A Revolution In Retail – The Patenting Of The Magnetic Stripe Card

It is no exaggeration to say that the magnetic stripe card transformed the world of retail (and financial services). The inventor of the technology, Ron Klein applied for a patent on the technology way back in 1966 – and today he is frankly amazed that the technology has been around for so long.

However, when he invented the technology in the mid 1960’s the concerns that he was addressing were slightly different from the concerns of today’s world. Yes, fraud was an issue, in those days clerks were handed a book of cards that were linked to fraudulent transactions. They had to manually check to see if the card presented by the customer had not been used for any of these transactions. This slowed the checkout time considerably and led to enormous customer frustration.

Klein wanted to automate the system so that salespeople could simply key in a number and get a result – but he thought further than that – what would happen if a computer could read the card itself?

He had tried a number of ways to get the magnetic strip to adhere to the card – but all eventually led to the degradation of the strip – which then became unreadable. He eventually took a variety of glues and other adhesives home with him one evening to continue work. He explained the problem to his wife who had been ironing that day – she suggested ironing the strip onto the plastic card – and this worked perfectly, the heat from the iron was just enough to form a perfect bond between the plastic and the magnetic strip.

Klein patented the idea in 1969. But another company, IBM was working on a different angle. The designers at IBM did not even bother to patent the magnetic strip idea – they wanted to capture the market for the computers and readers of the strips – and the idea paid off handsomely. An engineer for IBM when interviewed in 1990 said that for every dollar that IBM had invested in the strip technology the idea of supplying the background technology of computers and readers had returned $1,500.

The magnetic stripe technology transformed financial services and the retail experience in the United States and later elsewhere in the world. Consumers could quickly and easily make purchases and just as easily fall into debt. By 2016 consumer loans and other credit debt stood at $3.5 trillion.

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