Future U.S. EMV Card Shipments Could Garner A Larger Share: Report

Shipments of smart cards capable of payments that adhere to the Europay-MasterCard-Visa (EMV) standard are expected to be six times greater in 2014 than in 2013 in the United States, says a new report from ABI Research.

That total, forecast to be 154 million this year, is not a staggering amount, especially in light of the estimated 1 billion credit and debit cards in circulation. “That’s not a massive number,” Phil Sealy, ABI Research senior analyst, tells Digital Transactions News about this year’s tally.

In his research, Sealy says 1.67 billion smart cards were shipped globally in 2013, primarily driven by shipments to China, which is in the midst of a smart card conversion. In 2013, 442 million smart cards shipped to China, he says. In the next few years, the U.S. conversion to EMV, with the first measurable impact coming in the form of a liability shift in October 2015 to the party not prepared for EMV, could have a similar impact, Sealy says.

More companies now expect that the U.S. payment card industry conversion is going to happen, he says. “It’s not just a good thing for the United States, but the EMV market worldwide.”

ABI forecasts that global EMV card shipments will reach 3.3 billion in 2019. Sealy would not share a U.S.-specific forecast. From a smart card perspective, the United States has been a sleeping giant in terms of the amount of cards, Sealy says. “China is the only other country with more cards in circulation.”

EMV card issuance in the United States has been slow going so far, but Sealy expects it to increase in the second half of 2014.

But the U.S. payment card industry is not just about getting chip cards into consumer wallets. It will need places to use these cards, meaning merchants have to install EMV-capable point-of-sale terminals.

As explained this week at the RetailNOW conference in Orlando, Fla., merchants will have to consider factors that include what kind of merchandise the retailer sells, how well the merchant knows his customers, how much recurrent business the merchant gets, how much counterfeit fraud the merchant sustains, how many locations the retailer has where banks are issuing the most EMV cards, and what type of point-of-sale configuration the retailer is using.

Indeed, there are an estimated 8 million POS terminals in the United States, says research firm Javelin Strategy & Research. Pleasanton, Calif.-Javelin forecasts that not until 2018 will nearly all—96%—of U.S. credit cards have chips in them.

Many issuers are expected to begin converting credit cards first, a not uncommon decision for markets converting to EMV, ABI Research’s Sealy says. Debit card issuance is expected to trail, especially given the multiple debit-network routing options mandated by the Durbin Amendment. For the most part, only technical matters related to that routing are outstanding.