Press Release

Following Target’s Security Breach, US Embraces EMV Microchip-Based Payment Cards

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Spurred by major data breaches at Target and other stores, the American banking and retail sectors are turning to more secure microchip-based payment cards, causing U.S. shipments of these cards to rise by more than a factor of fifteen seven by 2019.

U.S. shipments of microchip-enabled payment cards that comply with the Europay, MasterCard and Visa (EMV) standard will expand to 344 million units in 2019, up from 23 million in 2013, according to IHS Technology (NYSE: IHS). EMV card shipments this year alone will surge by 230 percent to 76 million units, as can be seen in the figure below.

To put these numbers into context, global shipments of smart payment and banking cards are projected to increase to 2.9 billion in 2019, up from 1.7 billion in 2013.

EMV is a global standard for microchip credit cards, sometimes called smart cards. Using their onboard secure microcontrollers, EMV cards can authenticate credit and debit card transactions at the point of sale (POS). This approach contrasts with the magnetic-stripe credit and debit cards now most commonly used in the United States, which conduct authentication using an online system.

Last year sounded the starting gun for the EMV card market, as the U.S. payment infrastructure reacted to the data breaches.

“Until recently, the United States was the only developed economy in the world that hadn’t committed to migrate to the EMV standard,” said Don Tait, senior analyst in the Digital ID & IT Security Group at IHS. “Instead, American banks and retailers relied upon increased security, encryption of data between the (POS) and the use of personal identification numbers (PINs), rather than increasing the security of cards themselves. However, the recent card security breaches at several major retailers including Target resulted in payment information from tens of millions of cardholders being stolen, prompting the wholesale migration to EMV.”

Since the Target security lapse in November and December of 2013, the company has expedited plans to issue chip-and-PIN-enabled store credit cards to replace the magnetic-stripe cards involved in the breach. In March, Target announced an accelerated $100 million plan to move its REDcard portfolio to chip-and-PIN technology. Target plans to have chip-and-PIN technology installed in all stores in the United States by this September, six months ahead of schedule.

Other U.S. retailers are expected to follow Target’s lead, contributing to the sharp increase in EMV card shipments.

“EMV technology would not have prevented the target breach, which involved the installation of malware inside POS terminals’ memories, where data is unencrypted regardless of the type of card from which it originated,” Tait noted. “However, the ability of criminals to reuse that payment information, specifically to create and sell counterfeit cards, would have been greatly reduced.”


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