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Report: Global smart card shipments will overtake mag-stripe by 2015

August 10, 2011

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Smart card shipments, which include contactless payment cards, EMV and non-EMV payment cards, will reach one billion during 2011, according to a recently released report from ABI Research, a market intelligence company specializing in global connectivity and emerging technology.

SBI Cards, a joint venture between State Bank of India and GE Capital, has announced that is has migrated to the EMV platform for the majority of its new customers and cards. It is the first credit card company in India to do so.

“The launch of the EMV chip-based cards for over 85 percent of our new cards will help our customers with greater security features and also help us launch more relevant offers for our customers. We will move to EMV for 100 percent of all new customers and cards within a few weeks,” said Kadambi Narahari, CEO, SBI Cards.

ABI Research forecasts that smart card shipments will overtake mag-stripe card shipments by 2015. Smart cards are being endorsed over mag-stripe cards, especially in developing countries, because of the enhanced security and widespread adoption.

“The entire banking population worldwide is increasing,” said Phil Sealy, research analyst, AutoID and Smart cards. “As countries become developed, the demand for banking services increases. For the banks, the primary reason for EMV migration is that EMV provides a higher level of security over mag-stripe cards.”

Global smart card integration: Why is the U.S. lagging behind?

China alone has 2.3 billion payment cards currently in circulation, all of which will need to be replaced by smart cards in China’s effort to undergo a complete transition to smart cards by 2015.

Although smart card growth is expected to accelerate rapidly, mag-stripe cards are not disappearing any time soon.

“Mag-stripe cards still have a stronghold in the payment card market, and will still account for 50 percent of all cards in circulation in 2016,” Sealy said.

CSF International sells software for ATM driving and card management globally and supports EMV technology in countries such as Saudi Arabia, Bulgaria and Romania, where the technology has already taken hold.

Bejan Nouri of CSF International said the U.S. has been slow to adopt EMV because of the high costs associated with implementation. All devices, from retail POS systems to ATM card readers, would have to be upgraded to support the technology, as would any issuing software.

“EMV migration is not cheap. Fraud has been the greatest factor in the need for smart cards, and we’ve seen successful implementation of the technology overseas, and the people that have tried to compromise those types of cards have been unsuccessful, so now they’re eyeing the U.S.,” Nouri said.

U.S. Bank, JPMorgan Chase & Co. and Wells Fargo are among the few banks that have already rolled out EMV cards in the U.S., targeting wealthier customers and customers who travel abroad.

“For widespread adoption to take place in the U.S., it would make sense for those at the top to do a comparison of the amount we’re losing each year in terms of fraud losses versus what it would cost to implement EMV. If the number of losses is greater, then logically, it would make sense to bite the bullet,” Nouri said.

Nouri also pointed out that the banks currently issuing EMV cards in small batches to a specific demographic may face issues with denial of service from its other customers.

Curt Binns, executive director of ATMIA Canada, said Canadian FIs and ISOs have come to terms with the costs to migrate to EMV.

“I don’t know why the U.S. isn’t all over this. It’s another part of the evolution of the payments system. I think the worldwide shift to EMV is inevitable because there will come a time, especially for travelers who come into Canada, where EMV is 100 percent and their cards won’t be accepted,” Binns said.

Binns warned that although EMV global adoption is imminent, no one should fool themselves into thinking the technology will eliminate fraud losses altogether.

“There are bad guys out there today working 24/7 to figure out ways around the chip,” Binns said.

For more information on this topic, visit our EMV research center.

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