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ICBA Payments Survey: Fraud and Compliance Costs Challenge Community Bank Payments Strategies

Washington, D.C. (October 13, 2011)— Community banks’ payments strategies are challenged by increased fraud and compliance costs, according to a nationwide survey released today by the Independent Community Bankers of America (ICBA). The 2011 ICBA Community Bank Payments Survey, conducted every two years, revealed that more than 25 percent of respondents ranked compliance costs as their top threat and 75 percent cited it among their top three.

“The 2011 ICBA Community Bank Payments Survey confirmed that increased fraud losses—coupled with overly-burdensome regulation—is of serious concern to Main Street community banks,” said Viveca Y. Ware, ICBA senior vice president, regulatory policy. “Compliance costs also represent a large threat to community banks’ payments strategies. Policymakers need to realize that regulation, especially when dealing with revenue streams, will impact Main Street.”

As a result of increased fraud and increased regulation, community banks are reporting declining payments revenue. In fact, 40 percent of respondents indicate that their consumer payments revenue has decreased over the past year, with 10 percent reporting a significant decrease. All the while, debit card and check-fraud losses continue to escalate.

Nearly every community bank surveyed was affected by debit card fraud, with 95 percent reporting an associated monetary loss from a customer's debit card last year, an increase of 28 percent since 2009. Ninety-two percent of community banks reissued a debit card last year as a result of fraud. Check fraud also faced a sharp increase, with 76 percent of community banks experiencing monetary losses due to check fraud, an increase of 20 percentage points from 2009.

Other findings from the 2011 ICBA Community Bank Payments Survey include the growth rates for these emerging payments products:

  • Debit cards: Debit cards continue to rank as the most important payments product or service for community banks, pulling in a mean score of 1.16 points (on a five-point scale, with 1 being “very important” and 5 being “not important at all”) among the nearly 100 percent of banks that offer them.

  • Person-to-person (P2P): 27 percent of community banks currently offer this; an additional 33 percent plan to offer it by 2013.

  • Consumer remote deposit capture: 25 percent of community banks currently offer this; an additional 20 percent plan to offer it by 2013.

  • Mobile payments: Nearly 15 percent of community banks currently offer this; an additional 50 percent plan to offer it by 2013.

"Community banks remain committed to providing the payments products and services their customers need and demand, but increased regulation and soaring fraud costs, place additional pressure on community banks’ payments strategies," said John Buhrmaster, chairman of the ICBA Payments and Technology Committee and president of 1st National Bank of Scotia, N.Y. "The ICBA survey released today demonstrates the importance of debit cards as a valued payment method for community banks and their customers. Amidst the fraud and compliance challenges, community banks remain committed to serving Main Street America."

For more information, visit www.icba.org/publications/paymentssurvey.cfm.

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