This is where the story of the magnetic stripe and the chip on your credit card begins — an airport in the 1960s. Back then, you want to pay with a credit card, you walk up to a ticket counter, hand over your credit card, and the airline calls up
the bank to make sure it all checks out. It’s all done manually. But as the lines grew, the time it took to
get on the plane grew, too. So, the airlines went to IBM, International
Business Machines, big deal back then, and they said, “This is the problem, can you make
us a card that works faster?” So, IBM tried a few different ways to make a card and a machine that could talk to each other. And finally, they said, “Yes, here, take this
piece of magnetic audio tape and stick it on the card like this.” And the tape had all of the important information
you’d normally have in that phone conversation. A credit card machine could read that tape,
send it over the phone lines, and the bank would get the information almost instantly. So instead of sounding like this, “Hello, I’m going to check on
Mr. Johnson’s credit right now.” It sounded like this, [beep boop warble warble] But not in France. France ended up with tons of credit card fraud because the phone lines there, well… they kind of sucked. “I can’t hear much of anything.” So sometimes those swipes just wouldn’t go
through to the bank. And the way French stores dealt with it was
to stockpile their credit card transactions and then make one big call at the end of the
day. If you were a French criminal, this was a
bonanza. You could get up in the morning, make a fake card, show up at the store, buy something, and by the time they call to check your credit,
you’re halfway to your mansion in Marseille. But, unfortunately for all those nefarious
fraudsters, there was a colorful man named Roland Moreno who knew just how to solve this. He was a hippie, a freelance journalist, a
comedian — “So, what is the deal with credit cards?” — and an inventor. And he had all these engineer friends who’d
tell him, “You know, France has a ridiculous, inordinate amount of credit card fraud. Why don’t you do something about that?” So our hippie inventor came up with a solution. He knew all about computers, so he said, “Why not put a computer chip in the card? The chip could generate a unique code every
time you use it. In fact, we don’t even need to use cards. We could put the chip in this giant ring.” But the ring didn’t really catch on. The chip was a good idea though because it
meant that the machine could confirm that you were using a real card offline, and as
fraud got worse and worse, it started to become harder for the banks to ignore the chip. Finally, French companies adopted it with
a PIN code system instead of a signature so it was even more secure, and it worked. It was so successful that the chip began to
spread all across Europe. Credit cards were finally super secure. But in the U.S., we were still using the magnetic
stripe. American phone lines worked better, the stripe
was fast, and so it was fine — until so many other countries were
using the chip and PIN that fraudsters turned their focus to the U.S. We finally adopted the chip, and that’s where
we are today. Waiting just a little bit longer in line than
we’d like, sort of like the 1960s.