking. Your company needs to provide comprehensive security education through training programs that educate your staff about:
- The importance of POS security
- Phishing awareness and recognition
- Proper handling of sensitive data
This can reduce the risk of human-based attacks and empower your employees to identify and report suspicious activities.
4. Multi-Factor Authentication
Implementing multifactor authentication (MFA) for more secure login adds another layer of security to safeguard your POS system. When users provide multiple forms of identification, such as a password and a one-time code sent to their mobile device, it reduces the risk of unauthorized access and prevents hackers from controlling the system.
Conclusion
As technology advances, businesses must stay sharp and adaptable in their POS security approach. Now, more than ever, it’s about staying informed, implementing best practices, and continuously reviewing and improving security protocols to minimize data breach risks and maintain customer trust.
The battle against POS hacking is ongoing, but with the right tools, knowledge, and security protocols, your business can protect its POS vault, safeguard its customers, and thrive.
What's Next?
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