HOUSTON— U.S. financial institutions substantially increased issuance of chip debit cards in 2016 and experienced reduced fraud losses, according to the 2017 Debit Issuer Study, commissioned by PULSE.
Since the fraud liability shift for most debit transactions took effect in 2015, an estimated 80% of U.S. debit cards have been converted to chip cards. The study also found that fraud loss rates dropped by approximately 28% in 2016 compared to 2015 levels.
Nonetheless, the 12th annual Debit Issuer Study confirmed that fraud continues to challenge issuers, PULSE said. 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, in a statement. “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, he added.
“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.”
Among the findings in the study:
- Mobile wallets see increased enrollment, but low usage. The study also found enrollment of debit cards into Apple Pay increased 80% in 2016.
- 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% of U.S. debit transactions.
Debit
- The total number of debit transactions continued to increase, rising an average of 7% 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% increase over results report in the 2016 study.
- The number of debit cards increased 1% year-over-year.
PULSE said chip card growth is likely to slow as transition plateaus “chip-on-chip” transactions – those conducted with chip-enabled cards at chip-enabled terminals – amounted to 30% of all debit transactions in January 2017, a 650% year-over-year increase.