Target Security Breach Spurs US Take-up of Microchip-based Payment Cards

Spurred by the late-2013 major data security breach at US retailer Target and similar incidents at other stores, the American banking and retail sectors are turning to more secure microchip-based payment cards, according to IHS Technology.

The information and analytics group last month predicted that US shipments of microchip-enabled payment cards that comply with the Europay, MasterCard and Visa (EMV) standard will expand to 344m units by 2019, up from 23m in 2013, while EMV card shipments this year alone will surge by 230% to 76m units.

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

The group adds that 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 US, 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 US 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 and 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.”

IHS’ recently-published ‘Payments and Banking Cards Report 2014’ noted Target’s initiatives since the breach to move its REDcard portfolio to chip-and-PIN technology by this September. Other US retailers are expected to follow the company’s lead, contributing to the sharp increase in EMV card shipments.



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