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South African banks lose almost R2.6m ($160,000) a year on average in interchange revenue, according to a global analysis on the cost to card issuers of legitimate customer transactions being incorrectly blocked due to outdated fraud-detection systems.The analysis of five markets — South Africa, Ecuador, Morocco, Malaysia and Europe — by global payment technology provider BPC found that banks track fraud losses closely but rarely measure how much false declines cost them, which makes it an industry blind spot, it says.The losses for local banks are nearly four times that of European issuers ($42,000), despite about the same number of legitimate transactions wrongly being declined, because of South Africa’s higher interchange rates — a debit rate of 0.44% and credit rate of 1.48%.By comparison, the debit rate in Europe is about 0.2% and the credit rate is 0.3%.BPC cited data from research and advisory firm Datos Insights, which projects that false declines will cost the global payments industry $297bn by 2029.“Most banks have a clear view of fraud losses, but very few measure what false declines are really costing them. Every legitimate transaction that’s incorrectly blocked represents lost interchange revenue today and potentially lost customer loyalty tomorrow,” said Khurram Ahmed, senior product consultant for fraud solutions at BPC.“As payment expectations become increasingly real-time, legacy authorisation systems are creating a hidden source of revenue leakage that many issuers simply aren’t tracking. Modern authorisation platforms using real-time decisioning can significantly reduce false declines, helping banks recover revenue that is currently being left on the table every month.”BPC’s analysis models a hypothetical issuer processing 10-million debit transactions per month, assuming an avoidable false decline rate of 0.5 percentage points and an average transaction value of $30. Estimated annual interchange losses are based on publicly available interchange rates in each market.Issuers also risk losing long-term customer spending when legitimate transactions are declined, as consumers switch to an alternative payment card rather than retrying the transaction.Supporting that, Datos Insights found that 78% of financial institutions believe failed payments have a critical impact on customer experience, while one-third report losing 2%-5% of their customers because of payment failures.The Reserve Bank referred Business Day’s request for comment on the BPC analysis to the banking industry. The South African Banking Risk Information Centre (Sabric) — a nonprofit company created by major banks to help fight organised crime, digital fraud and bank-related security threats — said it had referred the query to the Reserve Bank “as the questions raised relate more specifically to payment ecosystem modernisation, payment processing frameworks and banking transaction authorisation practices. The Bank is therefore better placed to provide an informed and authoritative response on these matters”.South African banks are using sophisticated, layered measures to combat card fraud, including real-time transaction monitoring, behavioural analytics, 3D secure authentication for online purchases, biometric and in-app transaction approvals, device and malware detection, card controls and limits, and chip-based cards that are more difficult to clone.Sabric’s latest annual financial crime statistics report shows the extent of card fraud in the sector, with gross fraud losses on South African-issued credit and debit cards increasing from about R1.5bn in 2024 to R1.7bn in 2025.Losses due to credit card fraud recorded the largest proportional increase, rising by 29.3% to R739.2m, while debit card fraud losses increased by 10.9% to R1bn and remain the biggest component. However, credit card fraud accounted for about 62.9% of the overall increase in losses.Losses due to fraud on South African-issued cards arising from transactions within the country increased by 43.3% in 2025. The increase in domestic losses is possibly linked to the growing use of cards for online payments and a shift towards locally executed “card-not-present” and social engineering-related fraud.A significant proportion of fraud involving South African-issued cards occurred abroad, Sabric said. In 2025, transactions outside the country accounted for 59.2% of credit card fraud losses and 44.7% of debit card fraud losses. That shows international transactions continued to represent an important part of the card fraud risk affecting South African-issued cards, it said.In a separate statement on Tuesday, the Reserve Bank said it was withdrawing its recognition of the Payments Association of South Africa as part of reforms to modernise the country’s national payment system, “ensuring it remains safe, efficient, innovative and responsive to the needs of all users”.It said the transition would not affect the ability of consumers and businesses to transact, with everyday payment services, including card payments, electronic transfers, debit orders and ATM withdrawals, continuing to operate as normal.
