In the payment industry, credit and debit card processing is one of the most widely used payment methods all over the globe. The processing of credit/debit card payments is carried out with electronic card machines. These machines are universal and are being used on a large scale by the merchants.
But have you ever wondered what the origin of these ingenious devices is? When did the idea of credit/debit card processing come up?
Buckle up because you are about to dive deep into the timeline of the history of credit/debit card processing. Here are the history and past development of card terminals.
From the 1950s to the 1970s
The Credit Card Invention
- In 1950, Diners Club came up with the first card that was used for payment transactions. American Express also followed the footsteps of Diners Club and launched their own payment card in 1958.
- At that time also these payment cards were known as credit cards. The cardholders were required to pay back the credit amount taken at the end of the month.
- The main purpose of inventing credit cards was to give merchants an option to settle payments with customers’ banks without using cash.
- Bank of America also released their payment card in 1958. It was named as BankAmericard, which was later named Visa.
- BankAmericard worked on a different credit system. It introduced a revolving system which allowed carrying a monthly balance to next months.
The Arrival of Imprint Card Machine
- The payment cards that came first were made from cardboard material. Due to this reason, the payment data was manually recorded at POS.
- In 1959, American Express introduced the first-ever plastic material credit card. Printed on it in embossed letters were the name of the cardholder, unique identification number, and the address of the cardholder.
- This allowed the merchants to come up with an imprint card machine. It was a non-electronic machine, also known as – Credit Card Imprint Machine. The machine helped in imprinting the payment information on slips made of carbon paper.
- These slips were kept as purchase records by merchants, banks, and customers.
Introduction of Electronic Card Device
- In 1970, magnetic stripes were introduced. They were embedded on the payment cards, thus making the payment system electronic.
- All the information including, the cardholder’s name, credit card number, card expiry date, etc., was present in the magnetic stripe.
- As a result, electronic card reading devices were also invented to process the magstripe cards. It led to more secure and safe transactions.
- The magnetic stripe cards allowed customers to control the balance of the account. Also, it enabled them to refuse or accept transactions at POS.
From the 1980s and Beyond
Electronic Credit Card Terminals
- The introduction of swipe credit cards did not change the landscape of payment processing much.
- However, in 1979, Visa launched the first-ever electronic credit card terminal machine.
- It was the same year when the name of MasterCharge changed to MasterCard. Also, the magnetic strip cards were taking over credit cards on a larger scale.
- These electronic credit card terminals helped to reduce payment processing time and at the same time offered more security against data breaches.
- With the widespread use of mobile phones, wireless payment terminals also came into existence. The advanced technology led to faster wireless terminals.
- These mobile payment terminals allow the merchants to accept payment transactions through debit/credit cards anywhere and anytime. Only a compatible internet connection is required.
- These wireless payment terminals use 3G, 4G, and even GPRS connections. They send and receive the transaction data simply using a mobile device.
- Wireless and portable credit card terminals have also been introduced. These machines work with the connectivity of Bluetooth and WiFi.
- These WiFi payment terminals are being widely used by business owners. It allows the consumers to pay directly on the spot of the purchase.
Card Reading Applications
- Card reading applications have become popular across the world due to their seamless user interface.
- These are small electronic devices without any SIM card. Merchants connect them to the compatible mobile phones that run specific card reading applications.
- The connectivity used by these card reading applications is Bluetooth. They are best suitable for mobile merchants and street vendors who consider traditional credit card processing devices to be expensive.
- In order to take the payment processing to a whole new level, contactless payments came into existence.
- Contactless payments work on the principle of Near-Field Communication technology. NFC technology is a derivative of RFID technology which is implemented in anti-theft devices.
- With NFC technology, a person can transmit payment information to another device within a range of 10 cm. When it was first introduced, people saw it as a gadget and suspected it before potentially using the NFC devices. However, things have changed now. Contactless payment devices are now being regularly used by consumers and merchants.
- The leading mobile wallets that are compatible with NFC devices are Google Pay and Apple Pay. Today, new credit card processing machines already come with the functionality to process contactless payments.
- Consumers can now also add their biometric data information along with their signatures and PIN. This biometric data helps in authenticating the payment transactions at the POS system.
- The biometric payment systems also have the capability to recognize fingerprints and features facia recognition.
- It helps in increasing the safety and security of each payment transaction. With biometric technology in place, the risk of data breaches is very low.
Innovation and technology are already taking credit card processing to a whole new level. Mobile and contactless payments are continuously on their rise.
However, with a variety of payment channels emerging every year, it is still not clear how the credit card payment industry will evolve.
But one thing that is clear is that payment processing will definitely become more diverse and faster than ever.