We use our payment cards constantly. Rarely can we be found outside our homes without them. It would seem obvious, then, to try to get more out of the payment card – to have it do more than serve as a dumb, unsecured receptacle for small amounts of financial data. Indeed, over the past four decades a tremendous amount of thought and creativity has been applied toward developing cards that are smarter, more powerful, more convenient and more secure.
Payment card tech has advanced along two separate development tracks: innovation around cards that are compatible with the ubiquitous swipe reader (e.g. powered cards/reprogrammable stripe cards), and innovation around cards that require specialized card reader capabilities (e.g. smartcards/chip cards/RFID cards). This article briefly traces the history of payment card technology, emphasizing the development trajectory of powered cards with dynamic magnetic stripes.
Early History of the Magnetic Stripe Card and Transaction Cards with Embedded Electronics
IBM engineered the world’s first magnetic stripe card in the 1960, but it was not until the early 1980’s that Mastercard and Visa circulated these cards widely and created the strong incentives necessary to convince merchants to accept them. By this time, card networks, card issuers, tech companies and independent inventors had already begun exploring novel techniques for improving upon the security and functionality of the magstripe card by embedding electronics in transaction cards.
Much of this early card tech innovation centered around the development of the smart card, a payment card with internal memory that communicates back and forth with specialized payment terminals via contact pads. Designed to eliminate offline card fraud, smart card payment systems have had great success in Europe where card transactions were traditionally processed offline (due to inferior telecommunications capabilities). In the US, however, strong centralized fraud management has historically minimized the need for card-level anti-fraud measures, undermining the economic justification for merchants to replace their swipe-based terminals with chip-card enabled terminals.
Origin of Reprogrammable (Dynamic) Stripe Technology
Recognition of the staying power of swipe terminals in the US (and throughout much of the rest of the world) provided the impetus for the development of reprogrammable magnetic stripe cards. Unlike traditional magstripe cards, reprogrammable, or dynamic, stripe cards do not transmit a static set of card data to a swipe reader. Rather, these cards transmit variable data, the contents of which depend upon user input, a preconfigured algorithm, or a combination of both.
Reprogrammable stripe cards offer two significant advantages over static (conventional) magnetic stripe cards. First, these cards needn’t constantly transmit a static array of sensitive card holder information, which means they can be more secure. Second, a reprogrammable card can be configured to transmit information for multiple cardholder accounts, enabling it to operate as though it were multiple ordinary magstripe cards.
It would appear the earliest written documentation of this technology dates back to 1985. In a patent filed in April of 1985, three former Visa employees describe a transaction card that employs inductive coupling (i.e. electromagnetism) to send a variable signal to the read head of a stripe reader. The patent, which draws heavily from innovation in the contactless smartcard field, specifies a power source, a processor and a coil apparatus. The processor draws energy from the power source and sends electrical signals to the coils, creating electromagnetic patterns that can be interpreted by a magstripe card reader. The patent’s authors envision a card that requires a pin code to unlock and with which a user may access up to three sets of cardholder information, selectable by push button.
Spanning the three and a half decades since the reprogrammable magstripe card concept was first introduced, a variety of novel applications for this technology are scattered about the technical literature on payment cards with embedded electronics. In a particularly interesting mid-nineties publication, inventors Samuel Goldberg and Even Yehuda describe a reprogrammable magstripe card that alters its card information dynamically based upon an internally clocked timing sequence. Essentially, Goldberg and Yehuda were describing a time synchronized OTP (one time password) card many years before the major card issuers had begunn distributing display based OTP cards. Similarly, Privasys, a Delaware Corporation, has developed a number of algorithm based OTP card solutions that leverage reprogrammable magstripe card technology to provide stronger card security without detracting from convenience of card use.
Reprogrammable Card Technology and the Universal Card
It will perhaps come as no surprise that the most commonly proposed use for reprogrammable stripe card technology has been the consolidation of the 6 or more payment cards with which the typical American stuffs his/her wallet/purse. After all, nobody enjoys carrying around all that plastic, and it seems just about everyone knows someone who has openly contemplated a single, “universal” card that could stand in for all the rest. While efforts to develop and commercialize a “universal” card long predate the reprogrammable stripe card (for example, see , a distant Echo of more recent universal card concepts such as Echo), the technology has been the foundation of substantially all meaningful implementations of this concept in recent history (Wallaby Financial being a potential exception to the rule); for, a card with a changeable stripe has the major advantages of being fully compatible with existing payment terminal infrastructure and requiring no new behavior on the part of cashiers, merchants or processors – ideal and probably necessary qualities for a commercially viable card product to have. Described below are a few of the more interesting examples of just this past decade.
Chameleon Network Inc.
In the early 2000’s, a small New England startup, Chameleon Network, set out not only to develop a highly innovative product, Pocket Vault, but also to take all steps necessary to bring their product directly to market . Pocket Vault, a biometrically secured electronic wallet, integrated with a reprogrammable stripe card, Chameleon Card. Chameleon Card could be inserted into Pocket Vault and programmed to emulate any card of a user’s choosing via a touch screen interface on the front of Pocket Vault. The product not only consolidated a user’s wallet into a thin, sleek device, but also secured his/her card information. Chameleon Network generated a great deal of excitement for Pocket Vault and won over the support of major card labels with its groundbreaking method for authenticating card account information. Unfortunately, negotiations between key stakeholders broke down and Pocket Vault was never publicly released.
iCache, Inc. followed closely in the footsteps of Chameleon Network in 2006 when it unveiled iCache Digital Wallet, a product concept functionally similar to Pocket Vault and styled after Apple’s iPod. To the best of this author’s knowledge, Digital Wallet never reached market. iCache pivoted in early 2012, launching an iPhone 4/4s case, Geode™, with similar functionality to Digital Wallet. Geode is currently available for sale online.
Another company to have made use of reprogrammable stripe technology is Dynamics, Inc. A relative newcomer to the powered card scene, Dynamics, Inc. has raised significant capital and generated a great deal of excitement over powered card and reprogrammable stripe technology in recent years. Over the past four years, Dynamics, Inc. has marketed a variety of card products that emulate multiple cardholder accounts. Dynamics, Inc. recently began developing ePlate™ – a credit card with which users can select between two different “experiences” (similar to loyalty programs) by pressing one of two buttons on the face of ePlate™.
Protean Payment, Inc.
Finally, Protean is developing Echo – the next generation in reprogrammable stripe tech. Echo is a stylish, minimalistic, reprogrammable stripe card that syncs via Bluetooth with Protean’s mobile wallet app (iOS/Android) – the first mobile wallet that can be used everywhere payment cards are accepted. With Echo, Protean aims to deliver upon the as yet unfulfilled promise of the universal card: a more enjoyable and convenient user experience. Moreover, Protean’s wallet app will eventually facilitate smarter and faster purchasing and financing decisions, saving its users time and money.
While we at Protean cannot claim to be the first to have envisioned a universal card, we wish to honor the hard work and creativity of those in whose footsteps we follow by striving to perfect the concept. We aim to do so by breaking new ground technologically and getting an outsanding product into the hands of as many excited customers as possible.
We hope you’ll be one of them!