Consumers are changing their buying habits and including more online and mobile purchases. Debit cards are less likely to be used in those channels than credit cards due in part to their concerns about the safety of their transactions and usability of their cards.
A new research report, Operational Excellence: The Best Debit Marketing Strategy, recommends that the best way to increase debit card usage and customer retention is to improve dispute handling and reduce the incidence of false positives in fraud detection.
"Debit has gotten a bad reputation in the popular press for being unsafe and less accepted, particularly in digital channels. To counteract this sentiment, banks and credit unions are re-examining their approach to handling cardholder disputes to make it less disruptive to consumers and the underlying activity in their checking accounts. Issuers are also focused on fine-tuning their transaction monitoring tools to protect transactions without being so restrictive as to turn away too many legitimate transactions," commented Sarah Grotta, Director, Debit Advisory Service and author of the report.
Highlights of the report include:
- Decline in the use of debit cards compared to credit cards for retail purchases in the United States
- Transaction types that consumers prefer in digital channels
- Trends and best practices in handling debit card disputes
- The rising risk of "friendly fraud"
- Discussion regarding the use of data analytics to curtail false positives.
1. Executive Summary
3. The Reasons for the Decline in Debit Card Growth
4. Disputed Transactions
5. The Problem Purchase: Disputes and Fraud
- "Friendly Fraud"
6. False Positives
List of Figures
Figure 1: Quarterly Growth Rates of Global Network Transactions: Debit Cards vs. Credit Cards, 2013-2017
Figure 2: U.S. Consumers’ Use of Debit Online, 2016
Figure 3: Dispute Timeframes and Associated Liability
Figure 4: Debit Card Reported Lost or Stolen or Had Actual or Potential Fraudulent Charges in the Last Year
Figure 5: Fraud Losses by Transaction Party as a Percentage of Dollar Value