U.S. financial institutions substantially increased issuance of chip debit cards in 2016 and experienced reduced fraud losses, according to the 2017 Debit Issuer Study commissioned by the debit/ATM network PULSE.

Since the fraud liability shift for most debit transactions took effect in 2015, an estimated 80 percent of U.S. debit cards have been converted to chip cards. The study also found that fraud loss rates dropped by approximately 28 percent in 2016 compared to 2015 levels.
Nonetheless, the 12th annual Debit Issuer Study confirmed that fraud continues to challenge issuers. U.S. financial institutions lost an estimated $900 million to debit card fraud in 2016.

“The financial services industry has taken a number of measures that likely impacted the reduction in fraud losses for debit card issuers,” Jim Lerdal, vice president of fraud and risk management for PULSE, said in a statement. “Among them are the conversion to chip debit cards, greater use of tokenization in mobile commerce and continued investment in fraud-mitigation solutions.”
But reducing card fraud is not a simple prospect.
“The more financial institutions tighten fraud-tolerance limits, the more they risk negatively impacting the cardholder experience,” said Lerdal. “It is a balancing act because declining potentially fraudulent transactions could lead to ‘false positive’ fraud identification, which can frustrate account holders and potentially drive them to other methods of payment.”
The study also found enrollment of debit cards into Apple Pay increased 80 percent in 2016. Key findings include:

• Three out of four issuers now support debit cards being loaded into at least one mobile wallet.
• Enrollment among consumers also has increased, with Apple Pay remaining the most popular mobile wallet, which includes Android Pay and Samsung Pay.
• Usage, however, of debit cards in wallets remains low. Combined, Apple Pay, Android Pay and Samsung Pay account for only about one-quarter of 1 percent of U.S. debit transactions.

Issuers have put chip debit cards in the hands of consumers at a faster pace than anticipated in last year’s study. “Chip-on-chip” transactions – those conducted with chip-enabled cards at chip-enabled terminals – amounted to 30 percent of all debit transactions in January 2017, a 650 percent year-over-year increase.
“The growth of chip-on-chip transactions is likely to slow as the card base migration concludes,” a partner at Oliver Wyman who co-led the study, said in a statement. “In addition, many transactions are not chip-eligible, such as online purchases and fuel dispenser transactions.”