28 Hoosier Banker January 2015 SECURITY / FRAUD The Debit Issuer Study, commissioned annually by PULSE since 2005, has made some accurate predictions. For instance the 2009 Debit Issuer Study predicted the rise of mobile banking. Seven years ago, the study identified quickservice restaurants and bill payment as important growth opportunities for debit. Eight years ago, the study stated: “Mobile devices may replace the traditional card as the primary debit transaction source.” Well, you can’t get them all exactly right. As has been the case for each year of the study, the study from 2014 presents facts about debit card issuer performance and perspectives across electronic payments. Results are gleaned from data and insights gathered from 71 financial institutions across a spectrum of type, size, location and network participation; in fact, participating financial institutions collectively represent more than 140 million debit cards and 76,000 ATMs. Some findings have been constant over the years, such as optimism about debit growth, concerns about fraud and the constant tweaking of rewards programs. The impact of major disruptive events also has been tracked and reported, such as how belt-tightening following the recession increased consumer preference for debit, and how Regulation II prompted financial institutions to reassess business strategies related to their debit programs. The 2014 Debit Issuer Study reported on the impact of another major disruptive event: high-profile data breaches. Many financial institutions are reacting by ramping up their plans to issue EMV cards – something that previously seemed stuck in neutral. The Target breach over 2013’s holidays was a motivator for financial institutions and the cardholders they serve. The highly publicized breach affected between 70 million and 110 million customers, many of whom lost both payment card data and personal information, and impacted every one of the 71 financial institutions that participated in our study. Eighty-four percent reported reissuing all cards exposed in the breach. This is far greater than the 29 percent of banks and credit unions that typically reissue exposed cards as a standard response to a breach. The year 2014 study confirms the industry is reaching a tipping point toward EMV, with 86 percent of respondents indicating that they plan to begin issuing EMV cards within the next two years, up from 50 percent in 2012. Security a key objective. The Debit Issuer Study found that issuers responded to the Target breach by re-evaluating their strategies for improving card security in 2014. After the previous Debit Issuer Study showed a drop in net fraud during 2012, fraud increased in some areas during 2013, the study showed. PIN debit fraud loss rates remained constant at 0.3 cents per transaction on average, while signature debit loss rates increase to 2.2 cents per transaction, up from 2 cents. Overall the percentage of debit cards exposed in data breaches nearly tripled in 2013. Also in 2013, 14 percent of all debit cards were exposed, compared to 5 percent in 2012. The resulting 2013 fraud losses to financial institutions amounted to About the Author Steve Sievert is executive vice president of marketing and communications for PULSE, a Discover financial services company headquartered in Houston. He joined the company in 2007 and has more than 25 years of communications and marketing experience, working for companies including Compaq Computer Corp., Texas Children’s Hospital, US Oncology and Baylor College of Medicine. He began his career as a broadcast journalist and was a sports reporter and columnist for the Houston Chronicle. Sievert is a graduate of the University of South Carolina. The author can be reached at 800-420-2122, email: ssievert@pulsenetwork.com. PULSE is an associate member of the Indiana Bankers Association. Debit Issuer Study Shows Renewed Card Security Focus
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