Security remains "top of mind" for cardholders, Dave Schneider, president of Pulse, the Houston-based electronic funds transfer network owned by Discover Financial Services, said last month at the 2008 Pulse Conference in Las Vegas.
Meanwhile, fraud-loss rates for signature- and PIN-debit cards have increased significantly since 2005, with PIN-based point-of-sale debit fraud increasing at a higher rate than signature-debit fraud, according to Oliver Wyman Group's "2008 Pulse Debit Issuer Study."
Oliver Wyman released the study April 29 at the Pulse conference. It found the loss per card for signature-debit increased 52%, to $1.92 in 2007 from $1.26 in 2005. The loss per transaction increased 23%, to 2.1 cents from 1.7 cents.
The loss per PIN-debit card increased 110%, to 19 cents from 9 cents, and the loss per PIN-debit transaction increased 67%, to 0.5 cents from 0.3 cents in 2005, the study found.
All of the surveyed issuers had cards that potentially were compromised by data breaches in 2007, says Tony Hayes, a partner in the Retail Banking practice of Oliver Wyman, a New York-based management-consulting firm.
While all the surveyed institutions received notices regarding potentially compromised cards, "there's a small percentage of those that may have had losses," he says.
Nearly half, 49%, of surveyed institutions expect signature-debit loss rates to worsen, while 37% expect PIN-debit loss rates to rise, according to the study.
Issuers should remain diligent about policing fraud even if their loss rates are not high, says Hayes. "Issuers that take a proactive approach to risk management can reduce those losses, and, conversely, issuers with a laissez-faire approach are much more likely to experience meaningful loss rates," he says.
To stem consumer debit-fraud fears, Schneider recommends financial institutions confront consumer disinformation about fraud.
Disinformation could include the belief debit fraud rates are higher than they are or the notion that debit cards are unsafe to use.
Consumers also have a responsibility to keep their debit card information safe, he adds.
Pulse commissioned the study of 62 financial institutions. Oliver Wyman conducted the nationally representative study in February
