August 26, 2021
Mastercard is discontinuing magnetic strips on their debit and credit cards in the next few years starting in Europe by 2024 and having them completely phased out by 2033.
While swiping cards aren’t going away immediately (as all cards require them currently), Mastercard will make magnetic stripes optional in 2024, and in 2029 Mastercard will no longer issue them. Having magnetic stripes eliminated by 2033, leaves other payment network providers and partners roughly a decade to follow suit and phase out magnetic stripes.“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.
”Before the innovation of the magnetic stripe, flatbed imprinting machines would record card information on carbon paper sheets also known as “knuckle-busters”. Merchants would then have to compare their customer’s credit card numbers from these carbon copies to a list of bad credit cards the card companies would circulate. Talk about inconvenience!
Enter IBM in the early 1960s with the magnetic stripe. Allowing banks to encode card information while offering security, real-time authorization and most importantly convenience for cardholders and merchants alike. This became the most dominant form of card payment over the years until EMV, the card smart chip, was launched in 1994 by Europay, Mastercard and Visa. EMV brought increased security to card and mobile payments combining a chip and personal identification number required to complete a transaction. While the EU was quick to move to this safer technology, the United States took longer to adapt and a fraud liability shift was introduced to US Merchants as a way to expedite this safer way to pay. The EMV Liability Shift deadline was introduced in October 2015 where merchants or the issuing bank were now liable for card-present fraud if the merchant used the magnetic stripe instead of “dipping” the card (using EMV).
Over the past few years, magnetic stripes have seen a massive decline in transactions while newer forms of payments such as EMV, Contactless (tap and go), and mobile payments have grown significantly. These factors have finally pushed the magnetic stripes expiration over the edge with Mastercard becoming the first payments network to eliminate it.
The pandemic also accelerated this shift. In Q1 of 2021, Mastercard processed 1B more contactless transactions than previous year and in Q2 of 2021, 45% of all in-person transactions were contactless across the globe. With this new comfort in mobile and contactless, Mastercard has noticed a shift in consumers' appetite for new payment options. They say consumers “are increasingly willing to experiment with new payment options,” with nearly 2 of every 3 respondents in Mastercard’s New Payments Index Report saying they tried a new payment method they would not have tried before the pandemic.
Over the next decade, as magnetic stripes are phased out, EMV technology is becoming even more secure than ever before. Mastercard recently introduced new quantum-resistant specifications (Ecos) for contactless payments. Ecos ensures trust, leveraging new quantum-resistant tech and specifications that deliver advanced protection and privacy when making a transaction. This new technology will protect merchants and cardholders significantly for years to come with the same tap-and-go experience.