💳 Swipe, Insert, or Tap - What's The Best Form of Payment?

Issue 18 - Finance

When you’ve chosen what toppings you want on your bowl at Chipotle, there are 3 ways you can pay at the counter. You can decide from the following options: Swipe, Insert, Tap, or Apple Pay or Google Pay (digital card). Most people think that they are all the same and can be used interchangeably, but can they? In this article, we’ll take a deep dive into all the forms of payment, and figure out the best payment method! Make sure to share and subscribe!

A Brief History

There are many claims about who came up with the credit card invention, but it’s widely agreed that it was John C. Biggins. He was a banker based in Brooklyn New York and worked for Flatbush National Bank. John introduced the concept with the name “Charg-It” in 1946 to members of his local community. The end goal was to bring more customers to his bank because only those at the Flatbush Bank could use the card. Since it was an experiment, it was only valid at participating local stores.

Fundamentally, the credit card John invented back then, worked like it does today. When customers tried to purchase something, the merchant would give them the item without them paying right then. The merchant would later deposit the sales papers at the bank, which would then reimburse the merchant and bill the customer.

Banks like American Express and Visa were the first to introduce their credit cards among others. However, this spikes one question: How did credit cards become popular so fast? The credit card was initially built for traveling salespeople. It was marketed as a convenience to use when traveling. Other people quickly picked up on it and figured that it could be used for saving time.

How Do They Work?

Each of these forms of payment has its way of operating. Here’s how they work:

Swipe

Swipe is by far the oldest payment method. It was invented in 1979 by an IBM engineer named Forrest Parry. He also invented the magnetic stripe on credit cards and identification badges, two things that go hand in hand.

Swipe works as follows: When you slide your card, the card reader reads a number off of the magnetic strip which is unique to the card and never changes. The reader then asks the card issuer if the number belongs to an authentic card and if the transaction should go through.

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Insert

The insert/chip payment method was developed in 1996 but introduced to the U.S. in the late 2000s.

The chip is like a mini-computer. When you insert your card, the card reader asks the card a question, that only the issuer would know. This question is for 1-time use only and always changes. Based on that, the transaction will be accepted or declined.

Tap

Tap-to-pay is also another payment method that was developed in the 1990s, however, it has only become mainstream in recent years. Note that Apple Pay and Google Pay also fit into this category.

Here’s how it works: Contactless payment methods are powered by RFID (Radio Frequency Identification) or NFC (Near-Field Communication) technology. When you’re trying to make a transaction, the radio waves share your bank account, contactless card, or phone app details with the merchant’s payment reader.

The transactions that you make are always encrypted (keeping your information private) so you know that your information is safe and secure.

Which One is the Best to Use?

After looking at these payment methods, two stand out as superior: Insert and Tap. Imagine if someone rigged a pin pad (which has happened before). Once you’ve swiped your card, they can take that number and create another identical card, which they can use to buy things under your account. On the other hand, you have insert/chip. It’s a lot safer, because even if someone rigged the machine, the question is only used one time, so it has no use for later purposes. Tap is the safest out of all because since it is encrypted, you can be assured that your data is not known to anyone else.

Thanks for reading this week’s article! Next time you go to buy something, make sure you use insert or tap! I’ll talk to you next week!

-Luke Rapaka