HOUSTON (7/12/13)--Debit card users performed more transactions and spent more per card during 2012, leading to a strong performance for debit card issuers in key areas, said PULSE's 2013 Debit Issuer Study, released Wednesday.
The average active cardholder performed 19.4 debit transactions per month in 2012, up from 18.3 transactions in 2011, said the study. As a result, the total annual amount spent per active consumer debit card rose to $8,753 from $8,326.
Penetration and active rates both improved year-over-year. Penetration increased to 77% in 2012 from 76% in 2011. Active rates rose to 68% from 66%, said the study, which was conducted by Oliver Wyman. It surveyed 64 large banks, credit unions and community banks.
Issuers also reported a decline in debit card fraud. Net fraud losses dropped 30% for both signature and PIN debit. Signature fraud losses were $0.02 per transaction, compared with $0.031 cents in 2011. PIN debit remained eight times more secure than signature debit, with fraud loss rates dropping to $0.003 from $0.004 per transaction, PULSE said.
Beyond the core debit business, issuers reported mixed outlooks on prepaid cards, chip-based Euro MasterCard Visa (EMV) cards and mobile payments.
Roughly 84% of issuers surveyed offer a prepaid card, with 73% offering gift cards. Because of low sales, issuers expressed indifference toward this product, said PULSE. By contrast, sales of general purpose reloadable (GPR) prepaid cards more than doubled in 2012-- to 36% from 19% in 2011.
Some positioned their GPR cards as supplemental accounts for existing account holders, while others targeted the cards to consumers outside mainstream banking. Financial institutions projected a 55% year-over-year growth for their GPR cards in 2013. That compares with a projected 2% decline in prepaid gift card sales.
As for the EMV standard, 95% said they are aware of payment networks' plans to shift in 2015 the liability for disputed transactions. Roughly 38% planned to issue chip-based debit cards in 2014; another 8% planned to do so in 2015. However, many were unsure how to support EMV while adhering to merchant routing choice obligations. "In this environment, more than half the issuers reported that their plan is to wait to see if the industry converges around a common solution," PULSE said.
More issuers were testing mobile solutions: 13% are participating in a mobile payments pilot, up from 9% in 2012. Large banks are the most active, with 26% testing a solution, up from 15% last year.
Many participants viewed the shift from card to mobile payments as inevitable with 93% expecting more than 5% of debit transactions to migrate to mobile in the next five years. However, they also cited a need for a compelling solution that goes beyond the novelty factor of paying with a phone to drive meaningful uptake.
News Now reported Thursday that the study also found that interchange revenue caps have impacted all issuers, whether "regulated" or "exempt" from the cap. Use the link to see the story, Debit Study: Interchange Rule Affected Regulated, Exempt Issuers.