Credit/ Debit Cards Could Be the Next Victim of a Global Chip Shortage

Global chip shortage is now threatening to derail the online payment system. Outlining the importance of payment cards for everyday life and commerce, the Smart Payment Association has warned about significant disruptions if the issue is not addressed. It said each year more than 3 billion EMV-based payment cards are produced globally for people who open a bank account, or those who renew them after expiration or to be replaced. But card manufacturers are facing increasing difficulties in obtaining chips due to bottlenecks in the supply chain.

The trade body of payment cards and the mobile payments industry has called on government bodies and stakeholders to improve the supply situation to avoid major disruption. Nearly 90 percent of non-cash consumer payments are made using cards in physical stores and they are also critical for accessing cash, it said, adding that 40-60 percent of online payments are supported directly or indirectly by payment cards. Thus, securing an uninterrupted supply chain for payment cards is essential to sustaining commerce and daily life.

The pandemic forced chipmakers to shut operations last year. By the time they reopened, they had a backlog to fill. As they limped back, they were swamped by a sudden demand for electronics globally. In recent months, the semiconductor industry has been hit by major shortages of products such as PCs, mobiles/ tablets, gaming consoles, but especially automobiles. Equipment manufacturers had to delay their production lines as there was not an adequate supply of chips. And it appears the shortage is now expanding to other sectors too.

Citing the resilience shown by the payment card industry during the pandemic, the body said it served the banks in unprecedented circumstances, delivering cards amid lockdowns wherever and whenever needed.

“Now, with the global chip shortage another threat has emerged,” the trade body said.

The association said the bottlenecks in chip supply have become critical and card manufacturers are facing increasing difficulties in obtaining chips, and that this shortage is likely to continue throughout 2022. It warned that significant disruption is likely on its way that will affect the ability of card manufacturers to meet the full demand.

The association added that it has initiated actions to ensure an adequate supply of payment cards but urged governments to do more. It said the card manufacturers working with the association are making “every effort possible” to minimise card delivery disruption.