Debit's growing dominance
While the payments industry may be enthralled by the potential of blockchain, the move to digital wallets and the merits of real-time transactions, the backbone of the U.S. payments landscape remains the checking account and debit card.

The debit card is growing in popularity in the U.S. for retail transactions, and consequently FIs are making debit a top priority. However, the strength of debit is a double-edged sword, as fraud is also a pervasive problem, particularly for PIN-less debit transactions.
Chart: Debit's a top priority for FIs
In a comprehensive study of nearly 300 FIs conducted by the American Bankers Association and Capital Performance Group, debit topped investment priorities for retail banks for 2017, with 77% of FIs considering debit to be a high or very high priority. This beat out many buzzworthy areas of payments innovation including mobile payments (68%), mobile P-to-P (55%), remote deposit capture (56%) and real-time payments (45%).

However, there is a diminished focus on debit with commercial institutions, with only 62% of FIs stating debit cards are a high or very high priority for investment. For commercial institutions, the top priority is ACH (84%), followed by remote deposit capture (67%), reflecting the desire to increase the velocity of B-to-B disbursement and to move away from paper checks.
Chart: Credit unions lead debit adoption
The debit card landscape has been shifting over the past few years.

According to recent research by Auriemma Consulting Group, which surveyed U.S. debit card holders, credit unions now have the largest share of debit cards, reaching 19%, up 7 percentage points on the previous year. They have taken the lead from Bank of America which, while remaining the largest single issuer of debit cards, is now 3 percentage points lower than credit unions and has taken a sizable drop in market share of 11 percentage points from 2016 figures.

Auriemma states that not only are credit unions increasing in market share, but cardholders are more frequently citing credit union-issued debit cards as their most frequently used card.
Chart: Debit card usage on the rise
Debit cards are also more frequently used, being the most popular way for consumers to pay over the last three years, according to Auriemma Consulting Group.

Furthermore, 2017 saw a significant jump in adoption, to 61% of transactions in Q4 2017 from 52% of transactions in Q4 2016. There was also a year-over-year increase in cash usage for transactions, growing to 12% in Q4 2017 from 9% of transactions in Q4 2016. These increases have been at the expense of credit card transactions, which have been squeezed down to 24% of transactions in Q4 2017 from 36% of transactions in Q4 2016. Whether this was a result of tightened access to consumer credit or a desire for greater consumer control was not immediately apparent from the research.
Chart: Fraud worries debit issuers
However, the popularity of debit cards comes at a cost.

In a Pulse / Discover survey published September 2017, fraud was by far the greatest pain point cited by debit card issuers — 90% of issuers stated that fraud was a problem. Nothing else came close to that level of concern. The second largest pain point cited was changing ecosystems (30%), internal systems (27%) and regulation (25%).
Chart: PINless debit is a fraud factor
Given the frequency of PIN-less debit transactions and the lack of authentication of the cardholder, PIN-less debit has a significantly higher level of fraud associated with it compared to PIN debit.

Pulse's September study calculates fraud losses per PIN-less debit card transaction at $0.018, compared to just $0.006 for PIN debit transactions. At 14 PIN-less transactions per month, nearly twice as many as PIN debit, the annual net fraud loss to PIN-less debit is calculated to be $3.22 per card, nearly six times higher than the 58 cents that PIN debit costs in annual fraud losses per card.