Yup, it's as simple as putting a magnetic stripe reader and putting it into a shell. These are a commodity on Alibaba now [1].

The idea of using headphone jack for data transfer has been around since the Commodore PCs [2]

The software side is pretty standard too [3]. It's a standard analog to digital conversion.

[1] http://www.alibaba.com/showroom/headphone-jack-magnetic-card...

[2] http://www.zimmers.net/anonftp/pub/cbm/crossplatform/transfe... And https://en.wikipedia.org/wiki/Commodore_Datasette

[3] http://www.slideshare.net/ShipengXu/data-transmission-throug...