A Brief History of Credit Card Processing

Humans have been using credit for financial transactions in some form or another since the beginning of recorded history. Even the ancient Romans used some forms of credit to finance the large number of transactions that occurred daily in the Empire.

The first “real” credit card popped up in 1946, developed by Jon Biggins. Biggins’s “Charg-it” system gave customers the ability to make charge purchases from local retail stores. The stores would then invoice Biggin’s bank, who would then collect payment from the customer at a later date. Biggin’s Charg-it system was the first real bank-issued credit card and set the template for the widespread adoption of credit cards going forward.

Credit card usage continues to grow in popularity through the 1950s and 60. The 50s and 60s saw the birth of several organizations that would later go on to dominate the credit card industry. One of these organizations was Bank of America and its BankAmericard service. As more companies began to offer credit cards, 14 banks met in New York City in 1966 to form the Interbank Card Association—an association that allowed the banks to accept credit card payments between one another.

In the early days, credit card processing machines were large mechanical devices that created physical paper copies of receipts. Retail locations would first have to make a phone call to the bank before any purchase could be authorized. This manual method of authorization and recording was highly inefficient and prone to copying errors.

So, in the 1970s, major card organizations began to introduce electronic payment authorizations for card services. A major development in this field was the introduction of the magnetic swipe card technology, invented by IBM. Magnetic stripe readers along with electronic authorization sequences allowed credit card purchases to be made wherever and whenever. Retailers no longer had to place a phone call to get authorization for credit card purchases. By the end of the 1970s, BankAmericard and MasterCharge, two companies that were highly influential in the proliferation of electronic car authorization technology, had changed their names to Visa and Mastercard, respectively.

One electronic authorization went mainstream, credit card use exploded worldwide. Electronic systems allowed companies like Visa and Mastercard to offer services in regions around the world such as Africa, Asia, and Australia. Credit cards quickly became one of the most popular payment methods worldwide, and still is the number one payment method in many countries.

The most recent development of credit card technology is the chip, first invented by French inventor Rolan Moreno in 1975. Although it was invented back in the 70s, chip technology in cards did not really pick up traction until the 90s and beyond. Chip technology allows more security when communicating with authorization organizations. Chip technology has become mandatory in some European countries, though chips did not reach the American mainstream until about 2010.

Now, credit card processing also involves things like contactless payments and smartphone payments. As the demand for cashless payment services increases, it is likely that we will only see more advances in credit card processing technology.

If you are interested in learning more about credit card processing services, give us a call at (888) 924-2743 or visit our website at Charge.com.