25% of US debit cards will convert to chip before the end of this year

blue chip-and-PIN payment card

Ninety percent of U.S. financial institutions either have begun issuing chip (EMV) debit cards or currently plan to do so by the end of 2015, according to the 2015 Debit Issuer Study commissioned by PULSE, a debit/ATM network.

71 million cards

Based on that data, 25 percent of U.S. debit cards – approximately 71 million cards – will be migrated to chip by the end of 2015. The percentage is expected to rise to 73 percent by the end of 2016 and 96 percent by the end of 2017.

“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.

‘Major step’

“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,” he added.

Full roll-out will take time

Despite these statistics, realistically, the full rollout will take more time. However, the majority of issuers (62 percent) plan to implement chip debit cards using an accelerated migration strategy.

That will involve natural reissuance to people whose cards have expired, but – more crucially – intelligent reissuance to heavy card users, international travellers and customers who request a chip card in general.

Nearly a quarter of issuers (23 per cent) prefer the natural migration method whilst 15 per cent are opting for a mass migration method.

How much will chip cards cost?

Financial institutions estimate the cost of a chip debit card will be double that of a standard magnetic-stripe card. Large banks report the lowest average cost of $2.17 per chip card, while credit unions have the highest average cost at $2.90 per chip card. According to the study, 71 million debit cards will be reissued as chip cards this year.

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.

Fraud still the top priority

More than 70 percent of issuers cite fraud as a key challenge for their debit business. Every financial institution participating in the study reported their cards were associated with a data breach in 2014.

Overall, issuers reported losses of 0.7 basis points to fraud when the debit card was used with a PIN and 6.1 basis points when the card was used with a signature. These reported loss rates translate into 0.3 and 2.2 cents per transaction, on average, for PIN and signature debit, respectively.

During the past decade, PIN debit loss rates reported by issuers have stayed constant (from 0.6 to 0.7 basis points), while signature fraud loss rates have increased by 30 percent (from 4.7 basis points in 2005 to 6.1 basis points in 2014).

Related reading

EMVcard
europe at night illuminated by electricity
berlin challenger bank
london city hall with people walking in front of it

Leave a comment