It may seem difficult to think of a time before credit cards, but they’re actually a fairly recent invention. As legend has it, it all began when a businessman took some clients out to dinner but discovered he had forgotten his wallet. Upset about having to bailed out by his wife, the experience sparked the idea for the Diners Club Card. This event marked the birth of what we now call credit cards, allowing us to make purchases on credit.
The first credit card processing machines
As credit cards gained popularity and became more widely used, the need to properly charge and monitor them arose. Credit card processing machines were designed to accurately track the use of credit cards. The first machines to rise to prominence for this task were manual imprinters. A merchant would fill out a form, insert the form into the machine, place the customer’s card under the form, and run an imprinting mechanism over it to transfer the card face onto the form. This form acted as a double receipt, one side of which would then be signed by the customer and mailed to the bank to issue the payment. Manual imprinters are still in use today, although they are increasingly rare, and considered a nearly obsolete technology. Since they are non-electronic and manually-operated, some businesses still keep one on hand for emergencies in the event of a communication or power disruption that prevents them from using their more modern credit card machines.
Credit card payments via phone authorizations
The next evolution in credit card processing was the phone authorization. Instead of using a manual imprinter and sending the receipt off to the banks to await authorization, merchants could choose to call a phone number listed on the card, give the credit card number to the representative, and get payment authorization by verbal confirmation. This was a relatively lengthy process which also increased transaction fees for the merchant, and as such was usually only used for larger transactions or other special circumstances.
Electronic point of sale terminals
Introduced by Visa in 1979, the point of sale (POS) terminal marked the beginning of the credit card terminals as we know and use them today. These bulky electronic data capturing terminals greatly reduced the processing time for credit card payments. In the same year, MasterCard introduced the magnetic strip on the back of credit cards, making 1979 a turning point in the credit card processing industry. These technologies have seen improvements over the years and are still widely used today.
Future credit card processing movements
Credit card processing technology is constantly evolving, being driven by reliability, security and increased processing speed requirements. IP and Wi-Fi based credit card processing are emerging to accommodate more flexible payment methods, while the nature of credit cards themselves are similarly changing. Smartphones now allow consumers to use their phones as payment devices in card-not-present environments, and credit cards now feature electronic chips instead of magnetic strips that are read by credit card terminals for higher security. Contactless payments, biotechnology and smart cards are just beginning to emerge as the next stage in the evolution of credit card processing, and the industry will continue to develop and advance to meet the needs of consumers.
For more information about credit card processing or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.