Debit Issuers Turning The Tech Tables On Fraudsters

That the pandemic has been a fraudster’s playground is not in doubt. Were it not for a flurry of digital transformation all through 2020 the frightful fraud scene might’ve been worse.

PYMNTS January 2021 Next-Gen Debit Tracker® done in collaboration with PULSE, A Discover Company, notes, “Banks, government agencies and retailers have scrambled to adjust to consumers’ digital spending and payment shifts during the pandemic, but doing so swiftly has presented security challenges. Merchants handling myriad online orders must quickly and safely process payments, but one recent report found that 83 percent of top U.S. retailers have online system vulnerabilities that could leave them open to fraud. They must also navigate these fraud risks while offering the payment methods customers crave — especially debit and contactless options.”

Considering that 80 percent of customers prefer debit cards for everyday purchases, and that the average customer spends up to 100 percent more when using a debit card rather than cash, as PYMNTS reported in early January, there’s been a big consumer swing toward debit.

Where consumer spending goes, thieves follow. The latest Next-Gen Debit Tracker® delves into fraud fighting on the debit front as new and better tech makes spending your own money safer.

Sensible Debit Needs To Be More Secure

In one 2020 study conducted by PYMNTS, 55 percent of U.S. consumers identified themselves as “debit-centric” compared to the 33 percent preferring credit. Debit’s popularity is easy to understand in a recessionary climate, and its popularity makes it a popular target, too.

“Skimming scams, prepaid card fraud and ATM attacks have risen significantly since the pandemic’s onset, with fraudsters following consumers’ lead in focusing on debit,” according to the January Next-Gen Debit Tracker®. “Successfully fending off these attacks is thus becoming crucial to businesses and FIs in preventing financial losses and retaining customers’ loyalty. Consumers are beginning to seek more innovative security measures attached to their debit cards, with the previously mentioned PYMNTS study finding that 39 percent of ‘debit-centric’ users who recently switched FIs were drawn in by more-robust fraud protection measures.”

Chris Tremont, executive vice president of virtual banking for Radius Bank, confirmed the debit trend, telling PYMNTS, “People [are] being more conscious of their spend and, in some cases, [are] maybe even spending less, but you still have to spend money in certain areas. So maybe there is that flight to safety and security [of using] a debit card tied to the deposits I have in my checking account versus, maybe, overextending myself using a credit card.”

Tremont said Radius Bank is also looking at moving certain debit-related features online, giving consumers more even more control over their own money — and control is what they want.

Radius is also working on digital issuance. “Not just putting your card in Apple Pay or Google Pay,” Tremont said, “but getting a digital version of your plastic, your physical plastic that you put in your wallet, sent right to your bank’s mobile app and getting it faster, on demand.”

Analytics ‘Essential’ To Debit’s Future

The draw of debit is always easy to understand in recessionary climates, like the one we’re in now. Making debit usage safer and more convenient is where many R&D dollars are now going.

“Consumers are continuing to choose debit over credit in higher numbers, but some are also concerned about being adequately protected when making online transactions,” per the Next-Gen Debit Tracker®. “The share of those troubled by the prevalence of debit-focused scams is higher when these cards are attached to contactless payment methods, such as tap-and-go cards, with 26 percent of consumers surveyed stating that they “strongly” agreed that being able to use these methods easily could put transactions at risk for fraud.”

Debit scams that target touchless seem like insult added to injury, and they are. It’s why more banks and financial institutions (FIs) are upping their debit anti-fraud protections.

As the January Tracker concludes, “Adopting new technologies that can give entities holistic looks at the risks associated with new payment solutions or help them more quickly verify consumers’ identities can enable them to keep these transactions safe. Tools such as data analytics and automation that can be broadly applied — and make use of a wider range of data — could be essential to the future of debit-related payments.”