Consumer debit with sustained growth in 2017, contributed to improved overall debit performance, while fraud losses per transaction declined for the second consecutive year, according to the 2018 Debit Issuer Study.
The 13th annual survey, commissioned by Houston-based debit/ATM network PULSE, also found that cardholder enrollment in mobile wallets doubled year-over-year while transactions per enrolled card remained flat.
Fifty-nine financial institutions participated in the study. Together, participants issued approximately 148 million debit cards and represented 42% of the U.S. debit market.
Issuers also revealed the longtime clash between PIN and signature debit proponents now mostly over. PIN transactions used to be the sole domain of electronic funds transfer networks, while signature transactions existed in the card networks’ field. Now, issuers increasingly track card use by cardholder (in-store or online, for example) rather than by the network routing the transaction. This change developed in part by growth in transactions requiring no authentication and card-not-present purchases.
PULSE acknowledged the movement away from the simple world of ‘PIN or signature’ to an array of options, including PIN-less and signature-less transactions at the point of sale and biometric authentication in digital commerce and mobile wallets. Meanwhile, advances in payments and a stronger overall economy are resulting in improvements in debit’s key performance indicators.
Among the debit fundamentals highlighted:
· Seventy-six percent of checking accounts had associated debit cards in 2017, compared to 75% in 2016.
· The percentage of debit cards used at least monthly grew to 66% from 65%.
· Among active consumer debit cardholders, debit cards users make 23.7 purchases per month, up from 22.9 last year, and an all-time high in the study’s’ history.
Based on fraud losses incurred by the respondents and extrapolated to the whole U.S. debit industry, issuers lost about $850 million on POS debit transactions in 2017, a 5.5% decrease from 2016, likely due to the transition to chip-enabled debit cards. Surveyed issuers have converted 91% of their debit cards to chip cards.
The study suggested card-not-present transactions may be more vulnerable to fraud due to the lack of chip card authentication or, in most cases, PIN protection. Even though CNP transactions account for 21% of transaction volume, they represent 44% of net fraud cases; and an average net fraud loss of $123 per incident.
Survey respondents reported that the costs of this fraud are elevated, amounting to 10.5 cents for every CNP transaction, of which issuers bear 1.7 cents, on average. The remaining 8.8 cents make up losses withstood by merchants and cardholder claims not charged back.
On average, issuers in the survey authorized nearly 95% of all attempted debit transactions in 2017. The biggest reason for declined debit transactions among this group is not suspected fraud (0.4%), but insufficient funds (1.8%).
The survey revealed that 86% of responding issuers support at least one mobile payment option, defined as the ability to use a smartphone at a POS, up from 74% in the previous study. Cardholder enrollment in mobile programs doubled in the last year. However, transactions initiated with a mobile wallet represented only 0.6% of in-store debit card purchases in 2017, compared to 0.3% in 2016.
Enhancing digital capabilities to deliver superior cardholder control and flexibility in managing their debit card activity, topped the list of 2018 priorities for survey respondents. Issuers also want to communicate with cardholders for real-time verification and fraud management, and even to automatically provision a digital card in a mobile wallet while pending the issuance of a plastic card.