Someone has paid tens of thousands of dollars for a piece of financial history that has borne billions of swipes and trillions in transactions.
A prototype of the first magnetic credit card sold Friday at Sotheby's for $23,750.
The buyer is believed to be private collector. "We had a lot of people who looked at it with great interest," says Richard Austin, head of books and manuscripts at Sotheby's in New York.
The prototype, which IBM developed in the late 1960s, consists of a piece of cardboard that measures three inches by five inches with a half-inch strip of magnetic tape that is affixed by Scotch tape.
Until recently, the card resided in the wallet of Jerome Svigals, 86, one of the engineers who invented it when he worked at the computer company in the 1960s.
Though credit cards had begun to proliferate by the time IBM's project began, they required merchants to write out a charge slip and to place a phone call to get the charge authorized.
Over a nine-year period starting in 1966, Svigals and his colleagues devised a series of magnetic stripes that allowed information encoded on the card to be read remotely by a computer, which could authorize the purchase and process the transaction automatically.
Eventually they settled on three tracks, each 0.28 centimeters wide, with a separator between them. One track, for banks, can hold 40 numeric characters — enough to record the identity of the issuing bank and the cardholder's account number. Another, used by airlines, contains 79 alphanumeric characters — sufficient to encode a cardholder's name. The third, which consists of 107 numeric characters, can contain information about a cardholder's driver's license.
The prototype that sold at auction had one track of numeric data. "The first tracks we built were for banking," Svigals says. "We later learned we needed to have three tracks."
"Our real problem was how to get magnetics to stick to plastic cards," Svigals recalled.
When the project wrapped, Svigals kept two of the prototypes. One he carried in his wallet. The other he later gave to the Computer History Museum in Mountain View, Calif.
"Prototypes like that were discarded at the end of a project — the only thing IBM kept was the actual products," Svigals said.
Svigals says the prototype he carried remained intact although the information on it faded. "The average life of a magnetic strip is only 18 months," he added.
In 1970, American Express became the first company to embrace cards with magnetic stripes, according to Sotheby's. In 2011, Visa, MasterCard, American Express and Discover together processed roughly 22 billion transactions worth $3.6 trillion in the U.S. alone.
Svigals, who retired from IBM in 1988 and went on to write books about payments technology, says credit cards of today resemble the prototype. "Magnetically, it's quite similar to that hunk of cardboard."
"Smartphones keep the same information because all the databases and systems are set up to handle them that way," he said.
Svigals, who lives in Redwood City, Calif., grew up in New York City and served after high school with the U.S. Third Army in Europe. "Cleaned out places like Dachau and supported the war crimes tribunal in Nuremberg," he recalled.
Following the war, Svigals earned an engineering degree at the City College of New York before being recalled by the military on the eve of the Korean War. The army sent Svigals to Aberdeen Proving Ground in Maryland, where he learned to program computers. "I was one of the first 50 programmers in the world," he said.
After the army, Svigals worked at RCA for two years then joined IBM, where he held a series of positions before becoming a project manager for the group that developed the magnetic card. "Once we developed a reliable way of putting magnetics onto plastic, the next assignment was how to put them on a ticket for mass transit," Svigals said. In the early 1970s, the group produced the first electronic transit tickets for San Francisco's Bay Area Rapid Transit system.
Svigals says he decided to part with the prototype after publishing an article in June that discussed the magnetic card's imminent death as payments move to smartphones. "If it's coming to an end, I better get rid of it," he recalled thinking.