Why is the magnetic stripe reader necessary? Why not just use the camera to OCR the card itself?
This may sound dumb, but why not just put this additional security code in a bar code or QR code somewhere on the surface of the card to allow for the equivalent security using a camera to read the card?
Reading QR or other codes with a smartphone's camera is extremely cumbersome whereas swiping a mag-stripe is simple and reliable.
It would seem that with a small investment in a magnetic stripe writer and a plastic mould, any scammer could create cards that could fool an imprint swiper or magnetic stripe reader.
Further, wouldn't a signature make all of the above close to equivalent?
True, but still even easier to duplicate a QR code.
Signatures don't help very much since the fraudster can sign his own fake card. That's why more stores are asking to see drivers licenses which is annoying.
Not really: http://en.wikipedia.org/wiki/Magnetic_stripe_card
The stripe usually just has the cardholder name, the card number, expiration date, and sometimes the CVV. It depends a lot on what tracks are present on the card, what info your bank has included in the "discretionary data" chunk, which track was read by the reader, etc.
If you grab a cheap USB magstripe reader, you'll find that most things (library cards, student IDs, airline tickets, etc) really don't include much of anything that is not already printed on the item.
There are technologies like MagnePrint (http://www.magneprint.com/) that use the signature of the ferrous oxide particles on the card. But it requires your bank and the merchant to use the tech.
http://en.wikipedia.org/wiki/Card_security_code
"The first code, called CVC1 or CVV1, is encoded on the magnetic stripe of the card and used for transactions in person. The purpose of the CVC1 or CVV1 is to ensure the data stored on the magnetic stripe of the card is valid and was generated by the issuing bank. This value is submitted as part of transactions and is verified by the issuing bank. A limitation of the CVC1 or CVV1 is that if the entire magnetic stripe is copied, rather than generated, the card can be duplicated. See the Skimming section for more details.
The second code, and the most cited, is CVV2 or CVC2. This CSC (also known as a CCID or Credit Card ID) is often asked for by merchants for them to secure card not present transactions occurring over the Internet, by mail, fax or over the phone. In many countries in Western Europe, due to increased attempts at card fraud, it is now mandatory to provide this code when the cardholder is not present in person."
http://www.sparkfun.com/products/8634
Also, searching for "magentic card writer" on ebay returns quite a few models.
http://stores.ebay.com/Mini-MagReader?_trksid=p4340.l2563
Take a look at the handheld readers. It will make you never want to let your credit card out of your sight again.
Card layouts also vary a lot, even from the same issuers (for example: the Amex PASS).
Reading the mag stripe prevents fraud and therefore is subject to lower fees by CC companies.
Not to mention, having someone take a picture of my credit card would spook me out a little (yes, even if I'm familiar with the product).
Considering that augmented reality app that translates words on signs in real time, I suspect there is far less entropy in the raised numbers on a credit card... though you may be right that the variety of layouts would make it harder than it would at first seem.
Socially however, I'd wager that fewer people would let you take a picture of their card compared to swiping it. People are simply used to having credit cards swiped, they aren't used to having pictures taken of them.