Mag stripe technology is on the ropes – better start looking ahead. Like other old technology, it’s on it’s way out the door.
That’s right. Mag stripe readers are going the way of a lot of technologies used in the past. VHS videos, cassette tapes, and dial-up Internet connections; sooner than you might think. The change is being driven by the big banks, primarily driven by security issues and the ever-advancing need for better and better purchase experiences for consumers.
In August, 2021, Mastercard announced it would be discontinuing the mag strip in 2024, it was merely the official beginning of the end for the magstripe. According to an article on MarketScale.com, “The shift had already been underway for some time, coming into focus during the EMV liability shift of 2015, where issuers or merchants who didn’t support EMV became saddled with the liability for counterfeit card transactions.”
A newer standard of operation, called EMV®, was developed and managed by American Express, Discover, JCB, Mastercard, UnionPay, and Visa to be a more secure way of paying. Eventually every consumer card will have its own embedded microchip. You can get more information on this here.
And as quickly as EMV came into being – and consumers learned how to insert chip cards into readers for the length of a transaction, this experience has been quickly outpaced by tap-to-pay.
With tap, all you must do to buy something is wave (or tap) your credit card, phone, or smartwatch (you can connect those devices to a card of your choice) in front of a chip-enabled reader. Swiping has become something we do only when the payment terminal won’t let you dip or tap. Apple, Google, and Starbucks (through their apps) have led the charge in mobile payments.
Contactless payments exploded in popularity in spring 2020, when the coronavirus upended how many people thought about paying for things. In a survey of 17,000 consumers in 19 countries, completed by MasterCard in April of that year, 82% of respondents said they view contactless payments as “the cleaner way to pay.”
Now, tap-to-pay is the fastest-growing, quicker and safer technology that is sweeping across all retail sectors. It dramatically increases the speed and ease of transactions for consumers, and they are dramatically more secure.
Chip cards and so-called contactless credit cards have become the norm in many places overseas. They make it harder for thieves to steal information compared with magnetic-stripe cards. Mobile payments and contactless cards don’t transmit the user’s name, card number, or three-digit security code. And, mag stripe “skimmers” will be eliminated with this technology.
Because the big banks are all in on EMV, and contactless payments – initially driven by the coronavirus ‘touch-free payment’ preference – tap-to-pay is now preferred across the retail transaction spectrum; tap-to-pay and mobile phone payment technologies are the near-future of retail payments.
Mag stripe reader hardware and technology support will be rapidly disappearing from the marketplace, and retailers who rely on these systems should keep track of the availability of both new and replacement mag stripe hardware in the marketplace.
Eventually, these systems will be difficult to find, purchase, or obtain service for.
For the foreseeable future, tap-to-pay (along with mobile payments) are the next wave of payment technologies that will be required by retailers in order to remain competitive.
Sources:
https://www.nytimes.com/wirecutter/money/contactless-payment/
https://squareup.com/us/en/emv
https://marketscale.com/industries/business-services/how-card-issuers-and-merchants-maneuvered-one-year-of-mastercards-magstripe-phase-out/