The magnetic stripe is losing its relevance and effectiveness with Mastercard becoming the first payments network to phase it out.
Since the early 1960s, when magnetic stripe cards were cutting-edge tech, credit card payment technology has changed dramatically.
With the development of the EMV standard, chip cards started becoming the preferred way to pay. Today, EVM chips are used for a major part of transactions worldwide. And more than half of Americans opt for a chip card payment at a terminal over any other payment method, with security being the driving factor. For every transaction, the chip creates a unique transaction code, which is validated by the issuing bank to ensure that the genuine card is used, so that the security of a cardholder’s data increases.
On the way to true progress and secure experiences, Mastercard announced plans to remove the black magnetic stripe from all of its credit and debit cards.
The magnetic stripe will start to disappear in 2024 from Mastercard payment cards in many regions, including Europe, where chip cards are already widely used. Banks in the U.S. will no longer be required to issue chip cards with a magnetic stripe, starting this year.
By 2033, no new Mastercard credit or debit cards will be issued with a magnetic stripe.
The pandemic has further pushed cardholders to move away from existing payment options and experiment with new methods that they would not have tried under normal circumstances. According to the Mastercard’s survey, in the first quarter of 2021 1 billion more contactless transactions were made compared to the same period in 2020, and in the second quarter of 2021, 45% of all in-person checkout transactions globally were contactless.
The shift away from the magnetic stripe is derived from consumers changing payment habits accompanied by the development of newer technologies. While changes in how we pay have typically taken years to become pervasive, the pace of digital transformation accelerated rapidly, and key players of the financial sector have progressively developed in parallel.