Hidden Debit Costs May Be Draining Millions From Financial Institutions
By CU Today Staff —
NEW YORK--A seemingly small decline in debit card authorization performance can translate into significant lost revenue for financial institutions, according to new research from PYMNTS Intelligence, which argues many issuers underestimate the true cost of relying on legacy debit processing systems.
According to PYMNTS, an avoidable false-decline rate of just 0.50 percentage points across 10 million monthly debit transaction attempts would result in roughly 50,000 legitimate purchases being declined. At an average interchange revenue of 24 cents per transaction, that equates to about $12,000 in lost revenue each month before factoring in customer service costs, reduced card usage and potential account attrition.
The report also found legacy systems can generate substantial operational expenses. PYMNTS estimated that a financial institution processing 25,000 monthly debit exceptions, with each requiring an average of 12 minutes of staff time, would consume about 5,000 labor hours monthly. At a fully loaded labor cost of $40 per hour, that amounts to approximately $200,000 per month, or $2.4 million annually. Citing Federal Reserve data, the report noted debit cards accounted for 30% of consumer payments by number in 2024, while nearly 40% of consumers used debit for their most recent non-grocery, in-store purchase.
Rather than viewing debit processing as a back-office utility, PYMNTS said issuers should treat it as a strategic revenue engine. Modern processing platforms can improve authorization rates through real-time decisioning, while features such as instant digital card issuance, digital wallet provisioning, configurable spending controls and real-time alerts can strengthen customer engagement and increase everyday card usage.
While processor conversions require careful planning—including token migration, network routing, BIN sponsorship and post-conversion performance monitoring—PYMNTS concluded that identifying hidden costs gives financial institutions a stronger business case for modernization. By measuring revenue leakage, fraud, exception handling and customer experience, issuers can better target investments that improve both operating efficiency and long-term profitability.
Originally reported by CU Today.