Mastercard will phase out magnetic stripes on its newly-issued credit and debit cards starting 2024 in most markets. By 2033, no Mastercard credit and debit card will have the magnetic stripes. This will also allow its partners that rely on the magnetic stripe technology to phase in chip card processing, the company said in a statement.
The magnetic stripes will leave firstly in regions such as Europe where chip cards are widely used. Banks in the US will no longer be required to issue chip cards with a magnetic strip starting 2027, said Mastercard.
Ajay Bhalla, President of Mastercard’s Cyber & Intelligence business, said, “It’s time to fully embrace these best-in-class capabilities, which ensure consumers can pay simply, swiftly and with peace of mind. What’s best for consumers is what’s best for everyone in the ecosystem.”
By 2029, there will be no new Mastercard credit or debit cards issued with a magnetic stripe. However, prepaid cards are currently exempt from this change.
CHANGE IN PAYMENTS
Mastercard said that changes in payments methods usually take years but the digital transformation has been accelerated amid the pandemic. In the first quarter of 2021, Mastercard saw 1 billion more contactless transactions compared to the same period in 2020. In the second quarter, 45 per cent of all in-person checkout transactions globally were contactless. The company said that consumers are increasingly willing to experiment with new payment options.
Today’s chips are powered by microprocessors that are much more secure. These cards are also embedded with a tiny antennae that enables contactless transactions.
For every transaction today, the chip creates a unique transaction code that is validated by the issuing bank to ensure that the card used is genuine.
MAGNETIC STRIPE WAS A GAME-CHANGER
In its initial days, credit cards were a far cry from what it is now. Checkout clerks had to write down the account information for every card-carrying customer. They later used flatbed imprinting machines to record the card information on carbon paper packets.
But clerks could not tell if the customer was good for the purchase. Credit card companies would circulate a list of bad account numbers each month. The merchants would have to tally each card against that information.
The first plastic credit card came about in 1959. A paper copy of the card would be sent for reconciling and billing.
The magnetic stripe that came in the 1960s changed everything. Largely credited to IBM, the stripe allowed banks to encode card information onto the magnetic tape at the back of the card. It eventually paved the way for electronic payment terminals and chip cards.
But the magnetic stripe has neared its end, with Mastercard being the first company to phase it out.
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