Much of the focus on the microchip shortages has been on
"This is a global challenge. Everyone we speak with is dealing with the same issue," said Jason Bohrer, president and CEO of Sentry Interactive, an Austin, Texas, workplace automation company. Bohrer is executive director of the U.S. Payments Forum, based in Englewood, Colorado. Formerly the EMV Migration Forum, the
The payments industry has been
"The entire payments industry relies on semiconductors, chip cards, smartphones and digital point-of-sale devices, which are all impacted by the shortage," said Oliver Manahan, the San Francisco-based senior director of business development for Infineon Technologies in Neubiberg, Germany. Manhan, who is in charge of partnerships with card vendors, issuers, payment networks and other firms at Infineon, is also co-chair of the Secure Technology Alliance and is on the steering committee of the U.S. Payments Forum.
EMV cards rely on memory chips and microprocessors that allow the cards to communicate with point of sale terminals and ATMs. There are about 11 billion EMV cards in circulation, according to
The median chip inventory that companies have on hand fell from a 40-day supply in 2019 to less than five days in 2021, according to a
"The economic pressure will be keen if we can't get enough chips. We haven't reached that stage yet, but it's something the payments industry has to keep track of," Bohrer said.
There are moves underway to increase overall chip capacity. A new semiconductor and chip manufacturing
"While we are working diligently to minimize the impact of the chip shortage on the payments industry, we believe government action will be necessary to help address the issue. We encourage Congress to include funding for chips in the Competes Act,” Scott Talbott, a senior vice president for government affairs for the ETA, said in an email.
Boosting chip capacity by increasing manufacturing requires new construction or expansion of manufacturing, then distribution into different industries that use chips, including but not limited to card production and point-of-sale hardware. That will take time, according to Bohrer, who said the chip-supply challenge is expected to persist through 2023 and perhaps into 2024. "A quick response is difficult," he said.
The Payments Forum
The combination of a longer chip cycle time and new device certifications may delay merchants' ability to upgrade point-of-sale technology.
"EMVCo engages extensively with payments industry stakeholders across the world, including technical bodies and industry associations, on issues that are important to the global payments industry and the delivery of secure payment experiences worldwide," Simon Kleine, the London-based director of communications for EMVCo, said in an email. "EMVCo recognizes the critical importance of chips to card-based payments and global commerce, and supports payments industry efforts to prioritize understanding and to addressing the challenges posed by the global chip shortage.".
The Payments Forum recommends reviewing expiration dates, adding to inventory for legacy products, increasing the use of virtual terminals, discussing potential extensions to expiration dates for EMV and PCI certification, and postponing the rebranding or relaunch of any payment card products.
"Point-of-sale devices that use Wi-Fi or Bluetooth may last a lot longer than cards, but what if a major retailer wants to do a refresh? Those are the things we try to look at," Manahan said.
The chip shortage will likely continue to be an issue, said Silke Krüger, communications manager for Giesecke + Devrient in Munich,
"The consequences of the war in Ukraine and renewed lockdowns caused by the pandemic are likely to further worsen the entire supply chain and specifically the situation of chip supply," Krüger said. "The shortage affects all chip-dependent industries globally and all payment card suppliers, which in turn can have lasting consequences for national economies."
G&D, which sells systems that process bank notes, smart cards and cash handling systems, says demand for chips has been growing for the past decade as smartphones have matured, another trend that indirectly impacts the payments industry given the growth of mobile wallets that are accessed via smartphones.
Bohrer, Manahan and Krüger all said the fallout from chip shortages and efforts from payment companies and technology firms to mitigate the problem could potentially delay broader payment automation if relaunches or updates get pushed back.
In an email, Mastercard's public relations office said the card brand has seen and is continuing to watch the stories regarding the broader semiconductor issue, but Mastercard said it would not speculate on how issuers may manage their programs.
"From my conversations with the largest processors in the industry, I know some of them have gone to great lengths to secure chips and other materials needed to produce cards for their clients and minimize any disruption," said Zil Bareisis, who heads Celent's retail banking practice in London.