The history of magnetic stripe cards dates back to the early 1960s, with significant developments occurring in the following decades:
Early Development
IBM engineer Forrest Parry invented the magnetic stripe card in the 1960s. The technology was initially developed to create more secure identity cards for CIA officials. Parry’s breakthrough came when his wife suggested using an iron to melt the magnetic stripe onto the plastic card, solving the adhesion problem he had been struggling with.
Adoption and Standardisation
- 1969: IBM spearheaded the establishment of standards for magnetic stripe technology.
- 1969: The magnetic stripe approach was adopted as a US standard.
- 1971: It became an international standard, enabling global use of mag stripe cards.
Commercial Applications
The adoption of magnetic stripe technology revolutionised various industries:
Banking and Retail
- Early 1970s: Banks began using magnetic stripe cards to store customer account information.
- By 1990: The technology had become so successful that for every dollar IBM spent developing it, they netted about $1,500 in computer sales.
Airlines and Travel
- 1970: IBM partnered with American Airlines and American Express to introduce an experimental self-service ticketing system at Chicago’s O’Hare Airport.
Impact on Merchants
Magnetic stripe cards significantly assisted merchants in several ways:
- Faster Transactions: They replaced slow, manual processes like handwriting account information or using “knuckle-buster” imprinting machine.
- Improved Accuracy: The technology reduced errors associated with manual entry of card information.
- Real-time Authorisation: Merchants could now verify a customer’s ability to pay in real-time, reducing the risk of fraud.
- Wider Acceptance: The standardisation of magnetic stripe technology made it easier for businesses of all sizes to accept card payments.
- Increased Sales: As card usage became more widespread, merchants could cater to customers who preferred not to carry cash.
By 1998, more than two-thirds of US families held a bank card, up from just 16% in 1970. This widespread adoption of magnetic stripe cards transformed commerce, enabling the growth of electronic payment systems and paving the way for the global credit card industry we know today.
