As per Statista, there will be around 28.44 billion payment cards in circulation by 2027. The domain of payment cards has evolved significantly over time, and there’s a fascinating story behind how all this has transpired.
In the same vein, Hannah Fry, in her recent BBC show, presented the “secret genius” of the modern payment card. In the first episode of this six-part series, Hannah took us behind the scenes of how European Visa card transactions take place. She shared interesting stories of how ancient jewelry led to the emergence of the magnetic chip and PIN.
Indeed, if you think about it, the story of the modern payment card is quite enthralling. Let’s delve right into it, shall we?
The Birth of the Modern Payment Card
Designed in the mid-1970s, the initial payment card was not even a card. It was basically a memory storage device connected to a ring. That’s right, a “piece of jewelry.”
French inventor Roland Moreno patented the “smart card” ring along with the device that could read it. Later, he used the signet ring and an attached microchip that worked as the unique personal identifier. This development led to the modern payment card with the embedded microchip and pin.
In 1974, Roland Moreno mounted the microchip on the card and used it to perform payment transactions. By the end of the year, Honeywell Bull had used this invention to develop its first CP8 Transac card.
How the “Humble” Ironing Board Transformed the Payment Card
Did you know that the magnetic stripe has been part of payment cards since the 1960s? It replaced the slow and error-prone carbon copy process. Forrest Parry was the IBM engineer who created the magnetic stripe card currently used for credit or payment cards.
Modern payment cards with magnetic stripes are capable of conducting transactions worth trillions of dollars every year. However, back in the 1960s, Forrest Parry faced the challenge of how to fix the magnetic tape to the back of the plastic card. He talked about this problem with his wife, who was ironing clothes on her ironing board.
She suggested the use of “ironing” to heat and melt the magnetic tape on the card. This was how IBM emerged as the pioneer of magnetic stripe technology.
What Role Did Espionage Technology Play?
During the Cold War, Russians used technology to spy on the U.S. ambassador – from 1945 to 1952. Russians planted the Great Seal Bug (also known as the “Thing”) in the U.S. embassy by concealing it in a “gift” to the American ambassador, W. Averell Herman.
The innovative part of this technology was that the bug was not directly powered. To avoid detection, Russian Intelligence powered the bug externally by sending a radio signal to its antenna.
On discovering this bug, the underlying technology caused a lot of controversy, as expected. However, this technology is now enabling contactless payments in the modern age.
Modern payment cards include an 85-cm wire antenna. This wire picks up radio signals from payment card readers (located close by) and executes the transaction.
In her BBC episode, Hannah Fry demonstrated this technology by dropping a bank card into acetone and then extracting the embedded wire and attached microchip from the card. She then proceeded to buy coffee by holding the wire and microchip on a card reader.
The Emergence of CVV for Online Shoppers
We are all aware of the 3-digit CVV number on the back of every payment card. Also known as card verification value, CVV is essential for completing any online transaction. The CVV is a security feature used whenever the physical card is not available for verification. But how did it originate?
As technology advanced, the simple magnetic stripe was not sufficient to provide security. This led to the emergence of the CVV technology. Also known as Card Security Code (or CSC), the CVV was developed by Equifax employee Michael Stone in the U.K. in 1995 as an 11-character alphanumeric code.
It was reduced to a 3-digit code after being adopted by the U.K.-based Association for Payment Clearing Services. Mastercard started issuing cards with CVC2 numbers in 1997 – while Visa started using CSC in 2001.
The Way Forward for Payment Cards in 2023 and Beyond
According to Natalie Kelly of Visa Europe, the fight against online fraud is an ongoing process. She talks about using Visa’s AI systems to prevent card-related fraud by dynamically generating a card number, expiry date, and CVV.
There’s also the case of exploring and utilizing the biometric technology. Hannah Fry, in her episode, also highlighted this development. She explored if biometric technology can eventually replace the current payment cards. But, she did question if consumers would be willing to share their facial information with banks and financial institutions.
Indeed, the story about the evolution of payment cards and the next frontier of payment technology is fascinating. At Verinite, we constantly explore innovations in digital payments and payment cards. We work with leading banks and fintech companies to innovate their payment systems for the future. Excited to be part of this payment revolution? Get in touch to know more.
Debasis Mohanty
Debasis heads the delivery for all client engagements at Verinite. He has a long track record of delivering high quality, responsive, secure and cost-effective business and technology solutions in BFSI domain. Outside his work, he is an amateur animator, a sports enthusiast, a voracious reader and a Trivia buff.
