The Great Debit Card Breach of 2013 was a watershed event, as nearly every U.S. bank was affected. A new study from Discover’s PULSE found that 84% of financial institutions reissued all exposed cards in response to the Target breach, compared to only 29% that typically reissue all exposed cards as a standard response to breaches.
Now there is growing wave to begin issuing EMV debit cards in the next two years.
PULSE says 86% of financial institutions stated that they plan to begin issuing EMV debit cards in early 2015.
Overall, 14% of all debit cards were exposed in data breaches in 2013, compared to 5% in 2012.
The resulting 2013 fraud losses to financial institutions amounted to 5.7 basis points for signature debit and 0.7 basis points for PIN debit. Compared with the prior year, PIN debit fraud loss rates remained constant at 0.3 cents per transaction, on average, while signature debit loss rates increased to 2.2 cents per transaction, up from 2.0 cents.
Issuers also reported on fraud loss rates by payment usage point. International transactions caused loss rates of 51 basis points, compared to 8 basis points for domestic card-not-present transactions and 2 basis points for domestic card-present transactions.
The PULSE study found the most common strategy among financial institutions is to provide account holders with an EMV debit card as part of their regular card reissuance cycle. Migration to EMV debit cards will begin in earnest in early 2015 and will span approximately three years, with many issuers attempting to provide chip cards to their international travelers and heavy debit users in advance of the liability shift in October 2015.
Outside of the challenges caused by data breaches, debit continued its growth trajectory in 2013. On the consumer side, the primary performance improvement was in transactions per active card per month, which rose to 20.1 in 2013 from 19.4 in 2012. Other metrics, such as penetration, active rate and ticket size, remained consistent year-over-year. There was an uptick in usage of business debit cards: transactions per active card per month grew to 14.5 from 13.5.
Continuing historical trends, signature debit declined in share of total transactions between 2012 and 2013, falling to 62 percent from 64 percent for consumer cards, and to 70 percent from 72 percent for business cards. As regulated issuers (those with more than $10 billion in global assets) receive equivalent interchange for signature and PIN transactions but incur lower costs on PIN transactions, large debit issuers now tend to prefer PIN transactions.
RESOURCES:
For more data on EMV Debit access CardData®. For information and commentary about EMV Debit visit the searchable CardFlash® Library of more than 58,000 articles published since 1995. Custom RAM Research® projects on EMV Debit are available exclusively through CardWeb.com.®
NOTES:
The 2014 Debit Issuer Study is the ninth installment in the study series. The study provides an objective fact base on debit card issuer performance and expectations for the debit card business. Seventy-one financial institutions – including large banks, credit unions and community banks – participated in the study, conducted by Oliver Wyman. Of these, 29 have at least $10 billion in assets and are therefore subject to Reg II’s interchange cap. Collectively, the participants issue approximately 142 million debit cards and operate approximately 76,000 ATMs; these cards represent approximately 45 percent of total U.S. debit transactions. The sample – the largest in the study’s history – is representative of the U.S. debit market in terms of institution type, geography and debit network participation. For additional information about the study, go to www.pulsenetwork.com/distudy.
PULSE, a Discover Financial Services company, is a leading debit/ATM network, serving approximately 6,000 financial institutions across the United States. This includes more than 4,000 issuers with which PULSE has direct relationships and 2,000 additional issuers through agreements PULSE has with other debit networks. PULSE links cardholders with ATMs and POS terminals at retail locations nationwide. Through its global ATM network, PULSE provides worldwide cash access for Diners Club and Discover cardholders through 1.3 million ATM locations. The company also is a source of electronic payments research and is committed to providing its participants with education on emerging products, services and trends in the payments industry. For more information, visit www.pulsenetwork.com.
