Page 31 - Banking Finance December 2022

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practices such as card skimming and cloning with chains and adding challenges for millions chipset
enhanced safety features. Our old credit and debit cards vendors, some of them tell me that they have
store our data on the magnetic stripe found on the something like overbooking of 300% of their capacity.
reverse side of your card. This makes it easy for a
SIM cards industry is also feeling the heat as vendors
fraudster to copy the data when we swipe the card.
are confronted to semiconductor vendors allocating less
Chip-based payment cards, in contrast, store our data
chips than they need, thus jeopardizing their production,
on a microprocessor chip embedded in the card.This
leading to extended lead times and growing costs. Also,
means that the card generates fresh user data every
the SIM card industry is evolving towards an increasing
time you transact.
proportion of eSIMs, making forecasting even more
The Smart Payment Association (SPA), the trade body difficult than before. This will impact mobile banking
for the cards and mobile payments industry, three billion services.The number of mobile banking payments across
payment cards are produced and delivered around the India in fiscal year 2019 accounted for approximately
world every year. Payment cards are used for 90% of 6.2 billion. This was tremendous increase compared to
non-cash-based transactions, and up to 60% of online the previous fiscal year.
payments are also supported by the precious plastic
Apart from above impacts the loan repayment cycle is
boards, including digital wallet solutions.The SPA has
also going to tumble as manufacturing industries which
warned that the bottlenecks that are currently hitting
uses Chip are cutting down their productions. Recently
the production of semiconductors is trickling down to
Mahindra & Mahindra said," the company will be
some payment card manufacturers, who are facing
observing about seven 'No Production Days' in its
difficulties securing the components they need to
automotive division plants in September, 2021, which
produce the items.
is estimated to result in reduction in production volumes
Disruption in global chip supply can halt the issuance of of the division by 20%-25%. The revenue and
up to 1bn payment cards over the next 18 months, with profitability will be impacted in line with the fall in
347m cards at risk of not being issued in the second half production volumes. Thus the loan repayment will
of 2021 and up to 740m in 2022 because of "significant adversely get effected in addition to COVID-19 impact.
chip shortages", according to an ABI Research forecast.
This Chip shortage is going to impact Internet services Why Can't we just produce more chips?
that helps Banking Industry to provide better customer Indeed, semiconductor manufacturers have already
service, as of 2020 nearly 1.9 billion individuals announced investments in expansions and new factories that
worldwide actively used online banking services with will increase supply. But those projects won't be completely
that the number forecast to reach 2.5 billion by 2024. finished until the end of 2022 at the earliest.
Broadband providers are seeing delays of more than a
year when ordering internet routers, becoming yet In that time, demand might fall and the immediate shortage
another victim of chip shortages choking global supply might ease. "Just when the new factories come online,
there's all this excess supply and then prices collapse and
no one wants to build another factory for a while."

This dynamic can create a disastrous cycle for the industry:
When suppliers stop building new factories, demand
gradually grows until it falls in line with supply. At that point,
small shifts in consumer demand can once again create big
shocks to the supply chain.All this means that chip suppliers
need to carefully plan their expansion, or else they risk
producing a semiconductor glut in the next few years, which
could be followed by another shortage.

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