In the past, financial transactions were primarily made with cash and checks, but today, most transactions are processed with plastic cards. Magnetic stripe cards and smartcards are at the center of this shift, and the technical differences between the two represent a significant difference in security and functionality.
In the past, most financial transactions were made with cash and checks. People either paid cash in person or made payments via check, a time-consuming process. But today, almost all transactions are done with a single card. People now use cards at restaurants, department stores, and even the local mom-and-pop shop. This means that the efficiency and convenience of financial transactions has increased dramatically around the world. Plastic card technology, in particular, is at the center of this change.
There are two main types of plastic cards. Magnetic stripe cards, which have a strip of magnetic material (called a magnetic stripe) on the back of the card, and smart cards, which are much more sophisticated and feature a wide range of functions.
Magnetic stripe cards are used as cash cards, credit cards, etc. These cards assign a unique number to the user for identification purposes, which is stored on a magnetic strip on the back of the card. The magnetic strip can typically store about 200 bytes of data, including the card number, cardholder’s name, expiration date, and the amount of money available. Each piece of data is stored in an information storage area (domain) on the magnetic strip, where each area of the domain consists of a pair of pieces of information. Here, pairs of information pointing in the same direction represent ‘0’, and pairs pointing in different directions represent ‘1’. The process of reading a card begins by passing the card’s magnetic strip through a reader, which induces a pulsed current (a very short period of electricity) in a coil around an iron core, which is converted by a microprocessor (the computer’s central processing unit) into binary code (binary code represented by only 0s and 1s), which the computer recognizes. In the case of credit cards, this process produces a printout or screen for verification, which the user must sign. Cash card users must enter a personal identification number, such as a password, to make a transaction.
However, magnetic strip cards have faced some limitations over time. The data on the magnetic strip can be corrupted by external magnets, and they also lack security. This is where smart cards came in.
Smart cards are used for credit cards, just like magnetic strip cards. However, unlike magnetic strip cards, they have an integrated circuit (IC) chip embedded in them. This chip greatly expands the functionality of the card, and it also greatly improves security. The chip gives smart cards a high level of computing power and the ability to store a variety of information. Smart cards can be broadly categorized into contact and contactless smart cards according to the contact method. Contact smart cards are those that require contact with a reader. When inserted into the reader, the card’s surface contacts react with the reader’s electrical connections to transfer data. In the case of contactless cards, passing the card near an antenna generates a weak electromagnetic signal that transmits the data on the card. This makes them ideal for applications that require fast processing, such as bus or subway fares.
In their early days, smart cards were expensive, which limited their use, but advances in technology and mass production have gradually reduced their cost, allowing them to be used in a variety of fields. Smart cards also differ from magnetic strip cards in that the transaction process is authorized by a program on the card itself. During this process, the program inside the card applies encryption technology to protect the user’s data and prevent unauthorized access from the outside. Smart cards are also designed to keep sensitive and confidential data secure. In contrast, data on magnetic strip cards is generally not always secure. Today, smartcards are used in many places, such as storing personal physical information or embedding security programs.
In the end, today’s financial transaction system is safer and more convenient thanks to technological innovations like these. In the future, more sophisticated and secure card technologies will be developed, making our daily lives even more advanced.
