Chip to account for 25 percent of debit cards by year end
Ninety percent of U.S. financial institutions have begun issuing chip EMV debit cards or plan to do so by the end of 2015, according to the “2015 Debit Issuer Study” commissioned by Pulse.
Based on these plans, 25 percent of U.S. debit cards — approximately 71 million cards — will be replaced with chip cards by the end of the year; this percentage is expected to rise to 73 percent by the end of 2016 and 96 percent by the end of 2017, according to a news release from Pulse.
“The 2015 Debit Issuer Study provides the most compelling evidence so far that we are quickly approaching the end of magnetic-stripe-only cards and entering the era of chip cards,” said Steve Sievert, executive vice president of marketing and communications for Pulse. “With fraud continuing to be a major concern among cardholders and a top priority for financial institutions, the issuance of chip cards represents a major step toward reducing losses from counterfeit cards.”
Based on the higher cost of chip cards, financial institutions will spend an incremental $69 million to replace magnetic-stripe cards with chip cards in 2015 and $266 million overall for the entire migration period.
Financial metrics are not driving chip card issuance. Only 56 percent of financial institutions have built a business case to support issuance of chip cards, according to the study.
“Issuers report that they are investing to help safeguard cardholder information, enhance the integrity of the overall payment system and protect their own reputation,” said Tony Hayes, a partner at Oliver Wyman who co-led the study.
The 2015 Debit Issuer Study is the 10th installment in the series and was conducted by Oliver Wyman, an independent management consulting firm. The sample is representative of the U.S. debit market in terms of institution type, geography and debit network participation.