Newsroom

September 18, 2014

Fed: Card payment fraud losses $1.57B in 2013

NAFCU Chief Economist and Director of Research Curt Long said the Federal Reserve's data on 2013 debit card transactions shows the incidence of fraud throughout the payments system is rising and cost $1.57 billion in losses last year.

That total includes fraud losses associated with debit and prepaid cards suffered by merchants, card issuers and consumers. Long found that the loss amount per fraud incident is decreasing, but that fraudulent transactions are becoming more common.

The report also showed that card issuers absorbed 61 percent of losses on debit card fraud, as compared to 36 percent for merchants.

Long found that debit transaction volume increased 6.8 percent – a slower rate than in previous years. Card-not-present volume grew by 18.1 percent, and card-present volume grew 5.2 percent. Yearly prepaid card use slowed significantly: it went from 36.2 percent annual growth between 2009 and 2012 to 4.7 percent between 2012 and 2013.

Average authorization/clearing/settlement (ACS) costs – excluding fraud – for issuers covered by the interchange fee rule fell from $0.05 per transaction in 2011 to $0.044 per transaction in 2013, the Fed reported.

Long also found that interchange fees for exempt card issuers are declining. Fees on signature-based transactions declined from 54 cents per transaction in 2011 to 50 cents in 2013, while fees on PIN transactions declined from 32 cents to 28 cents. NAFCU, which opposed the Fed's low fee cap, has warned exempt issuers will be affected as market forces drive the fees down.