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Point-of-sale terminal makers such as VeriFone Systems Inc. and Ingenico Group are cashing in on the conversion of U.S. payment cards to the EMV chip card standard. On the other side of the card industry, the big plastic card manufacturer CPI Card Group Inc. also is enjoying a chip-induced windfall.
Littleton, Colo.-based CPI, which filed for a possible initial public offering of stock this summer, said in a prospectus that EMV cards accounted for 37% of its net sales of $338.1 million for the 12 months ended June 30.
CPI produced more than 360 million credit, debit, and prepaid cards in 2014 for 3,200 banks, credit unions, and prepaid card issuers. The company claims it makes 35% of all financial payment cards in the U.S., “which we believe gives us the No. 1 market position by unit volume.”
An amended registration statement CPI filed Sept. 4 with the Securities and Exchange Commission shows the company expects to get a lift from the EMV conversion for quite a while. CPI commissioned Annapolis, Md.-based First Annapolis Consulting Inc. to study the card market, and according to the firm’s analysis, EMV cards accounted for only 2% of all financial cards in 2013 but will command an estimated 42% share this year and 71% by 2019.
Driven by normal replacements, replacements due to fraud, and the beginning of the EMV conversion, the financial card market, excluding services, more than doubled from $180 million in 2013 to $371 million in 2014. “The conversion of U.S. financial payment cards to the EMV standard is expected to further increase this market size by more than three-fold to $1.2 billion by 2019,” the filing says.
CPI sold 62.5 million EMV cards for the U.S. market in 2014, compared with just 5.6 million in 2013.
EMV cards are much more expensive than the magnetic-stripe cards they’re replacing. CPI says that, excluding services, industrywide average prices are 20 cents per card for a mag-stripe card, $1 for a contact EMV card, and $2 for a dual-interface card that supports both contact and contactless payments. CPI notes that actual prices vary significantly depending on issuer and order size, card features and finishes, and chip features.
Most U.S. EMV cards are of the contact variety, but CPI expects dual-interface cards to grow in popularity. “We believe that as the U.S. market migrates to the EMV standard, dual-interface EMV cards … will gain share relative to contact EMV cards, further expanding the dollar value of our market opportunity,” the prospectus says.
Affiliates of Tricor Pacific Capital Inc., a private-equity firm with offices in Lake Forest, Ill., and Vancouver, British Columbia, own 91% of CPI’s preferred stock and 83% of its common stock.
