EMV Laggards Flock to Instant Issuance

The October deadline for EMV-chip card adoption is fast approaching, and banks that are behind the curve are turning to instant issuance to quickly get chip cards into the hands of their customers.

Between January and April, the CPI Card Group reported instant issuance of more than 528,000 cards, more than double the amount reported a year earlier. Instant issuance refers to cards that are immediately available at a branch rather than mailed to the consumer. Banks generally outsource most of the technology for instant issuance, then access the service through an electronic connection to printers in the branch.

"What's we're seeing is small to mid-sized issuers that had been lagging behind the rest of the market," said Diane Jackson, vice president of business development and strategic marketing for the CPI Card Group.

Banks are using different strategies to deploy EMV cards. BMO, for example, is timing its migration to match the natural expiration date of its mag stripe cards, though it has contingencies for faster distribution if necessary. Other banks, such as Wells Fargo, are also making sure their ATMs are ready to accept EMV cards in time.

The recent spike in instant issuance has come from mostly smaller financial institutions because most large banks began issuing EMV cards within the past year, Jackson said. From smaller issuers, "we're seeing increases in volume on virtually a weekly basis," she said.

The volume should continue to accelerate through the end of 2015, and rates should stay relatively high given fears over data breach exposure, which has also contributed to spikes in instant issuance, Jackson said.

Since EMV cards include more technology than magstripe cards do, they are harder to produce and more expensive to issue. To accommodate the spike, CPI last year added a 50,000 square foot facility. Nearly 600 million EMV cards are expected to be issued this year, Jackson said, which is up from about 185 million in 2014. Since the percentage of instant issuance is relatively small—about 10%, Jackson said—CPI expects to maintain its volume by relying on general consumer demand for fast access to payment cards.

"We can see instant issuance growth over the next few years because issuers can get those cards into the hands of consumers faster," Jackson said, adding the EMV migration will likely continue well past the card networks' October 2015 deadline. "You never get to 100% conversion of EMV."

Issuers that opted out of purchasing EMV-capable onsite instant issuance equipment are also driving a spike in activity, said Bill Dinker, president of EFT Source, a card technology company CPI acquired to bolster its EMV and instant-issuance capabilities.

"We're going back to retrofit equipment to get these issuers in the EMV game," Dinker said, adding these issuers were "getting their toes wet" when initially adopting EMV without onsite issuance equipment. "They weren't all-in and are now looking to us to help them with the migration process."

CPI's competitors, which mostly include other manufacturers, have also made acquisitions to boost instant issuance, said Sarah Grotta, the director of the debit advisory service at Mercator Advisory Group. These include ABNote's purchase of Custom Card Systems and Gemalto's buy of Shoreline Solutions.

Instant issuance can also help address the EMV knowledge gap among consumers, Grotta said.

"Issuance in the branch offers the opportunity to explain how EMV works far better than bullet points on a card mailing ever could," Grotta said, adding the strategy should be integrated with the bank's overall EMV program. "Central issuance and branch issuance needs to be carefully linked through the card management system. A bank that replaces or issues a debit card in the branch wants to make sure that they don't duplicate that card in an EMV mass issuance or reissuance."