Fed finds slower debit growth, rising fraud losses, steady interchange

The Federal Reserve on Dec. 19, 2025, published its long-anticipated biennial report on debit card transactions, offering detailed insight into how Americans pay with debit and prepaid cards and how related fees and costs have evolved through 2023.

The report fulfills a statutory requirement under the Electronic Fund Transfer Act and provides data on interchange fees, issuer costs and fraud losses from the nation's largest debit card issuers and payment networks.

The Fed found that total debit and general-use prepaid card transactions grew more slowly during 2021–23 than in prior years, with the roughly 100.7 billion transactions in 2023 reflecting average annual growth of about 4.6 percent. This, according to the Fed's research, is significantly slower than the historical pace before 2021. The total value of these transactions also grew, but at a reduced rate relative to trends seen in the previous decade.

Fees under Reg II largely unchanged

Interchange fees, the amounts merchants pay card issuers for processing debit transactions, totaled $34.12 billion in 2023, up modestly from prior years with an average annual increase of 3.9 percent since 2021, the Fed noted. Fees on transactions covered by Regulation II, the Fed's implementation of the Durbin Amendment, have remained largely unchanged since the regulation's 2011 adoption.

For covered transactions processed on dual-message networks such as signature-authenticated debit, average interchange fees remained near $0.22 to $0.24 per transaction, while exempt transactions, including some prepaid cards, continued to command higher fees averaging $0.52 per transaction, the Fed added.

Fraud a persistent, rising source of losses

The data also highlight persistent and rising fraud losses, which are tracked as a share of transaction value. In 2023, fraud losses across all covered debit transactions were 17.6 basis points, or about $17.63 per $10,000 in transaction value, more than double the level seen in 2011.

In addition, the Fed found that prepaid card transactions exhibited especially high fraud loss rates. Importantly, the burden of these fraud losses has shifted over time: merchants absorbed nearly half of fraud losses in 2023, up from less than 40 percent in 2011, while issuers and cardholders absorbed the remainder.

Issuer costs for processing transactions continue to remain low, with average authorization, clearing and settlement costs per covered transaction measured at roughly four cents in 2023. The Fed concluded that these costs, adjusted for fraud losses, indicate that the existing regulatory interchange fee cap continues to exceed issuer costs in the vast majority of covered transactions.

Debate over fees and regs continues

The release of the report comes amid ongoing debate over debit card fees and regulations. Merchants and industry groups have recently urged the Federal Reserve to implement or revisit proposed caps on debit interchange fees, arguing that higher costs are passed on to retailers and consumers. Retailer coalitions have pushed for action to counter growing interchange fees, while other stakeholders stress the importance of balancing fee caps with access to debit services.

The Federal Reserve's report thus provides not only a snapshot of current payments system dynamics but also critical empirical grounding for policymakers and industry participants engaged in ongoing discussions about how best to regulate debit card markets and support secure, efficient payment options for consumers and businesses alike.

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