With the advent of contactless payments, blockchain, cryptocurrency and other innovations, the buzz about fintech (financial technology) has been especially louder in the last few decades. But the fact is, we have been living with fintech for over 60 years. Think about an alternative to using cash (or checks) to make a purchase — credit cards. These were among the first financial products that used fintech. Credit cards solved an everyday problem of being caught without cash. Although the idea of using credit to pay for a product or service is not new, the way it has taken form is. The earliest credit card were charge plates in the 1800s in the United States. These metal plates were the size of a dog tag, had the name of the customer and his/her address on the front and then a piece of paper on the back recorded the charge and the customer’s signature.
Charge plates evolved in form (format) to a piece of paper, the size of a card. The first credit “card” was issued by Briggs Bank in Brooklyn, New York. John Briggs, created the Charg-it card. The charges were forwarded to the bank and then a third party reimbursed the merchant and obtained payment from the customer. A few years later, the idea for another credit card came into play. Frank McNamara forgot his wallet on a business trip and did not have the cash to pay for his meal. After the matter was settled, McNamara and his partner, Ralph Schneider, created the Diners Club Card. It was a credit card for entertainment, travel and dining purchases.
Although the Diners Club Card signaled the start of the credit card industry, it was Bank of America’s BankAmericard in 1958 that established it. BankAmericard expanded on the Diners Club Card in that a person could charge a purchase from different kinds of merchants from all over the United States. Eventually, Bank of America began licensing its credit card to other banks. In the next two decades, we saw the format of credit cards change in size and form (plastic) as well as how purchases were processed. Instead of using a small credit card machine to imprint the card information, cash registers were outfitted with credit card readers. Fintech enabled the information to become digitized (e.g. magnetic strips) and to be sent to the credit card company in a matter of hours. Soon, credit cards were issued all over the world with transactions processing 24/7. The credit card bill is another example of fintech. Automation made calculating the charges much faster, not to mention printing and mailing the statements.
We rely on credit cards to make everyday purchases, and enjoy their perks (e.g. earning points). They have been made more secure and have a faster processing time thanks to fintech. The evolution of credit cards is only one view of fintech in the financial industry. In following decades, we will discover more advancements and how they have made our lives easier and more enjoyable. Watch out for Part 2 of our continuing series on The History of Fintech!