Federal Reserve Data on Debit Networks, Fees, and Fraud: Part One

In late December 2025, the Federal Reserve released its latest biannual Reg II Report providing insights into how debit card transaction market shares, fees, and fraud evolved across the U.S. in 2023. As policymakers, merchants, and financial institutions continue to debate the role of regulation in card payments, the data offers important context on network dynamics, cost trends, and fraud risk allocation. In this two-part blog, we will explore the report’s main findings.
 
 

Debit is Thriving

In 2023, payment card networks processed 100.7 billion debit and general-use prepaid card transactions totaling $4.7 trillion, growing at an average annual rate of 4.6% since 2021.¹ The rising importance of debit and the optimization options at merchants’ disposal makes a debit optimization strategy more important than ever.

The Continued Expansion of Card-Not-Present Transactions

CNP transactions continue to expand across use cases and ticket sizes. In 2023, CNP transactions accounted for 34.4% of total debit volume and nearly half of total transaction value. From 2021 to 2023, CNP volume grew at an annual rate of 8.2%, compared to 2.8% growth for card-present transactions.2

This shift to CNP provides merchants complexities including increased use of tokens and digital wallets. As networks further integrate these technologies, merchants face growing exposure to incremental fees tied to digital payment functionality, and challenges to routing.

Implications for Merchants: PINless Debit

The report is the first release since the Fed’s Reg II FAQ clarification – which entered into force from July 2023 – stating that “the final rule specifies that card-not-present transactions are a particular type of debit card transaction for which issuers must enable at least two unaffiliated networks”.³ Prior to the clarification, merchants’ debit routing options had typically been limited to single-message PIN authenticated card present transactions.

The clarification paved the way for PINless debit, which essentially allows merchants access to single-message debit networks – and therefore multiple routing options – for a much larger portion of their debit card transactions, particularly Card-Not-Present (CNP).
However, despite the Reg II routing clarification, the Fed report shows that in 2023 the network mix of debit transactions continued to shift towards dual-message networks where routing is not typically available for merchants. Since 2009, the dual-message share of total transactions has increased by 9%, and from 2021 to 2023, dual-message transactions grew faster than single-message transactions in both volume and value.

We believe the main reason PINless growth has been slow is that enablement can be challenging for merchants.⁴

PINless Enablement Issues

The Fed’s Reg II clarification opens the possibility for merchants to materially decrease costs with more routability and therefore competition. With the report showcasing a significant difference in costs between single-message and dual-message transactions, the business case for PINless enablement is more critical than ever.

However, the business case for PINless isn’t simple and needs to be carefully built. Challenges for merchants include internal stakeholder management, as well as external supply chain collaboration with networks, processors, gateways and POS providers.

CMSPI has significant experience developing PINless business cases for merchants since the July 2023 Reg II clarification, and in doing so, we have delivered many millions of dollars of value for merchants. The Fed report reveals a lack of engagement from merchants regarding PINless despite its potential savings; we encourage merchants to reach out to CMSPI to ensure they uncover value from their PINless debit strategy.

Conclusion

Debit transactions, in particular Card-Not-Present transactions, continue to increase in both volume and ticket size. This trend presents merchants with the on-going responsibility to review and optimize their payment strategy with PINless enablement remaining a prominent concern. In Part Two, we will dive deeper into the complexity of network and interchange fees accompanying the rising debit transactions and the liability shifts and fraud impacts that come in their wake.