Despite increasing fraud attempts in 2008, fewer banks were forced to reissue large blocks of debit cards, and the average losses fell, according to the Pulse Network's 2009 Debit Issuer study.

The average loss per signature debit card dropped to $1.81 last year, from $1.92 in 2007, the study said. Average losses for PIN-debit cards fell to 15 cents per card, from 19 cents.

"What we're seeing is that the industry is working very diligently in preventing payment card fraud, and that is having an effect," Cindy Ballard, a Pulse executive vice president, said in an interview.

The study, released this month, found that fewer financial institutions had reissued large blocks of cards after data breaches in 2008.

Of the financial institutions surveyed, 5% reported having to reissue large blocks of cards due to data breaches, compared to 25% in 2007. Thirty-seven percent said they had reissued cards in 2008 after transaction monitoring indicated they were being used fraudulently, compared to 40% the previous year.

Debit card issuers expect transaction volume to grow 7% this year as the recession prompts more people to use debit instead of credit. Ballard said that volume growth could turn out to be even higher if people continue shifting their spending to debit.

Seven percent "shows consumers are using debit cards for really a large portion of their everyday necessary expenses," she said, "and I think that will continue."

The New York research and consulting company Oliver Wyman surveyed 73 financial companies for Pulse, the Houston debit network operator that is owned by Discover Financial Services. The participants, including large banks, community banks and credit unions, collectively issue 94 million debit cards and operate 61,000 automated teller machines. The report did not name the participants.

The financial companies said they had 8% overall transaction growth in their debit card programs from July to December 2008. PIN-debit transaction volume grew 15%, and signature-debit 4%.

The average debit purchase fell in 2008 to $42, from $43 the year before.

The banks said that several factors contributed to the decline, including more use at grocery stores and the falling price of gasoline in the second half of last year.

Ballard said that average ticket size is a new category in Pulse's annual report.

Debit card penetration, which the report defined as the percentage of eligible account holders who have a debit card, was 73% in 2008, unchanged from 2007.

Consumers are using their debit cards more often. The report found that people initiated an average of 17.3 debit card transactions per month in 2008, up from 16.6 the prior year. Use increased at big banks and community banks, but declined to 13.6 transactions per month at credit unions, from 16.6 in 2007.

Fifty-three percent of issuers were participating in a surcharge-free ATM network, down from 56% in 2007. The decline was driven largely by big banks; 31% of big banks were participating in such networks last year, compared to 47% the year before.

The top issuers had an average penetration rate of 91%. The increasing use of instant debit card issuing systems at branches may have been a factor in improved card penetration and activation rates, the report said.

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