An early 1960s innovation largely credited to IBM, the magnetic stripe allowed banks to encode card information onto magnetic tape laminated to the back. It paved the way for electronic payment terminals and chip cards, offering more security and real-time authorisation while making it easier for businesses of all sizes to accept cards.

A fixture on billions of payment cards for decades, the thin strip has finally reached its expiration date, with Mastercard becoming the first payments network to phase it out.

As contactless and biometric payment cards become the norm, newly-issued Mastercard credit and debit cards will not be required to have a stripe starting in 2024 in most markets. By 2033, no Mastercard credit and debit cards will have magnetic stripes, which leaves a long runway for the remaining partners who still rely on the technology to phase in chip card processing.

The US had been the last major market to convert to chip cards, necessitating the continuation of magstripe technology - and all the security liabilities that came with it. But with the rollout of chip cards to the US market almost complete, merchants, banks and consumers have quickly come to appreciate the faster chip checkout process and improved security.

More than half of Americans prefer using a chip card payment at a terminal over any other payment method, with security being the driving factor, according to a December survey for Mastercard by the Phoenix Consumer Monitor. That was followed by contactless payments — with a card or a digital wallet. Only 11% said they preferred to swipe, and that drops to 9% when looking at cardholders with experience using contactless payments.

And in a July study by Phoenix, 81% of American cardholders surveyed reported they would be comfortable with a card that does not have the magnetic stripe, and 92% would increase or keep usage of their cards the same if the magnetic stripe was no longer on the card.

The pandemic has also been a driving factor in chip card usage. In the first quarter of 2021, Mastercard saw 1 billion more contactless transactions compared to the same period in 2020, and in the second quarter of 2021, 45% of all in-person checkout transactions globally were contactless.

John Drechny, CEO of the Merchant Advisory Group, which represents more than 165 US merchants, comments “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.”