By Michelle Cassell
Let the chips fall where they may, but if they’re in your debit or credit card, you may have a long wait to replace one. The supply chain shortage of microchips is impacting national and area banks’ ability to provide payment.
The shortage is impacting North Carolina–including Chapel Hill–with the State Employees’ Credit Union (SECU) reporting a lack of supply of cards and explaining the delay to their customers in a statement to The Local Reporter on Tuesday:
“Like many businesses, State Employees’ Credit Union’s (SECU) debit card supplier is experiencing delays in shipping replacement cards due to supply chain constraints. We expect the supplier to begin moving toward standard shipping time frames soon. Any members who are experiencing delays may contact SECU for assistance. We thank our members for their patience as we work with the supplier to address this issue,” said Sandra Jones, communications officer at SECU.
SECU is the second largest member credit union in the United States, both in asset size and membership. According to SECU’s website, the credit union now has $53.1 billion in assets, and GoBankingRates.com states that SECU serves over 2.6 million members statewide with over 270 branch locations and more than 1,100 ATMs. It has a presence in all 100 North Carolina counties.
The shortage was reported as early as April 2022 by American Banker, warning that payment cards and point-of-sale devices were under more significant strain from Russia’s war in Ukraine and China’s lockdowns.
“The semiconductor supply is not going to increase immediately. There are a lot of raw materials and gases required for producing those semiconductors,” Vinay Gupta, the International Data Corporation’s Asia-Pacific research director, told CNBC’s “Squawk Box Asia.”
The worldwide shortage of microchips and semiconductors is putting everyday supplies of cars, computers, and cellphones on the slow track. Increased demand for these products caused a greater need for semiconductors. A semiconductor is a substance that has specific chemical properties that enable it to serve as a foundation for computers or electronic devices. Unfortunately, one product deeply affected by the dwindling supply of semiconductors is the card stock used to make debit and credit cards.
While initial predictions posited that the microchip shortage would start leveling off in mid-2022, the problem threatens to persist throughout 2023 and possibly into 2024, according to a report from the U.S. Payments Forum.
Though efforts are underway to build new semiconductor foundries — the facilities where manufacturing takes place — the construction process is costly and could take years to complete. Until the imbalance resolves, The U.S. Payments Forum advises financial institutions in its report to take certain steps to minimize the risk of disruption.
Another complication is that chip demand is greatest for the newer, more sophisticated chip versions, and those chips will take precedence over the older technology nodes (the specific semiconductor design) typically used in payment cards. As a result, corporate financial institutions (CFIs) can expect to face shortages and higher expenses for chip-enabled payment cards.
The trade body Smart Payment Association (SPA), which represents the cards and mobile payments industry, also confirms that the bottlenecks currently hitting the production of semiconductors is trickling down to some payment card manufacturers. Consequently, the manufacturers are facing difficulties securing the components needed to produce the items.
Jacques Doucerain, the president of SPA, made this eerie prediction in 2021, “If the situation does not improve, there are going to be millions of cards missing, and this will have a direct impact on consumers worldwide who will not be able to get a bank card or renewal of their bank card. You cannot pay in-store, online, or withdraw cash without a card.”
A computer in your wallet
Your credit card contains a microcomputer running applications that securely process your purchases. This technology is known as EMV. EMV stands for Europay, Mastercard and Visa. These three international payment systems came together in 1999 after much work standardizing how electronic payments are conducted worldwide.
Your EMV card chip is a tiny computer system, containing data and the ability to perform certain functions. It even can communicate using RFID (radio frequency identification), which is why you can now tap your card instead of inserting it into a reader.
This microprocessor helps to ensure each of your transactions is secure by generating a one-time code for each separate transaction and verifying your individual pin for debit card purchases.
None of this would be possible without a microchip, and the sooner the supply chain returns to normal, the sooner consumers will be able to “let the chips fall where they may.”
Michelle Cassell is a seasoned reporter who has covered everything from crime to hurricanes and local politics to human interest over the course of 35 years. As assignment editor, she hopes to encourage writers of a wide range of backgrounds and interests in TLR’s coverage of Orange County news.