June 26, 2014 - Spurred on by the fall-out from last year's Target data breach, 86% of US financial institutions plan to begin issuing EMV-based chip cards within the next two years, according to the annual debit issuer report from Pulse.

The Target breach impacted every one of the 71 financial institution that participated in the study, causing fraud loss rates to increase in 2013 and compelling issuers to re-evaluate their strategies for improving card security in 2014, the study found.

Prior to the Target incident, many financial institutions were hesitant to commit to EMV because of uncertainty around retailer adoption of chip card point-of-sale terminals, questions about the viability of the business case for migrating from magnetic stripe cards to chip cards, as well as unresolved issues related to regulation and support for merchant routing choice.

With the Target incident seen as a watershed, 86% of financial institutions stated that they plan to begin issuing EMV cards in the next two years, a significant increase from 50% in 2012.

Migration to EMV debit cards will begin in earnest in early 2015, says the report, and will span approximately three years, with many issuers attempting to provide chip cards to their international travelers and heavy debit users in advance of the liability shift in October 2015.

"We were quite surprised by the across-the-board embrace of EMV by debit issuers," says Tony Hayes, a partner at Oliver Wyman who co-led the study. "There has been a dramatic shift from issuers' tepid interest last year to their active plans to implement EMV beginning in 2015."