The Deep dive: Growing Supply Chain Pressures on Payment Card Industry

By Puja Sharma

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Smart Payment Association Warns of AI-driven semiconductor demand, geopolitical instability and rising raw material costs threaten chip availability for the global payment card sector

The Smart Payment Association (SPA), the trade body of the cards and mobile payment industry, issued a position paper warning that intensifying global supply chain tensions are placing growing pressure on the availability of payment cards worldwide.

The paper identifies two converging forces reshaping the payment card supply chain: semiconductor foundries increasingly prioritising capacity for AI-enabled applications and data centres over mature manufacturing nodes, and sustained geopolitical instability affecting the supply of key components and materials used in payment cards, notably precious metals and PVC.

Payment card chips rely on mature nodes of 28nm and above. While AI is not expected to change their technology roadmap, surging AI-related demand is intensifying demand for the manufacturing capacity these chips depend on. Gold and other precious metals used in EMV chip components and electrical contacts also face sustained supply pressures due to geopolitical tensions, which are compounded by capacity constraints on trading routes.

Who is under the radar?

Given the interconnected nature of global supply chains, payment card manufacturers are already taking steps on an individual basis to avoid the kind of chip shortages experienced after the Covid-19 pandemic. However, as semiconductor foundries report growing capacity constraints, manufacturers are increasingly required to qualify and transition to alternative sources for the production of payment card chips – a process that demands significant time, resources and technical effort.

To help mitigate these risks, the SPA is urging card issuers to share accurate demand forecasts with their manufacturers as early as possible, communicate anticipated changes in volume or product mix promptly, and align early on frame orders and long-term planning. This, the SPA says, will allow manufacturers to secure capacity and work more effectively with semiconductor suppliers.

Why does it matter now?

Payment cards are entering a period where the resilience of the physical card supply chain matters as much as the resilience of the digital payments infrastructure. The surge in AI and data-centre investment is competing for semiconductor manufacturing capacity, while geopolitical tensions and higher raw material costs are adding pressure across the wider supply chain. For banks and card issuers, the concern is not simply higher production costs, but whether they can secure sufficient chip and card capacity as demand and supply become harder to predict.

This makes the issue particularly relevant now: payment card production depends on a highly interconnected supply chain, and disruptions can take months to resolve because switching semiconductor suppliers requires technical qualification and testing. As issuers plan card volumes, replacements and new product launches, early visibility into demand is becoming increasingly important to avoid a repeat of the shortages seen during the pandemic.