Swiping a credit or debit card through a card terminal has long been based on the so-called magnetic stripe. Well, not anymore. Whether you refer to it as a magnetic stripe or magstripe at the back of your payment card, it’s time to say goodbye to a technology that is sliding into obsolescence.
Precisely, Mastercard is discontinuing the issuance of credit and debit cards with magnetic stripes over the next decade. As of 2024, newly issued credit/debit cards in Europe may optionally not carry the magstripe, while this feature won't be needed on cards across the US from 2027 (specific dates will be clarified below). This is mainly because the payments industry and consumer needs are pivoting towards more advanced, convenient, and secure alternatives such as chip and pin and contactless payment options.
Let's deep dive into the history of magnetic stripes, what’s changing with their withdrawal, the timeframe, and how emerchantpay can help your business adjust to the shift.
The history of magnetic stripes
The magnetic stripe made its debut in the early 1960s, enabling issuing banks to encode card data onto the magnetic tape laminated at the back of a payment card. This was not simply an evolution of the flatbed imprinting machines which were used to record card details on carbon paper packets. Most crucially, magstripes made card acceptance for businesses a safer and almost instantaneous process.
Although Mastercard is the first payment network to phase out magnetic stripes, the announcement came as no surprise. Whereas these cards have been around for more than 60 years, they still pose a few security risks. Not only is the sensitive information contained in the card (i.e., cardholder’s name, account number, expiration date and card verification value) unchanged, but the card isn't protected by any kind of encryption. This exposes cardholders tapping into the magnetic stripe feature to the risk of counterfeit card fraud.
However, the global EMV (Europay, Mastercard, Visa) chip standard emerged in the 1990s and marked an improvement upon traditional credit cards. By generating time-sensitive authentication codes for each transaction, chips store cardholder data more securely on integrated circuit chips in addition to magnetic stripes. Therefore, while a magnetic stripe card could fall prey to a skimming device – a tactic fraudsters apply to copy a physical card and steal card details – an EMV card provides an additional layer of security that has reduced in-person fraud by 76% since its Visa launch in 2015.
When and how are we entering the era of magstripe-less cards?
When it comes to Mastercard’s timescale, the shift will take effect in 1st April 2024. During that time, the magstripe will no longer be needed in newly issued cards across the European market where chip and pin cards are widely adopted. Credit and debit card issuers in the US, where the usage of chip payments is lagging, won’t be required to issue chip cards with a magnetic stripe from 1st April 2027. As of 2029, no new Mastercard debit or credit cards will be circulated with a magnetic stripe, while they’ll disappear by 2033.
In any case, the tide of changing consumer appetite over new payment methods cannot go unnoticed. In fact, EMVCo reports that two-thirds of consumers (88.55%) favoured EMV chip transactions in Q2 2021, fuelling the decline of card swiping via magnetic stripes. What's more, just as chip payments are the successors to magnetic stripes, so are NFC-enabled contactless payments (initiated either via card or mobile). Research from Statista reveals that over 1.3 billion contactless transactions were made in the UK as of October 2021, which testifies to their popularity. The tap functionality carries much of the same underlying EMV technology (i.e., one-off encrypted tokens), presenting itself as an equally safe payment solution to chip cards.
Biometric cards are also gaining traction given the enhanced security they offer during transaction processing. This is because they combine chips with the unique fingerprint or face of the cardholder to authenticate their identity and proceed with payment authorisation. It's worth mentioning that Mastercard has partnered with Samsung Electronics to pilot a biometric card which deploys a built-in fingerprint sensor to confirm in-store transactions in South Korea. (Read more about biometric payments here).
How emerchantpay can help
As the use of magnetic stripes is coming to an end, EMV technology and contactless payments are taking strides to heighten payment security. Here at emerchantpay, we offer a rich suite of chip and pin and NFC-enabled POS terminals to facilitate a secure and seamless payment experience your customers expect.
As global leading payment service providers (PSPs), we also ensure that payment security remains a staple for your business. Along with our robust fraud prevention tools and experienced risk analysts, we also enable businesses to build a secure payments experience for their customers with a PCI-approved point-to-point encryption (P2PE) solution. By encrypting cardholder details when the card has been swiped, dipped or tapped on your POS terminal and decrypted using a secure key when transferred to your PSP, you can safeguard your customers from potential data breaches.
Get in touch with our payment experts to learn how you can manage risk and optimise your payment processing for higher profitability and conversions.