PULSE Study: Debit Fraud Loss Rates Decline After Chip Cards Introduced
August 14 2017 - 2:50PM
Business Wire
2017 Debit Issuer Study finds continued growth
in debit and mobile wallet enrollment
According to the 2017 Debit Issuer Study, commissioned by PULSE,
one of the nation’s leading debit/ATM networks, U.S. financial
institutions substantially increased issuance of chip debit cards
in 2016 and experienced reduced fraud losses. Since the fraud
liability shift for most debit transactions took effect in 2015, an
estimated 80 percent of U.S. debit cards have been converted to
chip cards. The study also found that fraud loss rates dropped by
approximately 28 percent in 2016 compared to 2015 levels.
Nonetheless, the 12th annual Debit Issuer Study confirmed that
fraud continues to challenge issuers. U.S. financial institutions
lost an estimated $900 million to debit card fraud in 2016.
“The financial services industry has taken a number of measures
that likely impacted the reduction in fraud losses for debit card
issuers,” said Jim Lerdal, Vice President of Fraud and Risk
Management for PULSE. “Among them are the conversion to chip debit
cards, greater use of tokenization in mobile commerce and continued
investment in fraud-mitigation solutions.”
But reducing card fraud is not a simple prospect.
“The more financial institutions tighten fraud-tolerance limits,
the more they risk negatively impacting the cardholder experience,”
said Lerdal. “It is a balancing act because declining potentially
fraudulent transactions could lead to ‘false positive’ fraud
identification, which can frustrate account holders and potentially
drive them to other methods of payment.”
Mobile wallets see increased enrollment, but low
usage
The study also found enrollment of debit cards into Apple Pay
increased 80 percent in 2016. Key findings include:
- Three out of four issuers now support
debit cards being loaded into at least one mobile wallet.
- Enrollment among consumers also has
increased, with Apple Pay remaining the most popular mobile wallet
of the big three “Pays,” which include Android Pay and Samsung
Pay.
- Despite this momentum, usage of debit
cards in mobile wallets remains low. Combined, Apple Pay, Android
Pay and Samsung Pay account for only about one-quarter of 1 percent
of U.S. debit transactions.
Continued growth of debit
Debit card usage grew in 2016, driven by an increase in both the
overall card base and transactions per active card. Study findings
include:
- The total number of debit transactions
continued to increase, rising an average of 7 percent
year-over-year in 2016 for the issuers in the study.
- The number of debit transactions per
active consumer card reached a record high of 23.6 transactions per
month, which represents a 6 percent increase over results report in
the 2016 study.
- The number of debit cards increased 1
percent year-over-year.
“This year’s study confirms that debit remains a core part of
the expanding payments landscape, even as new forms of payment
emerge,” said Steve Sievert, Executive Vice President of Marketing
and Brand Communications for PULSE. “The average consumer now uses
their debit card 39 percent more often than they did in 2010, and
for more transactions of lower value, indicating that debit is a
fundamental financial tool for their everyday lives.”
Chip card growth likely to slow as transition
plateaus
Issuers have put chip debit cards in the hands of consumers at a
faster pace than anticipated in last year’s study. “Chip-on-chip”
transactions – those conducted with chip-enabled cards at
chip-enabled terminals – amounted to 30 percent of all debit
transactions in January 2017, a 650 percent year-over-year
increase.
“The growth of chip-on-chip transactions is likely to slow as
the card base migration concludes,” said Tony Hayes, a Partner at
Oliver Wyman who co-led the study. “In addition, many transactions
are not chip-eligible, such as online purchases and fuel dispenser
transactions.”
About the Study
The 2017 Debit Issuer Study is the 12th installment in the study
series, commissioned by PULSE and conducted by Oliver Wyman, an
independent management consulting firm. The study provides an
objective fact base on debit card issuer performance and financial
institutions’ outlook for the debit card business. Fifty financial
institutions – including large banks, credit unions and community
banks – participated in the study. Collectively, the participants
issue approximately 134 million debit cards. The sample is
representative of the U.S. debit market in terms of institution
type, geography and debit network participation.
About PULSE
PULSE, a Discover Financial Services (NYSE: DFS) company, is one
of the nation’s leading debit/ATM networks. Financial institutions,
merchants, processors and ATM deployers across the United States
and around the world depend on PULSE’s comprehensive suite of
products and services and its commitment to providing exceptional
client service, flexibility, security and superior economics. PULSE
also is a resource for debit education, research and knowledge
drawn from more than three decades of industry experience. For more
information, visit pulsenetwork.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20170814005875/en/
PULSEAnne Uwabor, 832-214-0234anneuwabor@pulsenetwork.comorDPK
Public RelationsDan Keeney, 832-467-2904dan@dpkpr.com
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