Mastercard, the Harrison, New York-based financial services corporation, has decided that, after three decades, its debit and credit cards can do without the magnetic stripe. Used on billions of cards worldwide since it was first introduced in the ’60s, the stripe once presented a much-needed solution for financial institutions, and an alternative to the timely task of writing cardholders’ names and card numbers by hand. Mastercard will begin phasing out the magnetic stripes for its U.S. cardholders in 2027, with a plan for it to be fully removed from all its cards by 2033. Mastercard explains how the stripe phase-out is part of the company’s plan to update practices to reflect consumers’ payment habits and integrate modern-day technologies. 

Considering the advanced level of technologies available to businesses today, and the massive number of people using bank cards for purchases every day—in late March, Mastercard had 249 million cards in the U.S. and 725 million cards worldwide—it’s peculiar why the technology hasn’t been updated in over 60 years. But, simply put, it’s because the magnetic stripe did its job. The EMV chip, which is used in bank cards today, was introduced in the late ’90s, and its development came as consumer technology began to develop rapidly. Especially impactful technologies developed in the 1990s were the worldwide web and text messaging, as well as major consumer products including MP3 players, DVDs, PlayStation and personal digital assistants, all of which are predecessors to the tech products available today. As it became possible and more convenient for companies to communicate and store information on computers and the web, enabling them to operate on a larger scale, hackers were also presented with greater opportunities to access confidential information. 

Because the magnetic stripe contains an embedded, static card number, it’s susceptible to tactics such as credit card skimming; a method of collecting cardholders’ card numbers, PINs and CVV data by using a device designed to access this information from card readers in public places, such as ATM machines or gas pumps. EMV chips offer an additional step to secure users’ data from hackers. Although it takes a few seconds longer for a card reader to process an EMV chip than it does a magnetic stripe, the chip communicates securely and directly with the cardholder’s financial institution to ensure the transaction being made isn’t fraudulent—which is the reason why, depending on the financial institution used, cardholders may receive a text message to their phone asking them to verify whether a purchase made from their card was, indeed, made by them. With the widespread use of EMV chips, in particular, and the additional benefits posed to cardholders, there’s no longer a need for the magnetic stripe. 

The decision to remove the magnetic stripe also comes at a time when consumers are making more contactless payments. Something which is made possible by EMV chips, contactless payment refers to the process of making a payment by waving an EMV chip-containing card near a payment terminal or RFID reader, which picks up the signal, then processes the card and completes the transaction. Following the coronavirus pandemic, in this year’s first quarter, Mastercard saw one billion more contactless transactions compared to first quarter 2020. In this year’s second quarter, nearly half (45 percent) of all in-person Mastercard checkout transactions worldwide were also contactless, according to company data. The decision also comes at a time when consumers are more willing to experiment with new methods of virtual payment. In the Mastercard New Payments Index, published in May of this year and containing data from more than 15,569 consumers across 18 countries, the report found that 93 percent of respondents worldwide said they are willing to consider at least one new payment method in this next year, such as contactless, QR code, biometrics or cryptocurrency. 


Danielle Renda is associate editor of PPB.