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Food Retailers Issue Report Demonstrating the Costs Associated with Shouldering Debit Card Fraud-Prevention

March 5, 2012 Comments off

Food Retailers Issue Report Demonstrating the Costs Associated with Shouldering Debit Card Fraud-Prevention
Source: Food Marketing Institute

The Food Marketing Institute (FMI) today issued a report that examines the extent to which FMI’s food retailer members are paying a disproportionately higher amount in fraud prevention costs compared to the actual rate of debit fraud in their stores. Signature debit transactions account for 85 percent of all debit fraud, while 41 percent of purchases with debit transactions are completed with a more secure PIN debit transaction.

Debit Card Fraud and the Impact of Regulations on the Grocery Industry estimates the cost of fraud across the entire food-retailing sector. The FMI study points out that if food retailers accepted debit cards at the same rate as other stores accept them, they could be paying as much as $3.17 billion in fraud prevention costs, more than 100 times what they actually lose from fraudulent transactions. In fact, 85 percent of all fraudulent debit transactions involve signature debit.

Despite the higher frequency of fraud, banks have historically encouraged consumers to use signature debit cards, which are more profitable for banks than PIN debit cards. Merchants bear more of the cost of fraud on signature debit cards, as liability shifts away from issuers.

+ Full Report (PDF)

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