Good news for debit card issuers emerged Thursday as a major report indicated fraud losses fell in 2017 compared to 2016. Losses on point-of-sale transactions totaled an estimated $850 million, down 5.5% from the 2016 total, according to the 2018 Debit Issuer Study from the Houston-based Pulse Network, a unit of Discover Financial services.
The report, the latest in a series periodically issued by the electronic-funds transfer network, indicates the likely cause of the decline is the nearly complete transition to EMV chip technology. Issuers surveyed for the report indicated they have now converted 91% of their debit cards to EMV. But while EMV has drastically reduced point-of-sale fraud, card-not-present fraud losses continue to plague the payments business. Card-not-present transactions account for 44% of net fraud cases, the report says, even though they represent just 21% of transaction volume.
“As the industry has moved to chip transactions, fraud has migrated to transactions that don’t require a physical card,” said Jim Laerdal, vice president of fraud and risk management for Pulse, in a statement. Losses amounted to 10.5 cents for every card-not-present transaction, according to the report. Issuers incur 1.7 cents of this, on average, while merchants and cardholder claims not charged back bear the remaining 8.8 cents.
Issuers authorized almost 95% of attempted debit card transactions, on average. But suspected fraud was not the biggest cause of declines. Insufficient funds led to declines of 1.8% of transactions, while suspicions of fraud caused refusals in only 0.4% of cases.
The survey, which also covers mobile transactions and other topics, is based on reports from the 59 financial institutions that participated in the study, with an extrapolation to the nationwide debit card base, according to a release from Pulse.