Federal Reserve Board: Debit-card fraud losses jump 44% in 2015

by Talk Business & Politics staff ([email protected]) 202 views 

Debit-card fraud losses increased 44% in 2015, while debit card issuers’ average cost per transaction fell slightly in the same year, according to a news release from the Federal Reserve Board.

Every two years, the board publishes a report on debit card transactions, including information on volume and value, interchange fee revenue, issuer costs and fraud losses.

Between 2013 and 2015, debit-card fraud losses rose 44% to $2.41 billion. The average debit-card fraud loss as a share of the transaction value rose 10.3 basis points or 0.103%, from eight basis points or 0.08% in 2013.

“The median covered issuer’s average fraud loss as a share of transaction value was 6.6 basis points (0.066%), up from 5.1 in 2013,” according to the release. “The median covered issuer had average fraud prevention and data security costs of 1.9 cents per transaction.”

Meanwhile, the average cost per debit card transaction fell slightly to 4.2 cents, from 4.6 cents in the same period. Those with the most debit card transactions generally had the lowest cost per transaction.

As in previous years, debit card transaction costs “varied greatly” among issuers in 2015, according to the report. “The median issuer had an average ACS cost of 12.3 cents, and the issuer at the 75th percentile had an average ACS cost of 30.5 cents.”

“Sixty-six percent of covered issuers had average ACS costs, including issuer fraud losses, below 21 cents plus five basis points (0.05%) of the value of a transaction (the base component of the interchange fee standard) in 2015,” according to the release. “This proportion is slightly higher than the 64% of covered issuers with average ACS costs below the maximum interchange fee in 2013. Covered issuers with average ACS costs below the maximum interchange fee in 2015 processed more than 99% of all reported covered transactions, the same proportion as in 2013.”

According to board regulation, debit card issuers cannot charge a fee exceeding 21 cents, plus 0.05% of the transaction and 1 cent for fraud protection. The regulation doesn’t apply to debit card issuers with assets of less than $10 billion, specific government-issued debit cards and some prepaid cards.