The shift away from the magnetic stripe points to both consumers changing habits for payments and the development of newer technologies. Today’s chip cards are powered by microprocessors that are much more capable and secure, and many are also embedded with tiny antennae that enable contactless transactions. Biometric cards, which combine fingerprints with chips to verify a cardholder’s identity, offer another layer of security.
Based on the decline in payments powered by magnetic stripes after chip-based payments took hold, 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.
Crediting history
Paying on credit is a concept that dates back thousands of years to agrarian cultures, predating even paper money. In the early 20th century, department stores, gas stations and even airlines offered metal “shopper’s plates” or cards to its customers, but the first modern universal payment card debuted in 1950. The cardboard “charge” card could be used at any participating merchant and featured the cardholder’s name, address and account number.
By the end of the decade, other merchants and banks started issuing their own cards, including the first plastic credit card in 1959. The cashier would take an imprint of the card and send the paper copy for reconciling and billing, a process that was slow and open to human error.
In the 1960s, IBM saw the potential of coding information onto cards via magnetic tape. That technique was already being used for audio recordings and computer disk storage before it was brought to cards.
According to IBM lore, engineer Forrest Parry couldn’t figure out how to combine a strip of the tape to a plastic identity card for the CIA and mentioned it to his wife, who suggested using her flat iron to melt the strip to the badge. It wasn’t exactly the kind of hardware IBM would be celebrated for, but it worked.