Monday , November 19, 2018

Predicted Contactless-Card Boom Remains Just That for Card Manufacturer CPI Card Group

Despite predictions of an upsurge in contactless payment cards, so-called tap-and-go cards have yet to generate much revenue for a major U.S.-based card manufacturer, CPI Card Group Inc.

Such cards are often called dual-interface cards because they support both contact EMV chip card transactions at point-of-sale terminals as well as contactless payments using near-field communication technology. The vast majority of current U.S. EMV credit and debit cards are of the contact-only variety, which is cheaper than dual-interface cards.

“For dual-interface EMV cards, we are seeing early signs of some transition to tap-and-go cards with our customer base in the overall market,” CPI president and chief executive Scott Scheirman said Wednesday morning as he reviewed the Littleton, Colo.-based company’s third-quarter financial results. “Dual interface is a small portion of our business today,” but he added that “we are optimistic about this opportunity” and promised a progress report in 2019.

Visa Inc. chief executive Alfred Kelly last month predicted Visa card issuers would be distributing more than 100 million contactless cards next year. Most U.S. POS terminals now support dual-interface cards, which facilitate faster transactions than contact-only EMV cards and have a large share of transactions in such countries as Australia, the United Kingdom, and Canada.

The U.S. transition to EMV from magnetic-stripe payment cards, which began about four years ago, is largely complete, but CPI still reported selling 22.1 million standard EMV credit and debit cards in the third quarter, up 13% from 19.1 million in the same 2017 period. U.S. credit and debit card sales totaled $48 million, up nearly 11% from $40.1 million a year earlier. U.S. prepaid card sales rose almost 20% to $21.2 million.

Net product sales grew 29.5% to $34.7 million, with the increase driven mostly by more sales of newer products that include not only dual-interface cards but also metal cards and CPI’s instant debit card issuance product for banks and credit unions dubbed Card@Once, according to chief financial officer John D. Lowe. The quarter ended with 8,900 Card@Once installations, up 30% from a year earlier. Services revenues rose 6% to $36.3 million.

The CPI executives did not take questions from analysts after making their prepared remarks during today’s conference call.

Average selling prices for non-premium EMV cards fell in the third quarter, and Scheirman said he expects prices to fall for the remainder of the year, as they did in 2017. Earlier this year, Digital Transactions News reported that a contact EMV card might cost about 90 cents in quantity, a number that could double for contactless variants.

In all, CPI reported revenues of $71 million, up 16% from $61 million in 2017’s third quarter. The company posted a net loss of $1.1 million from continuing operations, driven in part by expenses from the discontinuance of its U.K. business in August as well as higher interest expenses.

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