Mastercard has announced that it will phase out the magnetic stripe from all of its credit and debit cards. The move will enable the company to ditch an anachronistic payment method that has been made obsolete by the emergence of chip-based cards.
The early 1960s innovation majorly credited to IBM, the magnetic stripe enabled banks to encode card information onto magnetic tape that is laminated to the back. This development paved the way for electronic payment terminals and chip cards, providing more security and real-time authorization while making it easier for businesses to accept cards irrespective of their sizes.
The thin strip has finally reached its expiration date after being a dominant fixture on billions of payment cards for decades, with Mastercard becoming the first payments network to phase it out entirely.
As biometric and contactless payments cards become the norm, all the newly issued Mastercard credit and debit cards will have no stripe from the start of 2024 in most markets around the world. By 2033, Mastercard said that none of its credit and debit cards will have magnetic stripes. This now leaves a long runway for the remaining partners who rely on technology to phase in chip card processing services.
The United States has been the last major market to change to chip cards, which has necessitated the continuation of magstripe technology, together with all the security liabilities that came with it. However, with the rollout of chip cards to the United States market nearly completed, banks, merchants, and consumers have rapidly come to appreciate the quicker chip checkout process and enhanced security.
Over 50% of Americans prefer using a chip card payment at a terminal over all other methods of payment, with security being the main driving force, according to a December survey for Mastercard done by the Phoenix Consumer Monitor. It was followed by contactless payments, with a card or a digital wallet.
Just 11% said that they preferred swiping and that plunges to 9% when looking at the cardholders with experience using contactless payments. In a July study done by Phoenix, 81% of the American cardholders surveyed reported that they would be comfortable with a card that has no magnetic stripe.
92% of those who participated said that they would increase or keep usage of their cards the same in case the magnetic stripe was no longer on the card. The COVID-19 pandemic has also been a driving factor in chip card usage. In the first quarter of this year, Mastercard recorded 1 billion more contactless transactions compared to the same period last year.
In the second quarter of this year, 45% of all in-person checkout transactions worldwide were contactless. The CEO of the Merchant Advisory Group, John Drechny, commented:
“We applaud Mastercard for taking this next step to help to strengthen payment security and protect merchants and consumers from risk. We’d like to see others in the industry move in this direction.”
Merchant Advisory Group represents over 165 US merchants.