On the long life and imminent death of magnetic stripe cards

Original author: Jerome Svigals
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This fruit of love of the aviation and banking industry has survived for more than half a century. However, its end is near.

In 1967, airlines used the Boeing 727 and Douglas DC-8 aircraft, air travel was still something special, and air carriers made a lot of money from it. However, a problem appeared on the horizon. Airlines were planning to purchase the first Boeing 747 and Douglas DC-10 wide-body aircraft, which would significantly increase passenger flow, and, consequently, the number of passengers arriving at the check-in counters at the same time. In order to prevent the mess that could have arisen because of this, airlines were forced to look for a way that would speed up the process of selling tickets and registering passengers.

Photo: Levy Brown; Stylist-requisite: Ariana Salvato

In turn, banks also encountered difficulties. The popularity of bank credit cards was booming, and sellers were simply buried in papers. Each time the buyer took any product on credit, the seller had to fill out a special form to register the purchase, and call the bank to authorize the payment. And the availability of convenience stores around the clock and even the growing popularity of night TV shows, led to the fact that people did not have enough official banking hours, and they began to expect from them that their services were available in the evenings and even on weekends.

The only way to solve this problem of banks and airlines (in addition to hiring a crowd of clerks) was to arrange self-service of clients using computers. For banks, this meant the use of ATMs, and for airlines, the use of similar machines that could track information about booked tickets and issue boarding passes. It was not difficult to design such a machine that would issue money or tickets. But in order for people to trust such machines, engineers had to offer a way by which users could easily, quickly and safely identify themselves.

In this way, magnetic stripe cards appeared. Developed by IBM and mass-produced in the seventies, which gained worldwide popularity in the eighties, by the nineties they became almost universal. However, over the years of their existence, they had to overcome many obstacles, especially in North America, before they became one of the most successful technologies of the past half century. Think about these numbers: in 2011 alone, 6 billion bank cards, as well as travel tickets and other magnetic stripe media, around the world passed through readers about 50 billion times.

The greatest difficulties for magnetic stripe cards arose in the mid-eighties when smart card technology appeared. Smart cards in their appearance are very similar to cards with a magnetic stripe, most of them still have such a stripe, for use where smart card readers are not available, but a microprocessor chip is built into the plastic of their case. This chip monitors the operation of the card, which means that for authorization and completion of about 85 percent of transactions, only the information stored directly in the chip is sufficient and communication with the network is not required, and this is a big plus for those places where the connection unstable. Such a card may also contain a hidden personal identification number (PIN), and thus the card can verify the PIN code entered by the user, without disclosing this code to reading equipment, which is a major security improvement. In Europe and in some other regions outside North America, microchip smart cards have almost completely replaced magnetic stripe cards, but in the USA and Canada the latter are still very popular.

But the end of magnetic stripe cards is just around the corner. Appeared schemes making payments via smartphones and technology near the contactless communication ( in Near Field Communication ) are gaining popularity, and probably in the end, completely replace the Honorable credit, even in North America. And since we are on the verge of a new era, the era of high-tech transactions, it's time to sing praises to the unsung engineers who stood behind the creation of the technology that was so amazingly successful.

Fast forward to 1967, at a time when the banking and aviation industries were struggling with a way of customer service that would allow them to do without a radical increase in the number of customer support staff.

Then the Blue Giant came to the rescue. Several hundred developers from the IBM Advanced Systems division located in Los Gatos (California) and Armonk (New York) were faced with the task of creating new computer applications that would help increase computer sales. They suggested using cards that resemble the size of punch cards existing at that time, with machine-readable information on them. The researchers decided that a single machine-readable data scheme should be used both for the needs of airlines and for the needs of banks, because in this case the customers would no longer need to carry several different cards with them, and IBM would not have to produce several types of equipment manufacturing such cards.

Photo: Marcus Lindstrom / iStockphoto

IBM did all the work without requiring extra money. They did not even patent the card they invented with machine-readable information. On the contrary, they allowed everyone to use this technology for free, in the expectation that the more operations will be performed using machine-readable storage media, the more computers will be sold to work with them. The strategy worked better than any expectation: By 1990, for every dollar that IBM spent developing magnetic stripe cards, there were one and a half thousand dollars from the sale of computers.

The engineers at IBM knew that there would be very little space on the card where information could be written. The size of payment cards is only 5.4 by 8.6 centimeters. On the front side of the card was a bank logo, and this could not be changed. Therefore, the machine-readable area had to be divided on the back of the card, along with information about the bank, issuer, and signature line. Engineers concluded that they can count on a strip along the card, about a centimeter wide. Thus, determining the size of a machine-readable area was not difficult: 1 by 8.6 centimeters. But how to encode information on this strip ?

IBM considered and rejected the idea of ​​using barcodes and perforated paper tapes (an idea that Citibank would later apply to its short-lived “magic middle” card) As a result, IBM settled on magnetic media used since the Second World War to store audio recordings, and later found use in the computer industry, as disk drives. Only the use of such technology could give engineers a data recording density sufficient to enable them to squeeze all the necessary information into the strip that was at their disposal. The information contained both alphabetic data, such as the name and address, needed by the airlines so that they could identify customers by their databases, as well as numerical data, such as account number and bank number, which were necessary for banks.

IBM proved the correctness of their chosen concept by creating the world's first magnetic credit card. It was a piece of cardboard with a magnetic strip glued to it literally with adhesive tape (see photo “Card with a magnetic strip version 1.0” ). Then the real problem arose: how to create a card strong enough so that it could withstand daily careless handling, and which could be produced quickly and inexpensively.

In order to stick a magnetic carrier, a piece of iron oxide, to the back of the card, the developers needed a binder that would melt when heated and bind this piece of iron oxide to the plastic of the card. Fortunately, the binder used to attach the signature line is also suitable for iron oxide. However, more than two years passed before a machine was created that could stamp magnetic strips with high speed and a sufficient level of reliability. However, the issue price of one card was two dollars, which is approximately equal to eleven today. This price was too high, and its decline to an acceptable five cents per card took a whole decade, until 1980. Today, issuing one card costs two to three cents.

In addition, there was another problem with magnetic media. In the case of passing the card through a skimmer, attackers could make a magnetic copy from the card, and then transfer the received information to a blank card. So the developers needed to find a way to ensure the security of the cards, despite this vulnerability.
Some researchers believed that this problem was intractable, and insisted that the idea of ​​using magnetic cards should be abandoned. However, others claimed that the large databases, whose widespread use was only just beginning, had sufficient capabilities to track and analyze the operations being performed, and could compensate for the vulnerability of the cards themselves. The fact that IBM saw the sale of database systems as one of its main areas of commercial activity did not hinder.


Here's how it works. When you or the cashier pass the card through a reader, it reads information encoded on the magnetic strip with the help of which you can be identified. Then this terminal, using either a dedicated line, or in the case of small shops, a dial-up, sends information about you, and about how much you want to spend, to a bank that collects data on your card payments. The bank then forwards this information to the issuer that issued the card using the issuer's network, for example using Visa. If the issuer determines that you have not exceeded your credit limit, then it sends a confirmation message to the bank, which in turn forwards it to the store. Usually this operation takes only a couple of seconds. However, the credit card issuer has not finished with your

At the checkout: Magnetic card readers appeared in stores in the early 70s. This shoe store visitor uses her magnetic stripe card to make a purchase in 1971. Photo: IBM Corp.

transaction. Even after the transaction has been authorized and you left the store along with the purchase, the issuer’s fraud-checking software checks your transaction to see if it matches your normal shopping style and notes the transaction in the event of a mismatch.

After the developers opted to use magnetic stripe technology, they needed to determine how the information would be placed on each card. At first, they were going to place all the information - digital codes for ATMs and alphanumeric for airlines, in a single data set, and let the reader choose the right data from all the data. But then they came up with a better idea, namely to use multi-track recording, a relatively new technology that would allow them to encode two different data sets on a single magnetic strip. Using such a scheme allowed IBM to give way to others, too, each industry could now, if necessary, create its own standards for its tracks. Moreover, the tape even left a place for the third track,

Each of the three tracks has a width of 0.28cm. and separated from others by a small space. The first track is dedicated to the aviation industry, and among other data includes an account number (19 digits), a name (26 alphanumeric characters) and other data (up to 12 digits). The second track - allocated for banks, contains the main account number (up to 19 digits) and various other information (up to 12 digits). Exactly the same format is still used.

In January 1970, American Express issued 250,000 magnetic stripe cards to its Chicago customers and installed self-service kiosks at the American Airlines desk at Chicago O'Hare International Airport for ticketing. The cardholder could choose whether to take their tickets and boarding passes at a kiosk or from a human employee. Cardholders crowded into kiosks. In fact, even United Airlines customers went to American Airlines racks a quarter mile across the terminal to use the kiosks.

Magnetic stripe card technology soon became the ubiquitous transaction mechanism. The strong position of such cards in North America was the result of both a happy occasion and good design. In the mid-eighties, major credit card companies spent tens of millions upgrading their network infrastructures. Soon after, smart card technology became available, however, the transition to the use of this technology would lead to the fact that most of these investments would become useless.

Magnetic stripe card version 1.0: Scotch tape, a strip of magnetic tape, and a piece of cardboard became the first magnetic stripe card in the world (see above). Its author Jerome Swigals and now wears this prototype in his wallet. Photo by Jerome Swigals

However, at present, these costs have largely paid off, and security concerns are growing. Therefore, companies working in this area are no longer so committed to using magnetic stripe cards, and smart cards are slowly seeping into North American wallets. However, smart cards did not reign long in North America, as soon they will be replaced by mobile phones and transactions made with their help.
Today, all new transaction processing devices installed at points of sale can also exchange data with smartphones using a set of wireless communication standards called the Near Field Communication standard. In North America and Asia, this opportunity is not so often used, but it is more and more available. Meanwhile, some airlines have already installed readers that eliminate the need for passengers to use self-service kiosks. Now they just need to present an electronic boarding pass displayed on the screen of the smartphone.

Ironically, one of the recent technical developments, a small plastic nozzle called the Square, which turns smartphones into card readers and allows anyone to accept payments made using credit cards, can, oddly enough, slow down the pace with which magnetic stripe cards are losing ground in favor of smartphone-based transaction technology. Square makes it easier for people to continue using magnetic stripe cards than to move on to new systems.

Over the next few years, magnetic stripe cards will finally leave the scene. However, their legacy continues to exist. The initial information standards, the way the data was physically located on the magnetic strip, survived all changes in storage media, migration from magnetic stripe cards to smart cards, and from them to smartphones. And just like many of us have completely forgotten the origin of the QWERTY keyboard layout, which we knock on for so many hours every day, that when we begin photographing checks in order to deposit them in the bank, when we wave our phones at scanners, for in order to pay for coffee, or when we slip through the turnstile in public transport, without even taking the mobile phone out of our pocket, and the fare will be automatically deducted from our account, we will also completely forget that

About the Author
In 1974, IEEE Spectrum Magazinethe theme of the issue was an article announcing the birth of magnetic stripe cards, which became one of the most successful inventions ever made. In an issue of Spectrum magazine published 38 years later, in June 2012, this article was published predicting the imminent death of magnetic stripe cards. Amazingly, the author of both was the same person, Jerome Swigals. This is probably the first time in world history when the same person, in the same magazine, announces first the appearance and then the death of such a powerful technology. In the sixties, Swigals worked as an IBM development manager in Asia, and later moved to the United States and was appointed director of e-banking development there. When IBM talked actively about new technology in 1974, Swigals, a regular reader of Spectrum magazine, convinced IBM employees in the public relations department to contact the editors of this magazine. They agreed to publish an article by Swigals and his colleague German A. Zegler. This was his first attempt to reach a wide audience, and he still keeps a treasured copy of that magazine among his papers. “The forecasts in this article hit the bull's eye,” he says. “However, we did not expect magnetic stripe cards to be used as, for example, keys in hotels. We were not so insightful. ” “However, we did not expect magnetic stripe cards to be used as, for example, keys in hotels. We were not so insightful. ” “However, we did not expect magnetic stripe cards to be used as, for example, keys in hotels. We were not so insightful. ”

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