The company’s goal is to gradually eliminate magnetic tapes by 2023
Mastercard has recently announced that it will phase out the magnetic stripes on its debit and credit card, starting from 2024, while contactless payments continue to rise.
The company stated that the magnetic stripe will not be used on newly issued Mastercard credit or debit cards in Europe by 2024, while banks in the United States will no longer be required to issue magnetic stripe cards by 2027. From 2029, the magnetic stripe will not be used on any new card, to be completely removed by 2033.
Chip-and-pin and the new biometric cards which require fingerprints offer greater security according to Mastercard. The company says it will be the first payment network to phase out the magnetic stripe technology, which dates back to the 1960s.
“It’s time to fully embrace these best-in-class capabilities, which ensure consumers can pay simply, swiftly, and with peace of mind,” says Ajay Bhalla, president of Mastercard’s Cyber & Intelligence business. “What’s best for consumers is what’s best for everyone in the ecosystem.”
“The merchant community looks forward to a day when requirements to support the magnetic stripe and the burden to protect data merchants really don’t need are eliminated,” says John Drechny, CEO of the Merchant Advisory Group, which represents more than 165 U.S. merchants. “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.”
The contactless era
In the first quarter of 2021, Mastercard saw 1 billion more contactless transactions compared to the same period in 2020, while 45% of all in-person checkout transactions globally were contactless in the second quarter of 2021.
The magnetic stripe technology was introduced in the early 1960s by IBM to help bank institutions to encrypt card information and verify their owners. But in the 1990s the global standard EMV chip was developed and provided an alternative option for card holders’ data to be safely stored on small integrated circuit chips embedded in the cards. This new feature gradually began to gain ground and today the EMV technology is used to 85% of card transactions worldwide.
It is interesting, however, that the US has not adopted EMV chips to the same extent as the rest of the world. Last year, the percentage of personal card transactions using the technology in the US was about 73% despite efforts to be boosted.
EMV technology is constantly evolving and now offers greater security in card transactions. Mastercard invests in EMV, now more than ever, and has developed new quantum-resistant specifications for contactless payments. The firm claims that this will protect cardholders and merchants from fraud attacks.
Due to the pandemic, contactless payments recorded a historic rise as the consumers tried to avoid touching as many items as possible, including card terminals. However, many analysts and experts estimate that a new era of contactless transactions is consolidating, creating a completely new landscape of shopping and interpersonal contacts, even after the end of the pandemic.
“True progress also means retiring technologies that no longer meet our needs,” says Howard Hammond, executive vice president and head of consumer banking at Fifth Third Bank. “The way we shop, pay, and interact is changing, and we are meeting these evolving needs with smarter and more secure experiences.”
