Food retailers' fraud prevention costs could potentially rise to US$3.17B -- 100 times more than the cost of fraudulent transactions -- if their signature debit card acceptance rate rose to match that of other retailers, says FMI report

Cindy Allen

Cindy Allen

LOS ANGELES , February 29, 2012 () – According to a study by the Food Marketing Institute (FMI), food retailers’ fraud prevention costs could potentially rise to as high as US$3.17 billion—100 times more than the cost of fraudulent transactions—if their signature debit card acceptance rate rose to match that at other retail sectors, Progressive Grocer reported Feb. 28.

Only 41% of debit card purchases made from food retailers were completed using a PIN number.

Eighty-five percent of all debit fraud involved signature debit transactions.

Although PIN debit transactions are more secure than signature debit transactions, banks have historically tended to promote the use of signature debit cards.

FMI reports that banks derive a larger profit from signature debit cards than PIN debit cards. In cases of signature debit card fraud, liability shifts away from the issuing entity and retailers end up absorbing more of the cost.

“Supermarkets have long encouraged their customers to enter a PIN when swiping a card because it is more secure and efficient, and we believe it’s inappropriate for food retailers to shoulder the cost burden of more fraud-prone signature cards,” said FMI Chief Executive Officer Leslie G. Sarasin.

She added, “Intervention in the debit card market was absolutely necessary to increase competition and efficiency in what has been, and remains, a broken market.”

The FMI has sent a letter to the chairman of the Federal Reserve System Ben Bernanke requesting that, prior to finalizing an interim final rule concerning adjustments to swipe fee fraud provisions, the board review the costs of preventing debit card fraud that are currently borne by supermarkets

The primary source of this article is Progressive Grocer, Deerfield, Illinois, on Feb. 28, 2012.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.

Share:

About Us

We deliver market news & information relevant to your business.

We monitor all your market drivers.

We aggregate, curate, filter and map your specific needs.

We deliver the right information to the right person at the right time.

Our Contacts

1990 S Bundy Dr. Suite #380,
Los Angeles, CA 90025

+1 (310) 553 0008

About Cookies On This Site

We collect data, including through use of cookies and similar technology ("cookies") that enchance the online experience. By clicking "I agree", you agree to our cookies, agree to bound by our Terms of Use, and acknowledge our Privacy Policy. For more information on our data practices and how to exercise your privacy rights, please see our Privacy Policy.