Microchips in payment cards improve security by generating unique transaction codes

On credit and debit cards, magnetic stripes have been slowly replaced by microchips that use dynamic, encrypted data to prevent card cloning and counterfeit fraud.

Why there are microchips in credit cards

Credit cards have evolved significantly since their invention in 1950, but security lagged in the US for years. Despite handling only a quarter of global transactions, the US once accounted for half of all credit card fraud. The 2013 Target data breach helped push the adoption of chip cards, reducing fraud but shifting risks to online scams.

Contactless credit cards descend from a batteryless Cold War listening device

The same physics that let Soviet spies eavesdrop on the US ambassador in 1945 underlie contactless payment methods today. The device is a passive chip powered wirelessly by incoming radio waves.

Algorithms built to detect credit card fraud can deny charges if they perceive the attempted purchase is unfamiliar or unusual based on historical data, even when a person has enough credit to make the purchase.

Watch a video that visualizes what really happens inside a credit card network when you make a purchase.

Old credit cards can be made into guitar picks, phone stands and more

Experts recommend always cutting through the chip and the card number when disposing of expired credit cards, as the magnetic strip, the chip, and the card number all contain information that thieves might be interested in.

Visualize how passkeys, which rely on asymmetric cryptography to authenticate users, work

After using biometrics or a PIN to access the private key stored on a device, it is combined with a random number generated by the site to produce a cryptographic signature. This signature is verified using the site's public key, allowing a user to log in without entering a password. This reduces the risk of fraudulent messages—phishing attacks—and data breaches.

Digital passports allow identity verification to be digitized

By scanning the security chip on the back of passports and capturing images or video of a person, apps like Google Wallet and Apple Wallet create a digital version of the document. Some states have also developed their own apps for digital driver's licenses.

Semiconductor chips are electronic devices that store and process information

They can contain billions of microscopic switches on a chip smaller than a fingernail. An article provides a quick overview of how the devices work and how they’ve provided the backbone of the computer age.

Every printed bill has its own unique serial number

In the US, each bill also has its own plate number, series year, Treasury seal, and more. Each design helps track money and combat counterfeiting.

Merchants have to pay credit card transaction fees each time a card is swiped

Credit card networks such as Visa, Mastercard, and American Express must calculate fees for not only the customer, but also the merchant in every transaction.

Listen to a podcast episode from 1440's editor in chief that explains how a credit card transaction works behind the scenes.

When you buy even something as small as a $5 latte, a global relay between banks and networks like Visa and Mastercard is triggered. It all started with a 1958 campaign from Bank of America that jump-started the credit card revolution.

Financial institutions check for lots of things before authorizing a purchase

Before authorizing a purchase, card issuers consider whether or not the cardholder has a high enough available credit limit to make the purchase, where the purchase is being made in order to reduce fraud, and more.

Credit card companies make money through interest, annual fees, and more

They also profit from interchange fees, the fee the retailer has to pay the credit card network in order to facilitate a transaction. The fee is typically between 1% and 3% of the transaction amount.

Gas stations top the list of riskiest places to use a debit card

Unlike credit cards, debit cards withdraw funds directly from your checking account, and federal laws provide fewer consumer protections against debit fraud. Gas station "skimmers" and long periods of separation from the card at restaurants are some of the more vulnerable spots for use.

Customers wrote just one check a year in 2024, on average

Major retailers like Target have stopped accepting checks in recent years as real-time payment systems are increasingly being implemented across the US. This shift is considered an improvement in safety—as checks are vulnerable to fraud—but can lead to some exclusion for those without access to digital devices.

Since computers rely on the distribution of electrons in microchips to represent binary code, cosmic rays and ionizing radiation from radioactive elements can introduce software errors by detaching electrons from atoms.

Charge cards are different from credit cards

Unlike credit cards, charge cards often don’t have a preset credit limit, but cardholders need to pay off the entire balance every month.

Card issuers are financial institutions that open credit to customers, while card networks facilitate purchases between merchants and customers

Card issuers give customers credit cards, set rate limits, and collect payments. Card networks, on the other hand, dictate where credit cards can actually be used by managing relationships between the network and merchants. These networks make money on interchange fees, which merchants pay to accept a specific card network at their stores.

A simple explanation of semiconductors

Semiconductor chips are electronic devices that store and process information. Today they can contain billions of microscopic switches on a chip smaller than a fingernail. The article provides a quick overview of how the devices work and how they've provided the backbone of the computer age.

There is a limit to how small transistors can become because they rely on being able to allow or block the flow of electrons, but quantum effects allow electrons to leak through these barriers, generating heat, current loss, and potential data errors.

Microchip fabricators create light by heating tin droplets to over 220,000 Kelvin

Every second, lasers strike 50,000 droplets moving at 250 kilometers (155 miles) per hour, vaporizing the tin in supernova-like miniature explosions that produce ultraviolet light. Knowing this light will spread via diffraction as it passes through a filter during manufacturing, designers reverse-engineer the filter design based on the required final microchip pattern.

See an original Diner’s Club charge card

Before credit cards, there were charge cards from companies like Diner’s Club. While credit cards allow cardholders to carry a balance from month to month (potentially accruing interest), charge cards like Diner’s Club cards had to be paid off right away.

Only 14% of transactions are in cash, as of 2025

Credit (35%) and debit (30%) cards have long eclipsed cash as the primary method of payment in the US. It is a primary backup, however, with 90% of customers intending to use cash to pay or store value and 80% carrying cash.

Within fabrication plants, it takes about three months to manufacture hundreds of microchips from a single wafer of pure silicon using light and significant quantities of electricity, water, and hazardous chemicals.

Passkeys, a new authentication method, aim to replace traditional passwords

Passkeys use cryptography keys to secure logins without passwords, resisting phishing and risks from data breaches. The FIDO Alliance developed passkeys as a combination of public and private keys for authentication.

Some graphics processing units advertised under different product names, such as Nvidia's RTX 5070-Ti and RTX 5080, are identically manufactured microchips with different defect counts.

Although there are 10,000 possible combinations of four-digit personal identification numbers, data suggests that about 27% of all PINs are one of 20 combinations, including 1234, 1111, and 0000.

The Australian $5 bill has an image of a bird that glows when exposed to UV light

That’s just one of the many anti-counterfeiting security measures that the Australian government implements on its currency. Popular banknotes from around the world all include their own unique security features—this infographic outlines a few unique ones.

Privacy concerns in the credit scoring system

Because credit scores use a lot of personal information (such as whether or not someone makes credit card payments on time), some worry their privacy is being compromised in the data collection process.

The US developed a coin circulation problem in 2020

As people reduced the frequency with which they paid for things in cash and change during the COVID-19 pandemic, opting for tap-to-pay systems or online shopping instead, the number of coins in circulation decreased. Those who did make cash purchases were more likely to keep their change at home rather than use it on a subsequent purchase.

AI could be increasing the opportunities for financial fraud

Systems that can reproduce near perfect counterfeits of legitimate financial documents are increasingly prevalent and sophisticated. The international Association of Certified Fraud Examiners estimate organizations lose about 5% of revenue to fraud each year.

China is making a deliberate push towards becoming a cashless society, making digital payment services like Tencent's WeBank even more valuable.

Traffic flow can be improved through research into card shuffling

Card-shuffling mathematics has been applied to solving problems in biology to estimate the evolutionary distance between organisms and in computer science to determine the optimal distribution of files and folders in databases.

The Majorana 1 chip may provide quantum computing using geometry-based qubits

Traditional quantum computers are incredibly fragile, with encoded information easily disrupted and requiring significant error correction systems. Microsoft’s approach involves storing data on a surface, which is more stable, but involves an elusive particle first theorized in 1938.

Transistors are the foundational components of integrated circuits and microchips and manage the processing of electronic signals by controlling the flow of electricity.

A company called Bluprynt is combating counterfeit cryptocurrency

While some cryptocurrency advocates might argue that it's more difficult to counterfeit crypto than physical currency, some estimate that fake cryptocurrencies are losing crypto users at least $1.6B each year.

Fraud and identity theft are among the most common dark web-related crimes.

Apple Pay is activated on more than 78% of US iPhones

As a result, some banks worry they could be losing ground to the tech company. As consumers continue to use Apple Pay instead of pulling out their physical debit card to pay for everyday items, some banks are fighting back in the digital wallet war.

How hash functions encrypt stored passwords and can be enhanced with 'salt'

Hash functions convert text into unique, random sets of characters, a process that is computationally expensive and time-consuming to undo. Because hashed outputs for many common passwords are publicly listed, some sites use a salt—additional characters appended to a password—before hashing to produce an output that is not known. When entering a password, it is salted and hashed, then checked against the database for a matching hash before permitting login.

The benefits and risks of smart grids, from improved efficiency to cybersecurity risks

By using a network of devices, including digital meters, sensors, and controllers, smart grids can quickly detect mechanical issues and fluctuations in supply and demand, automatically adjusting electricity flow to prevent cascading failures. While this is important for variable solar and wind power generation, many of these computer systems are designed to be controlled remotely, which increases the risk of malicious access.

Chip-based 3D printers can be pocket-sized and involve no moving parts

Researchers have demonstrated a proof-of-concept version of a chip-based 3D printer that emits visible light onto light-sensitive resin to construct solid shapes. The technology may provide a portable, low-cost solution for future, small-scale fabrication needs.

Lasers help build the layers of circuit components in microchips

During the photolithography process, light is projected through a blueprint onto a light-sensitive chemical layer on silicon wafers, etching patterns that become transistors through a series of successive reactions. These processes require significant electricity, as only about 2% of photons reach the wafer.

Explore a visual timeline of fintech’s history and growth

From the debut of the world’s first ATM in 1967, to Apple Pay launching in 2014, financial technologies have come a very long way in a relatively short historical period. A colorful visual timeline highlights some of the most important milestones along the way.

Metal detectors identify induced magnetic fields in conductive objects

A changing magnetic field in a transmitter coil causes an electric current to be produced in materials that conduct electricity. This current generates its own magnetic field, which can be detected by a receiver coil and transmitted to a control box, which identifies the presence and depth of an object.

Consumers will use digital payment processing for nearly $40T in spending by 2028

That's just one signal of the industry's massive growth. Investments in the global fintech industry have grown from $4B in 2010 to $92.3B in 2021, as both businesses and consumers seem to quickly adopt new fintech products, from digital payment apps to robo-advisers.

A visual guide to how bitcoin transactions work and rely on cryptography

The "crypto-" in cryptocurrencies like bitcoin refers to the mathematical functions that generate pairs of public and private keys and encrypt data in blocks. When combined, these systems secure transactions on the network, verify digital asset and token transfers, and contribute to end-user anonymity.

Some coin denominations have ridges on their sides in part to prevent counterfeiting.

American Express is both a card issuer and a processing network

Unlike most credit card companies, American Express issues credit cards and processes payments—something called a closed-loop model. By offering both services, American Express profits from both interest and interchange fees, and also has access to more data on how customers spend their money so it can offer better perks.

Today's massive data centers evolved from single-room mainframes

Punch card computers from the late 1940s were used to store and process a company's data locally before the advent of desktop computers. As the amount of data and company sizes increased alongside the miniaturization of technology, mainframes were replaced by local server rooms and external facilities with interconnected servers running cloud-based and AI software.