The Apple Card and More Will Lose Magnetic Stripes for Good, Mastercard Announces

Although Apple naturally prefers that most Apple Card users make purchases with their iPhone or Apple Watch using Apple Pay, it does issue a sleek physical card that’s made from (mostly) Titanium.

After all, as great as Apple Pay is, it’s still far from universally accepted, especially within the United States — the only country where you can get an Apple Card in the first place. Hence, there are still those times when you have no option but to use a physical card.

To facilitate this, the titanium Apple Card features both an EMV chip and a magnetic stripe, making sure that you’ll be able to use it just about anywhere. The downside is that you’ll only get 1% cashback perks when you pull out the physical card — again, Apple really wants you to use Apple Pay wherever possible.

For the same reason, the Apple Card also doesn’t include any contactless payment technology — it’s only for when you really need to insert or swipe a physical card at a terminal rather than tapping to pay.

It looks like at least one of these options will be going away in a few years, however, as Mastercard has just announced plans to remove the physical magnetic stripe from all of its branded cards worldwide — which will eventually include the Apple Card.

Legacy Technology

To be fair, much of the world has already moved away from magnetic strips on cards, at least as a primary payment method.

This is one area in which the U.S. is a bit behind the curve, mostly due to the large number of banks, payment processors, and retailers that have to deal with credit and debit cards.

With fewer banks and other financial institutions in the mix, Canada and European countries are in a better position to move quickly when it comes to adopting new payment technologies.

Apple has already led the way in contactless payment adoption within the U.S., considering that when Apple Pay first debuted in 2015, only 2% of U.S. retailers supported any kind of contactless payment technology, and few banks even offered contactless payment cards. Today, however, over half of U.S. consumers now use some form of contactless payments, and over 58 percent accept contactless payment cards.

By contrast, however, other countries like Canada and Europe had widely adopted contactless payments years before Apple Pay came along. In fact, U.S. iPhone users visiting Canada found more places to use Apple Pay north of the border than they did in their home country — even years before Apple Pay officially came to Canada.

The same is true with the magnetic strips found on most cards. These have been all but completely abandoned in most other countries, where they’re supported as a fall-back for those situations where the chip reader fails for some reason. In fact, most chip-equipped terminals will generally refuse to accept a swipe from a chip card unless it fails to successfully read the chip.

Fraud Prevention

The problem is that magnetic stripes are little more than an encoding of the card number that offers little to no security or anti-fraud protection. The information on the magnetic stripe can be read by any number of very inexpensive accessories, and it’s trivial to duplicate a mag-stripe credit card.

By contrast, EMV chips are encrypted, with the user’s PIN stored directly in the chip. No identifying information is presented until the user keys in their actual PIN, which can be validated immediately without the need for the terminal to communicate with the bank’s servers.

Europe adopted EMV chip cards in the late nineties, and Canada began its shift to EMV in 2002. According to Thales Group, the move to EMV chips in countries like France and the United Kingdom has resulted in credit and debit card fraud all but disappearing in those countries.

Likewise, the same report notes that the U.S. move to EMV adoption in late 2015 resulted in a 48% one-year decrease in “card-present fraud”, with the numbers dropping from $3.68 billion in fraudulent transactions in 2015 to only $1.19 billion in 2016. By June 2019, those numbers had dropped even more — by 87%.

Needless to say, that’s a pretty big incentive for Mastercard to start pushing card users and merchants more strongly away from the magnetic stripe to using EMV chips or contactless payment methods instead, and it expects that by 2033 there will be no Mastercard branded cards available with magnetic stripes at all.

Removing the Stripe

The new initiative will begin in Europe, where EMV is already widely deployed — 99.23% of transactions in Europe already use EMV, as compared to only 72.83% in the U.S. Starting in 2024, newly issued Mastercard credit and debit cards in Europe and other markets like Canada where chip cards are already widely used will no longer include the magnetic stripe.

The magnetic stripe will start to disappear in 2024 from Mastercard payment cards in regions, such as Europe, where chip cards are already widely used. Banks in the U.S. will no longer be required to issue chip cards with a magnetic stripe, starting in 2027.

Mastercard

This policy will come to the U.S. beginning in 2027, when banks will no longer be required to issue cards with magnetic stripes, but they’ll still have the option of doing so until 2029.

Notably, prepaid cards in the U.S. and Canada will be exempt from this change, since it’s not yet practical to employ EMV and contactless technologies for these types of cards.

Since there are many smaller retailers that still use older terminals and rely on magnetic stripes, Mastercard wants to make sure that everybody has fair warning, so the end of the magnetic stripe is still at least 12 years away, by which point many other things will have likely changed.

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.

Mastercard

Then again, while it may seem hard to believe for folks who have grown up with magnetic stripe technology as the norm, chip cards have been around — and in wide use — for far longer than 12 years. In fact, the EMV chip technology dates back to the 1960s, although it wasn’t standardized in Europe until 1993.

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.

Mastercard

While there still seems to be a bit of resistance among some consumers to the idea of losing the magnetic strip, a recent study showed that more than three-quarters of American consumers are open to the idea of a card that no longer has a magnetic strip, while over 90% would continue using their cards in much the same way if the magnetic stripe was removed.

Nearly two-thirds of customers have also shown a willingness to experiment with new payment methods like Apple Pay and Mastercard’s new Cloud Tap on Phone payment terminal solution.