2015 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions

by Sarah Grotta 0

The Fed’s biennial report on debit card activity was released on November 30, 2016. It is chock full of information regarding the size of the market, transactions, interchange and fraud data. There are also statistics regarding the costs issuers pay to support debit transactions. This is a good source of industry data for debit issuers to get a broad understanding of the market but also to understand what policymakers and regulators will have as they look at the debit market. (It is import to note that some of the data is inclusive of not just debit, but also prepaid).

One important insight the report provides is the growth of single message vs. dual message transactions as a result of some of the tumult occurring in the market around card routing:

Dual-message networks experienced slightly slower transaction volume growth than single message networks from 2014 to 2015, with growth rates of 6.7 and 7.1 percent, respectively.

This is the first time since data collection began in 2009 that transaction growth for single message networks has exceeded transaction growth for dual-message networks.

The report also offers information on industry-wide fraud losses:

The Board estimated debit-card fraud losses to all parties (merchants, cardholders, and issuers) increased by 44 percent from 2013 to $2.41 billion in 2015, with an average loss of 10.3 basis points (0.103%) as a share of transaction value as compared to 8.0 basis points (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. The median covered issuer had average fraud prevention and data security costs of 1.9 cents per transaction.

If you are interested in the full report from the Fed, that can be found here.

Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group

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