The Critical Component – Microchip Shortages Impact on Payment ProcessingComplex Merchant Profiles

The Critical Component – Microchip Shortages Impact on Payment Processing

Last Updated on March 22, 2024

It’s hard to avoid how integral technology has become to our day-to-day lives. Everything from your smartphone to your light switches and refrigerator could have an embedded microchip to connect the device to the cloud. It’s made life much more accessible when you can unlock your iPhone and see who is ringing your front doorbell in the middle of a haircut.

Unfortunately, our use of these technologies seems to have resulted in demand far exceeding supply. Prior to the COVID-19 lockdowns of 2020, the ongoing trade war between China and America resulted in the global megacorporation, Huawei, being sanctioned and unable to purchase more beyond the 15th of September, 2020. To avoid this, the company placed a massive order on everything they could, draining the reserves of most suppliers. Normally, this would not be an issue for most consumers. However, the pandemic further exasperated these problems. First with the need for more devices to facilitate work and school from home. Then to support this change the demand for cloud computing services further caused major disruption in the supply chain of these critical, minuscule devices. The ever-expanding domain of Bitcoin alone accounted for one-tenth the sales of one of the world’s largest producers of semiconductors.

As a result, there is a global shortage of this key piece of technology. I’m sure you or someone you know has been affected by said chip shortage in one way or another. The most evident industry that has been affected is the vehicle manufacturing industry. Companies like Nissan are forced to no longer include navigational systems in current-era car manufacturing. Likewise, Ram Trucks are forgoing equipping their vehicles with smart-detection rearview mirrors. Toyota will be slashing production by a staggering 40% in order to compensate for the overwhelming shortage. It’s not just car production that is being crippled by the current technological drought. Goldman Sachs estimates that 169 industries will be significantly impacted by this shortfall.

What does this mean for the payments industry?

Access to critical technologies when it comes to credit card processing equipment, point-of-sale terminals, and credit/debit cards will be affected. As reduced supply drives demand, and prices, higher. The difficulty in acquiring enough technology to meet demand will only increase as this crisis worsens.

What next?

Unfortunately, the resolution to this shortage is not going to be immediate. Intel is planning to invest in creating plants in both Europe and America to help solve the problem, but the chip shortage is expected to persist well into 2022. For our clients, we know this may mean lengthier waits for critical items, and frustration is inevitable. During this taxing time, we ask that you be patient, and know that we will do everything we can to provide you with the technology you need, in the shortest timeframe we can.

By using Nexio, you have access to products like tokenization and digital wallets. If you anticipate that your business might be affected by the current shortage, we’d encourage you to seek ways to utilize Nexio’s tokenization to store credit card tokens on file for card-not-present transactions and explore mobile wallets like Google Pay, Apple Pay, Paypal, Klarna that do not require a physical, semiconductor-requiring chip to enable purchases.

Nexio has solutions to help reduce the impact of the chip shortage. We are staying engaged in developing trends and pushing for innovation. There is no way to know what is coming next, but we are committed to supporting our customers and partners in whatever direction the future takes us.

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