By Ray Birch
RANCHO CUCAMONGA, Calif.—The shortage of payment card stock and chips that has led to a slowdown in card issuance this year at many credit unions is likely to continue through 2023, several sources have told CUToday.info.
The supply shortage, which has had members waiting a month or more at times for a replacement card is not just a challenge to member satisfaction, it also could become a threat to a credit union’s top-of-wallet card status when members become dissatisfied.
The shortage of physical cards is another strong argument for greater reliance on digital issuance, according to Co-op Solutions.
John Patton, senior growth advisor at Co-op, said the degree to which a member really feels the shortage is typically determined by the card the member uses.
Members Get ‘Worried’
“Debit cards typically have higher transaction volumes for everyday purchases, like groceries, gas, etc. So, if there’s a delay in the debit card reissue, members get worried they’ll need to use cash, checks or another card for these daily purchases,” he said. “Most want to receive their new card 30 to 45 days before expiration. Members typically have similar concerns about their reissue credit card, because most members leverage their credit card for larger purchases and card-on-file for subscriptions, memberships and other automated purchase models.”
And when members start getting concerned over a delay in receiving a replacement card, most start reaching out to the CU via its call center, branch or digital messages, Patton reminded, noting the member may not be pleased with the response they receive.
“Unfortunately, if the delay is beyond what the member expects, they will consider switching to another card,” Patton said. “The credit union then experiences lowered average balances and interchange income and risks losing the relationship.”
Other Reasons for Delays
John Patton
In St. Petersburg, Fla., meanwhile, PSCU, in a Jan. 6 statement to CUToday.info over the issue, said there are additional reasons for the delay in card shipments—card embossing and shipping delays due to problems at the embossing vendor’s facility.
“It is our understanding these delays are the result of a combination of higher peak-season reissue volumes, staffing challenges and production equipment maintenance issues, along with delivery delays of additional equipment to meet forecasted additional volume, at the facility,” PSCU said in January. “The entire PSCU team recognizes the impact of these delays and has been working with our vendor at all levels of our organization to expedite and remediate this situation.”
Co-op’s Patton said he believes the situation will eventually rebound.
“Although the production is normalizing, we do hear from our card partners that allocations will continue to strain the market through 2023,” he said.
On Feb. 23, PSCU said that their card embossing vendor had achieved its stated goal of being caught up on the backlog of card production and delivered on its plan to remain current on daily card production and reissues.
“Card production timelines have returned to normal and we have received no indications that delays will continue,” PSCU said in a statement.
“Additionally, we are not aware that any of the delays recently experienced by PSCU and our credit unions are related to the global semiconductor shortage referred to in the recent Washington Post article,” PSCU said.
Attracting National Attention
The issue has been attracting broader attention. The Washington Post recently provided coverage, reporting consumers are waiting often six weeks or more and stating credit union members may be waiting the longest.
In the report, Patrick Penfield, a professor of supply chain practice at Syracuse University, said he expects card deliveries will lag throughout 2023, even as manufacturers are projected to produce three billion cards this year.
Moreover, the Journal pointed out demand for cards with EMV chips is high: by the end of 2021, 63% of U.S. cards carried chips according to payment technology standards body EMVCo. From July 2021 to June 2022, chip-enabled cards were swiped in 85% of transactions made in the United States, and 92% globally.
“Manufacturers can’t keep up: Lead times for chips now average 20 to 25 weeks, according to Everstream Analytics, which specializes in supply chain risks, compared with a pre-pandemic range of 10 to 14 weeks,” the Journal stated.
Patton said during these times credit unions there is one step every CU must take.
An Imperative for CUs
“Member communication is imperative,” he said. “Most issuers leverage a 90-day reissue cycle in which a list is generated of members whose cards will expire on the last day of the expiration month.”
The credit union then reviews these accounts and at 60 days from reissue, the cards are typically produced.
“There is a review at 30 days to purge cards for accounts that were closed, etc., prior to mailing,” Patton said. “This 90-day cycle allows suppliers, like Co-op Solutions, to determine the impact and prioritize members. If the member’s card won’t arrive before expiration, the credit union has several alternatives to assist the member, including generating a temporary card or moving funds to other accounts.”
The Post-COVID World
As PSCU noted in January, part of the problem is a staff shortage at card production facilities, an issue that others within the industry have reported to CUToday.info. Patton emphasized that with COVID pushing consumers more deeply into digital services, digital card issuance becomes an even stronger solution for to address the delays.
“COVID is a new-normal for all of us. COVID taught us to leverage technology when and where it helps us in our work life and home,” Patton said. “Digital services remove so many barriers, helping us to be more productive, and protect the environment. For example, digital issuance allows credit unions to push a credit or debit card to a member so they can hold their mobile device near the merchant POS for payment. Digital issuance removes several member concerns, including not getting their reissued card.”