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This love fruit of the aviation and banking industry has been experienced for more than half a century. However, its end is near.
In 1967, airlines used the Boeing 727 and Douglas DC-8 planes, air travel was still something special, and air carriers made a lot of money from it. However, there is a problem on the horizon. Airlines were going to buy the first wide-body Boeing 747 and Douglas DC-10 aircraft, which would significantly increase passenger traffic, and, consequently, the number of passengers arriving at check-in counters at the same time. In order to prevent the mess that could arise from this, airlines were forced to look for a way that would speed up the process of ticket sales and passenger check-in.
In turn, banks also faced difficulties. The popularity of bank credit cards was on the rise, and sellers were simply drowning in paperwork. Every time a buyer took a 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 presence of convenience stores within walking distance and even the growing popularity of late-night TV programs, led to the fact that people did not have enough official opening hours of banks, and they began to expect them to make their services available in the evenings and even on weekends.
The only way to solve this problem of banks and airlines (except for hiring a crowd of clerks) was to arrange self-service for customers 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 a car that would give out money or tickets. But in order for people to trust such machines, engineers needed to come up with a way for users to identify themselves simply, quickly, and securely.
This method was used to create cards with a magnetic stripe. Developed by IBM and mass-produced in the seventies, which gained worldwide popularity in the eighties, by the nineties they had become almost ubiquitous. However, they have had to overcome many obstacles over the years, 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, passed through readers around the world about 50 billion times.
The greatest difficulties with magnetic stripe cards arose in the mid-eighties, when smart card technology appeared. Smart cards are very similar in appearance to cards with a magnetic stripe. Most of them still have such a stripe, for use where readers for smart cards 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 execution of about 85 percent of transactions, only the information that is stored directly in the chip itself is enough, and network communication is not required, and this is a big plus for those places where communication is unstable. Such a card can also contain a hidden personal identification number (PIN), and thus the card can verify the PIN code entered by the user without revealing this code to the reader equipment, which is a major security improvement. In Europe and in some other regions outside of North America, microchip-based smart cards have almost completely replaced magnetic stripe cards, but the latter are still very popular in the United States and Canada.
But the end of magnetic stripe cards is just around the corner. Emerging payment schemes using smartphones and Near Field Communication technology are gaining popularity, and are likely to eventually replace the venerable credit cards altogether, even in North America. And as we stand on the threshold of a new era, the era of high-tech transactions, it's time to sing the praises of those unsung engineers who were behind the creation of the technology that was so stunningly successful.
Fast forward to 1967, when the banking and aviation industries were struggling to find a way to serve customers that would allow them to do without radically increasing the number of customer service employees.
Then the Blue Giant came to the rescue. Several hundred developers from IBM's Advanced Systems division, located in Los Gatos, California, and Armonk, New York, were tasked with creating new computer applications that would increase computer sales. They were asked to use cards that were similar in size to the then-existing payment punch cards, with machine-readable information on them. The researchers decided that a single machine-readable data scheme should be used for both airlines and banks, since this would eliminate the need for customers to carry several different cards with them, and IBM would not have to produce several types of equipment that makes such cards.
IBM did all the work without asking for any extra money. They didn't even patent the machine-readable card they created. 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 media, the more computers will be sold to work with them. The strategy worked better than anyone expected: By 1990, for every dollar IBM spent developing magnetic stripe cards, it accounted for fifteen hundred dollars in computer sales.
The engineers at IBM knew that there would be very little space on the card to write down information. The size of payment cards is only 5.4 by 8.6 centimeters. On the front side of the card there was a bank logo, and this was not subject to change. Therefore, the machine-readable area had to be shared on the back of the card, along with information about the bank, the issuing company, and the signature line. The engineers concluded that they could count on a strip along the card, about a centimeter wide. Thus, it was not difficult to determine the size of the machine-readable area: 1 by 8.6 centimeters. But how to encode information on this bar?
IBM considered and rejected the idea of using barcodes and perforated paper tapes (an idea that Citibank would later use for its short-lived "magic middle" card). As a result, IBM decided on magnetic media, which has been 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 enough data recording density 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 required by airlines in order for them to identify customers from their databases, and numerical data, such as the account number and bank number, which were required by banks.
IBM proved their chosen concept right by creating the world's first magnetic credit card. It was a piece of cardboard with a magnetic stripe glued to it literally with adhesive tape (see the photo "Card with a magnetic stripe version 1.0"). Then there was the real problem: how to create a card that is strong enough to withstand daily careless handling, and that can be produced quickly and inexpensively.
In order to glue the 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 string was also suitable for iron oxide. However, it took more than two years before a machine was created that could stamp magnetic strips at a high speed and a sufficient level of reliability. However, the issue price of one card was two dollars, which is approximately equal to eleven dollars today. This price was too high, and it took a decade, until 1980, to reduce it to a reasonable five cents per card. Today, it costs two or three cents to issue a single card.
In addition, there was another problem with magnetic media. If the card was passed through a skimmer, the 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 maps, despite this vulnerability.
Some researchers believed that this problem was difficult to solve, and insisted that the very idea of using magnetic cards should be abandoned. However, others argued that large databases, whose widespread use was only just beginning, have sufficient capabilities to track and analyze ongoing operations, and can compensate for the vulnerability of the cards themselves. The fact that IBM saw the sale of database systems as one of its main commercial activities did not prevent it at all.
Here's how it works. When you or the cashier swipe the card through the reader, it reads the information encoded on the magnetic stripe, which can be used to identify you. Then this terminal, using either a dedicated line, or in the case of small stores, dial-up, sends information about you, and how much you want to spend, to the bank, which collects data on your card payments. The bank then sends this information to the card issuer via the issuer's network, such as Visa. If the issuer has determined that you have not exceeded your credit limit, it sends a confirmation message to the bank, which in turn sends it to the store. This operation usually takes only a couple of seconds. However, the credit card issuer isn't done with your card yet.
At the checkout: Magnetic card readers appeared in stores in the early 70s. This shoe store customer uses her magnetic stripe card to make a purchase in 1971. Photo: IBM Corp.
a transaction. Even after the transaction has been authorized and you have left the store along with the purchase, the issuer's fraud-checking software checks your transaction and sees if it matches your usual shopping style, and if there is a discrepancy, marks the transaction.
After the developers decided to use magnetic stripe technology, they needed to determine exactly how the information will be placed on each card. At first, they were going to put all the information-numeric codes for ATMs and alphanumeric codes for airlines-in a single data set, and let the reader choose the right ones from all the data. But then they came up with a better idea, which was to use multitrack recording, a relatively new technology that would allow them to encode two different sets of data on a single magnetic stripe. Using such a scheme allowed IBM to give way to others, too, and each industry could now create its own standards for its tracks, if necessary. Moreover, the tape even left room for a third track, and with its help, loan and savings companies were able to record information about transactions directly on the card itself.
Each of the three tracks is 0.28 cm wide. and separated from the others by a small space. The first track is dedicated to the aviation industry, and among other data includes the account number (19 digits), name (26 alphanumeric characters) and other data (up to 12 digits). The second track, dedicated to 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 today.
In January 1970, American Express issued 250,000 magnetic stripe cards to its Chicago customers and installed self-service ticket kiosks at the American Airlines counter at Chicago's O'Hare International Airport. The cardholder could choose whether to take their tickets and boarding passes from a kiosk or from a human employee. Cardholders were breaking into kiosks. In fact, even United Airlines customers went to the American Airlines counters located a quarter of a mile away, at the other end of the terminal, to use the kiosks.
Magnetic stripe card technology soon became a ubiquitous mechanism for making transactions. The strong position of such cards in North America was the result of both good luck 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, but the transition to using this technology would lead to the fact that most of these investments would become useless.
Magnetic Stripe Card version 1.0: Tape, a strip of magnetic tape, and a piece of cardboard became the world's first magnetic stripe card (see above). Its author Jerome Swigals still carries this prototype in his wallet. Photo by Jerome Swigals
However, at the moment, most of these costs have already been paid off, and security problems are growing. Therefore, companies operating in this field are no longer so committed to the idea of using magnetic stripe cards, and smart cards are gradually seeping into North American wallets. However, smart cards will not last long in North America, as they will soon be replaced by mobile phones and transactions made using them.
Today, all new point-of-sale transaction processing devices can also communicate with smartphones using a set of wireless communication standards called the Near Field Communication standard. In North America and Asia, this feature is still not used very often, but it is becoming more and more accessible. Meanwhile, some airlines have already installed reader devices that eliminate passengers from having to use self-service kiosks. Now they just need to present an electronic boarding pass displayed on the smartphone screen.
Ironically, one of the recent technical developments, a small plastic attachment called Square that turns smartphones into card readers and allows anyone to accept payments made with credit cards, may, oddly enough, slow down the pace at which magnetic stripe cards are losing ground in favor of the technology of making transactions with credit cards. using smartphones. Square makes it easier for people to continue using magnetic stripe cards rather than move on to new systems.
Over the next few years, magnetic stripe cards will finally disappear from the scene. However, their legacy continues to exist. The original information standards, the way data was physically located on the magnetic stripe, survived all the changes in data carriers, the migration from magnetic stripe cards to smart cards, and from them to smartphones. And just as many of us have completely forgotten the origin of the QWERTY keyboard layout, which we tap for so many hours every day that when soon we'll be photographing checks to deposit them at the bank, when we'll be waving our phones at scanners to pay for coffee, or when we'll be slipping through the door, we'll be looking at the a turnstile in public transport, without even taking out your mobile phone from your pocket, and our account will automatically be charged for travel, we will also completely forget that the magnetic stripe started all this.
About the author
In the 1974 issue of IEEE Spectrum, the subject was an article announcing the birth of magnetic stripe cards, which became one of the most successful inventions ever invented. In the June 2012 issue of Spectrum magazine, published 38 years later, this article was published, predicting the imminent death of magnetic stripe cards. Surprisingly, both were written by 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 significant technology. In the sixties, Swigals worked as IBM's head of development in Asia, and later moved to the United States and was appointed director of e-banking development there. When IBM was actively talking about the new technology in 1974, Swigals, a regular reader of Spectrum magazine, persuaded IBM's public relations staff to contact the magazine's editorial staff. They agreed to publish an article by Swigals and his colleague Herman A. Zegler. It was his first attempt to reach a wider audience, and he still keeps a treasured copy of that magazine among his papers. "The forecasts given in this article hit the bull's-eye," he says. "However, we did not expect that magnetic stripe cards would be used as keys in hotels, for example. We weren't that perceptive."
In turn, banks also faced difficulties. The popularity of bank credit cards was on the rise, and sellers were simply drowning in paperwork. Every time a buyer took a 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 presence of convenience stores within walking distance and even the growing popularity of late-night TV programs, led to the fact that people did not have enough official opening hours of banks, and they began to expect them to make their services available in the evenings and even on weekends.
The only way to solve this problem of banks and airlines (except for hiring a crowd of clerks) was to arrange self-service for customers 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 a car that would give out money or tickets. But in order for people to trust such machines, engineers needed to come up with a way for users to identify themselves simply, quickly, and securely.
This method was used to create cards with a magnetic stripe. Developed by IBM and mass-produced in the seventies, which gained worldwide popularity in the eighties, by the nineties they had become almost ubiquitous. However, they have had to overcome many obstacles over the years, 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, passed through readers around the world about 50 billion times.
The greatest difficulties with magnetic stripe cards arose in the mid-eighties, when smart card technology appeared. Smart cards are very similar in appearance to cards with a magnetic stripe. Most of them still have such a stripe, for use where readers for smart cards 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 execution of about 85 percent of transactions, only the information that is stored directly in the chip itself is enough, and network communication is not required, and this is a big plus for those places where communication is unstable. Such a card can also contain a hidden personal identification number (PIN), and thus the card can verify the PIN code entered by the user without revealing this code to the reader equipment, which is a major security improvement. In Europe and in some other regions outside of North America, microchip-based smart cards have almost completely replaced magnetic stripe cards, but the latter are still very popular in the United States and Canada.
But the end of magnetic stripe cards is just around the corner. Emerging payment schemes using smartphones and Near Field Communication technology are gaining popularity, and are likely to eventually replace the venerable credit cards altogether, even in North America. And as we stand on the threshold of a new era, the era of high-tech transactions, it's time to sing the praises of those unsung engineers who were behind the creation of the technology that was so stunningly successful.
Fast forward to 1967, when the banking and aviation industries were struggling to find a way to serve customers that would allow them to do without radically increasing the number of customer service employees.
Then the Blue Giant came to the rescue. Several hundred developers from IBM's Advanced Systems division, located in Los Gatos, California, and Armonk, New York, were tasked with creating new computer applications that would increase computer sales. They were asked to use cards that were similar in size to the then-existing payment punch cards, with machine-readable information on them. The researchers decided that a single machine-readable data scheme should be used for both airlines and banks, since this would eliminate the need for customers to carry several different cards with them, and IBM would not have to produce several types of equipment that makes such cards.
IBM did all the work without asking for any extra money. They didn't even patent the machine-readable card they created. 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 media, the more computers will be sold to work with them. The strategy worked better than anyone expected: By 1990, for every dollar IBM spent developing magnetic stripe cards, it accounted for fifteen hundred dollars in computer sales.
The engineers at IBM knew that there would be very little space on the card to write down information. The size of payment cards is only 5.4 by 8.6 centimeters. On the front side of the card there was a bank logo, and this was not subject to change. Therefore, the machine-readable area had to be shared on the back of the card, along with information about the bank, the issuing company, and the signature line. The engineers concluded that they could count on a strip along the card, about a centimeter wide. Thus, it was not difficult to determine the size of the machine-readable area: 1 by 8.6 centimeters. But how to encode information on this bar?
IBM considered and rejected the idea of using barcodes and perforated paper tapes (an idea that Citibank would later use for its short-lived "magic middle" card). As a result, IBM decided on magnetic media, which has been 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 enough data recording density 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 required by airlines in order for them to identify customers from their databases, and numerical data, such as the account number and bank number, which were required by banks.
IBM proved their chosen concept right by creating the world's first magnetic credit card. It was a piece of cardboard with a magnetic stripe glued to it literally with adhesive tape (see the photo "Card with a magnetic stripe version 1.0"). Then there was the real problem: how to create a card that is strong enough to withstand daily careless handling, and that can be produced quickly and inexpensively.
In order to glue the 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 string was also suitable for iron oxide. However, it took more than two years before a machine was created that could stamp magnetic strips at a high speed and a sufficient level of reliability. However, the issue price of one card was two dollars, which is approximately equal to eleven dollars today. This price was too high, and it took a decade, until 1980, to reduce it to a reasonable five cents per card. Today, it costs two or three cents to issue a single card.
In addition, there was another problem with magnetic media. If the card was passed through a skimmer, the 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 maps, despite this vulnerability.
Some researchers believed that this problem was difficult to solve, and insisted that the very idea of using magnetic cards should be abandoned. However, others argued that large databases, whose widespread use was only just beginning, have sufficient capabilities to track and analyze ongoing operations, and can compensate for the vulnerability of the cards themselves. The fact that IBM saw the sale of database systems as one of its main commercial activities did not prevent it at all.
Here's how it works. When you or the cashier swipe the card through the reader, it reads the information encoded on the magnetic stripe, which can be used to identify you. Then this terminal, using either a dedicated line, or in the case of small stores, dial-up, sends information about you, and how much you want to spend, to the bank, which collects data on your card payments. The bank then sends this information to the card issuer via the issuer's network, such as Visa. If the issuer has determined that you have not exceeded your credit limit, it sends a confirmation message to the bank, which in turn sends it to the store. This operation usually takes only a couple of seconds. However, the credit card issuer isn't done with your card yet.
At the checkout: Magnetic card readers appeared in stores in the early 70s. This shoe store customer uses her magnetic stripe card to make a purchase in 1971. Photo: IBM Corp.
a transaction. Even after the transaction has been authorized and you have left the store along with the purchase, the issuer's fraud-checking software checks your transaction and sees if it matches your usual shopping style, and if there is a discrepancy, marks the transaction.
After the developers decided to use magnetic stripe technology, they needed to determine exactly how the information will be placed on each card. At first, they were going to put all the information-numeric codes for ATMs and alphanumeric codes for airlines-in a single data set, and let the reader choose the right ones from all the data. But then they came up with a better idea, which was to use multitrack recording, a relatively new technology that would allow them to encode two different sets of data on a single magnetic stripe. Using such a scheme allowed IBM to give way to others, too, and each industry could now create its own standards for its tracks, if necessary. Moreover, the tape even left room for a third track, and with its help, loan and savings companies were able to record information about transactions directly on the card itself.
Each of the three tracks is 0.28 cm wide. and separated from the others by a small space. The first track is dedicated to the aviation industry, and among other data includes the account number (19 digits), name (26 alphanumeric characters) and other data (up to 12 digits). The second track, dedicated to 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 today.
In January 1970, American Express issued 250,000 magnetic stripe cards to its Chicago customers and installed self-service ticket kiosks at the American Airlines counter at Chicago's O'Hare International Airport. The cardholder could choose whether to take their tickets and boarding passes from a kiosk or from a human employee. Cardholders were breaking into kiosks. In fact, even United Airlines customers went to the American Airlines counters located a quarter of a mile away, at the other end of the terminal, to use the kiosks.
Magnetic stripe card technology soon became a ubiquitous mechanism for making transactions. The strong position of such cards in North America was the result of both good luck 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, but the transition to using this technology would lead to the fact that most of these investments would become useless.
Magnetic Stripe Card version 1.0: Tape, a strip of magnetic tape, and a piece of cardboard became the world's first magnetic stripe card (see above). Its author Jerome Swigals still carries this prototype in his wallet. Photo by Jerome Swigals
However, at the moment, most of these costs have already been paid off, and security problems are growing. Therefore, companies operating in this field are no longer so committed to the idea of using magnetic stripe cards, and smart cards are gradually seeping into North American wallets. However, smart cards will not last long in North America, as they will soon be replaced by mobile phones and transactions made using them.
Today, all new point-of-sale transaction processing devices can also communicate with smartphones using a set of wireless communication standards called the Near Field Communication standard. In North America and Asia, this feature is still not used very often, but it is becoming more and more accessible. Meanwhile, some airlines have already installed reader devices that eliminate passengers from having to use self-service kiosks. Now they just need to present an electronic boarding pass displayed on the smartphone screen.
Ironically, one of the recent technical developments, a small plastic attachment called Square that turns smartphones into card readers and allows anyone to accept payments made with credit cards, may, oddly enough, slow down the pace at which magnetic stripe cards are losing ground in favor of the technology of making transactions with credit cards. using smartphones. Square makes it easier for people to continue using magnetic stripe cards rather than move on to new systems.
Over the next few years, magnetic stripe cards will finally disappear from the scene. However, their legacy continues to exist. The original information standards, the way data was physically located on the magnetic stripe, survived all the changes in data carriers, the migration from magnetic stripe cards to smart cards, and from them to smartphones. And just as many of us have completely forgotten the origin of the QWERTY keyboard layout, which we tap for so many hours every day that when soon we'll be photographing checks to deposit them at the bank, when we'll be waving our phones at scanners to pay for coffee, or when we'll be slipping through the door, we'll be looking at the a turnstile in public transport, without even taking out your mobile phone from your pocket, and our account will automatically be charged for travel, we will also completely forget that the magnetic stripe started all this.
About the author
In the 1974 issue of IEEE Spectrum, the subject was an article announcing the birth of magnetic stripe cards, which became one of the most successful inventions ever invented. In the June 2012 issue of Spectrum magazine, published 38 years later, this article was published, predicting the imminent death of magnetic stripe cards. Surprisingly, both were written by 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 significant technology. In the sixties, Swigals worked as IBM's head of development in Asia, and later moved to the United States and was appointed director of e-banking development there. When IBM was actively talking about the new technology in 1974, Swigals, a regular reader of Spectrum magazine, persuaded IBM's public relations staff to contact the magazine's editorial staff. They agreed to publish an article by Swigals and his colleague Herman A. Zegler. It was his first attempt to reach a wider audience, and he still keeps a treasured copy of that magazine among his papers. "The forecasts given in this article hit the bull's-eye," he says. "However, we did not expect that magnetic stripe cards would be used as keys in hotels, for example. We weren't that perceptive."
