I don't imagine they are as straightforward as buying a magnetic reader and putting it in a shell. The interface is somewhat unique after all. It connects through the audio jack. The processing on the software side need to be somewhat custom as well.
No, that's exactly what they do. They pipe audio track data through your mic port, like any other reader would. Although they did start encrypting the signal, because people started using these cheap readers for nefarious things.
