Magnetic stripes were a huge improvement over the flatbed imprinting machines (aka “knuckle-busters”) that cashiers used to have to use to record card details. But in the 1990s the global EMV chip standard was introduced, which paved the way for cardholder details to be held more securely on small integrated circuit chips embedded into cards. Nowadays, 86 percent of in-person card transactions globally use EMV chips. These are typically authenticated using a PIN, but biometric fingerprint authentication is also emerging as a more secure alternative.
Interestingly, the US hasn’t adopted EMV chips to the same extent as the rest of the world. Last year, the percentage of in-person card transactions using the technology in the country was lower at around 73 percent, despite efforts to encourage adoption. The US has historically been an outlier for a number of reasons, including its size and low fraud rates.
Although chip cards are being positioned as the successor to magnetic stripes, Mastercard notes that contactless payments, which can be made by either a card or digitally using most modern smartphones, have exploded in popularity during the pandemic. The amount of contactless transactions have increased by 1 billion in the first quarter of this year compared to last year, it says. Globally 45 percent of in-person checkout transactions in the second quarter of the year were contactless.
By 2029, no new cards distributed by Mastercard will have this so the US needs to step up their tap and chip game.Mastercard becomes the first payment company to completely phase out magnetic stripes as they'll do so by 2033 although the transition will happen by 2024 in the EU and in 2027 in the US