Banks profit six times their costs as merchants absorb 50% of debit fraud
A new report reveals shifting trends in debit card fraud and transaction costs over the past decade. Merchants now bear nearly half of all fraud losses, while banks see rising profits from interchange fees. The data highlights a growing burden on both businesses and cardholders.
In 2023, merchants absorbed 49.9% of debit card fraud, up sharply from 38.3% in 2011. Meanwhile, cardholders faced a bigger share of losses too—rising from under 1.8% to 21.8% over the same period. Banks, however, saw their share of fraud costs drop from 59.8% to just 28.3%.
Transaction processing costs have fallen steadily since 2009. Authorization, clearing, and settlement expenses dropped from around $0.08 per transaction to $0.041 in 2023. High-volume issuers achieved the lowest costs at $0.036, while smaller banks averaged $1.088. Despite lower costs, banks earned far more from interchange fees. Large institutions made roughly six times their processing costs in revenue. The typical regulated fee exceeded actual expenses for 80.1% of issuers, covering 99.2% of transactions. Profit margins on these fees neared 500%.
The findings show a clear shift in who bears the cost of fraud. Merchants and cardholders now shoulder a larger portion, while banks benefit from higher revenue and lower expenses. The trend suggests ongoing financial pressure on businesses and consumers in the debit card market.
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