The History Of Credit Card Processing

Most people aren’t going to remember the days of making carbon copies of your credit card in order to process transactions, but that’s exactly what businesses had to do. Electronic processing was first introduced to the public in 1979, having been invented by Visa. Since then numerous innovations have taken place that bring us to a very pivotal point in history, where you don’t even physically need a credit card in hand to use a credit card. Along the way, each innovation has been a step forward in the ease of using a credit card, but reflecting back on the history of how they were processed is fun and interesting.

The Machine that was Not a Machine

To call the first credit card processing machine a machine is overstating the fact. It’s roughly equivalent to the difference between a wheelbarrow and a 4×4 pickup truck. Like the wheelbarrow, it represented a step forward in the way transactions could be handled. Like the wheelbarrow, there was much more room for innovation. Consider the fact that a wheelbarrow is capable of transporting a couple hundred pounds at a snail’s pace, while a modern pickup can move a ton at 300 times the speed.

The first credit cards were processed like so. The customer would hand the sales clerk their card. The sales clerk would fill out a form detailing pertinent information on the card. The card was run through a “machine” that basically made a carbon copy of the rubbings on the card. The form was then signed by the customer, and proprietor had to mail it to the bank. After all that, the business would receive payment for the transaction.

Phone Authorization

If that wasn’t bad enough, imagine handing your card over to the clerk, and waiting for them to call the credit card company for authorization. You’d hate to be stuck in that line, right? Well, that’s what they had to do. There was a number printed on the back of the card, the clerk would call it, read out the credit card number, and then wait for verbal confirmation. This of course, was before things like call waiting, so the chance of getting a busy signal was high. Since this was time consuming, the process had to be reserved for larger transactions.

Point of Sale Transactions Enter the Marketplace

The capacity to make point of sale transactions was introduced by Visa in 1979, and it ushered in a brave new era that took pressure off both the store clerks and the customers. It was less tedious for customers and it required far fewer steps for merchants to process credit card transactions. This is also the point at which credit cards really began to take off as a medium of exchange.

The technology was so solid that it remained roughly the same over the next 40 years, and is still the predominant way for transactions to take place via credit and debit. Over the years, this technology has improved, but the magnetic strip that carries the card’s information is still basically the same. This was also around the same time personal computers, diskettes, and VCRs became popular.

EMV or Credit Cards with Computer Chips

The next major advancement for credit card purchases was the EMV chip. The original magnetic strips contained extremely sensitive information and could be copied easily by anyone with the technical know-how to do so. This is because the information on the card remains static and never changes. Chipped cards sent the information alongside a transaction code, and this changes from one transaction to the next. If anyone were to steal that information, it would be useless to them, because another transaction could never take place with that code. This has resulted in an unprecedented reduction in credit card fraud and stolen information.

Cardless Credit Cards

Mobile wallets are both the present and the future. It’s estimated that by 2020 the amount of consumers using mobile wallets will increase by 80% over the next 4 years. A technology that received a lukewarm reception in 2015 when it was introduced to the public has recently caught fire. More consumers and more vendors are buying in.

The Future is Now

With as many seriously disruptive technologies being introduced into the realm of payment processing, it’s hard for businesses to keep up and that’s one of the reasons why Merchant Services are so vital to today’s rapidly changing economy. Businesses caught with outmoded technologies are putting themselves at a serious disadvantage.

It’s imperative for today’s businesses to keep on top of emerging technologies. The future is now, and the groundwork is being laid for many more advancements in the near future. With the amount of excitement surrounding Bitcoin and related crypto currencies we could see digital wallets carrying more than just US dollars, and understanding and adapting to the changing landscape keeps your business in lockstep with major corporations.

Let us take your business into the future of payments. Call us at 1-800-531-8575 x 100 or connect with us online

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