The proposed $19 million settlement to cover financial institutions' losses from the Target data breach in 2013 has failed, and financial institutions believe public data security fears provide a strong hand in future talks.

"The banks don't believe that they are in a position where they need to compromise on this," said Thad Peterson, senior analyst with the Aite Group, who added that the financial institutions will now push for "as close to a full recovery as they can get."

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