It’s electric! The evolution to electronic merchant services
If you’re like most businesses today accepting credit and debit card payments, you probably don’t think, or care, about the complexities behind the processes of acceptance. You shouldn’t have to really. Still, there’s a lot that we consumers and businesses take for granted about what’s truly a complicated, always-evolving system. How we accept credit cards, process payments and the merchant services we receive as businesses has changed wildly over the last few decades. Let’sstroll down payments memory lane to see how far things have come.
The first true plastic credit card comes to be
You might be surprised to learn thatAmerican Express created the very true plastic credit card back in 1958 as a T&E (travel and expense) card for traveling business people. The idea behind this card was so business people on the road, then mostly men, wouldn’t have to carry large sums of cash to pay for lodging, meals, transportation and other such expenses. And it wasn’t until decades after its first card, that American Express offered a credit card that could be used for any type of expense.
Simple processing with early credit cards
Early credit card processing involved just three parties:
- The merchant
- The consumer
- The card issuers – such as American Express, Visa, MasterCard and, much later, Discover
There were no merchant accounts, no merchant services providers and no credit card processors – the process was perhaps simpler for the merchant, but it was impractical for large-scale use of credit cards.If you’re old enough to remember, everything used to involve those knuckle-busting imprint machines and lots of paper and carbon slips—lots and lots. Credit card processing during the 1950s and ‘60s was manual and time-consuming, taking employees many man-hours to obtain authorizations and process transactions – not to mention having to wait days or weeks for your funding.
Manual credit card terminal and manual imprinting
With a manual credit card terminal, the so-called knuckle-buster, the clerk had to physically capture the customer’s credit card (and other pertinent) information to complete a sale. While these relics are the thing of museum-ware, they were everywhere once credit cards started rolling out and they were regularly on the scene through the 90s.These imprinters typically used carbon sheets to create multiple copies of the credit card data tocreate both merchant and customer records. At the end of a business day or week, the business merchant would then mail in the imprinted sheets of customer credit card data to the bank for settlement and distribution of funds.
As if the drawbacks, by today’s standards, aren’t evident. They were many:
- Time-consuming process
- Data security risks – at the merchant’s location and in transit to the bank
- Super slow funding process
- Crazy risk for human errors – key-entering incorrect transaction or tax amount
1979: A turning point for payments processing
What a year, 1979! Annual inflation was 11.2% in the U.S. Interest rates at year-end as noted by the Federal Reserve were pegged at 15.25% and we were, on average, making about $17,500/year. It was a big year for credit cards and payment processing too.
Three key events occurred in 1979 that changed the credit card processing industry forever:
- First POS terminal. Visa developed the first modern point of sale terminal, which greatly reduced the time it took a merchant to process a card payment.
- MasterCard established. The company previously known as MasterCharge became MasterCard, which was to become one of the major global credit card companies.
- Magnetic stripe embedded. For the first time, credit cards are embedded with the magnetic stripe, which contains data about the payment card and makes the card quicker, easier and more efficient to process.
The merchant account provider enters the playing field
As credit card processing became increasingly complex – but also easier for merchants and consumers to use and more widespread – outside service companies began to offer processing services to businesses (merchants) and banks. These merchant service providers became the savvy middle men in the payments process that streamlined systems for all involved parties, helping everyone get a bigger slice of the payments pie and grow their respective businesses.
Benefits of electronic merchant services
As you can see, credit card processing has come a long way to the easy, secure electronic transactions that we all know and take for granted today. Here are some of the other benefits of modern electronic merchant services:
- Easier for merchants than manual processing of the past
- Quicker transactions than in the past
- Increased data security with reduced chance of breach
- More accurate than older methods
- Less paper records to store and manage
- Speedier funding to your bank account
- Peace-of-mind with immediate authorizations
Partner with a respected merchant services provider and get set up with modern point of sale systems, and you will be well on your way to accepting secure, quick credit card payments for years to come—to 2079 and beyond.