The use of debit and credit cards are part of our daily financial life. According to the Bank of Spain, currently there are approximately 85 million payment cards (plastics) in circulation in Spain, more than 60,000 electronic teller machines and almost 2 million point of sale (POS) terminals, which indicates that this technology is far from obsolete. However, the history of this payment mechanism is not well known and that is why this article will briefly describe its origin for each of the most recognized brands of payment cards.
Origin of claims
The concept of "credit", in which a person or entity offers to another a certain amount of money or other elements with the condition of returning them within defined temporal parameters along with a benefit to the lender (known as "interest"), has been present for centuries in humanity. This concept gave rise to what we currently know as "credit transactions", since these loans involved a record of these exchanges to keep track of the amount borrowed and their payment dates.
One of the first civilizations to employ a credit registration mechanism was the Mesopotamian (covering what is now Iraq, Syria and Turkey) and the Harappa (located in Pakistan), where they used clay boards and shells to register loans between communities.
Mesopotamian clay table (source: Getty Images)
During the 19th century, merchants in the United States used credit plates to offer money loans to local farmers and ranchers, allowing them to pay their bills when collecting their crops or selling their livestock. In the early 1920s, this concept was also applied to department stores, where shoppers could use metal plates for their purchases, which were then charged at the end of the month.
Likewise, in 1936 airlines (especially American Airlines) made use of a card called Air Travel Card, which allowed tourists to pay for their trip on their return.
Air Travel Card, used for deferred travel payments on airlines (source: delta.pastperfectonline.com)
Diners Club (later Discover)
In 1949, during a dinner at the restaurant Major’s Cabin Grill (located right next to the iconic building Empire State in New York), Frank X. McNamara (of the Hamilton Credit Corporation), Ralph Sneider (lawyer for Mr McNamara) and Alfred Bloomingdale (grandson of the founder of Bloomingdale’s, a chain of luxury goods outlets) were talking about a client of Mr McNamara who had financial difficulties in dealing with his debts. Ironically, that day Frank McNamara had forgotten his wallet at home and had no money to pay for dinner, having to call his wife to help him.
magen of one of the first credit cards issued by ‘The Diners’ Club’ (source: dinersclub.com)
Due to the embarrassment generated by this situation, he swore that he would not go through it again and devised a system that avoided the use of cash using a card linked to a credit quota. Later, in February 1950, these same three people founded The Diners’ Club (“The Dinner Club”) by offering restaurants a series of cardboard cards with access to credits (Diners Club Card) which involved the payment of the expenses covered plus a small maintenance fee to the holder (at the end of the month) and a commission to the establishment for each transaction made.
In 1951, Diners Club It had achieved approximately 42,000 users, understanding its coverage not only to restaurants but also to entertainment services, insurance policies and travel. In 1960 cardboard began to migrate to plastic for reasons of durability.
Currently, Diners Club International is present in 59 countries of the world through different independent franchises, as part of Discover Financial Services.
More information: Uncover Diner Club’s rich history
Visa
The model implemented by The Diners’ Club began to be used by banks for credit management and was like this in 1958 the Bank of America put your card into circulation BankAmericard in Fresno (California, USA). Initially, this program was only going to be valid at the state level but soon began to offer licenses to other banks outside of California.
Poster by BankAmericard (source: adclassic.com)
In 1960, the banks that used this service set up a joint venture (joint venture), offering customers of the service (cardholders) access to centralised payments and avoiding competition problems between different banks. Subsequently, in 1970 the Bank of America delegated control of this service to a new entity known as National BankAmericard, Inc. (NBI) while the management of the model at the international level was assumed by IBANCO, a multinational company with a presence in 15 countries in 1974. In 1976, NBI and IBANCO renamed their services as U.S.A. Visa y Visa International, respectively, entities that were brought together under the same brand in 2007 and 2016 (with the acquisition of Visa Europe) as Visa Inc.
Visa currently operates in more than 200 countries and territories, with more than 20,000 member entities and more than one billion cards in circulation.
More information: History of Visa – Our journey
American Express
American Express Company (AMEX, a company founded as a competition of the US postal service) already had experience with financial products. In the late 1890s, American Express decided to expand its asset transport services to compete with the banks it served, issuing money orders and cheques. The idea of issuing credit cards had already been contemplated by AMEX, but it was not until the launch of the Diners card program when it began with its own program, whose launch was in October 1958, when traveler's checks were replaced by cards in the United States and Canada.
Prototype of the first American Express cards (source: chargeback.com)
In order to expand its market, American Express initiated contacts with airlines and other companies in the transport and entertainment sector to create its member loyalty program Membership Miles, in which bonuses were offered to customers for the use of their card.
Miss Amexco (Lynn Weston) sponsoring American Express (AMEX) cards in 1960 (source: Getty Images)
In 2019, American Express had more than 115 million cards worldwide, controlling the 23% the U.S. card market.
More information: American Express – Our History
MasterCard
In 1966, a group of banks in California (USA) – among which were United California Bank, Crocker National Bank, Wells Fargo and Bank of California – together with the First National Bank in Louisville and the Marine Midland Bank (later HSBC) in New York, they created an organization to compete with the Bank of America and your initiative BankAmericard. This new entity was named Interbank Card Association (ICA), that offered a credit card product called Master Charge – the Interbank Card.
Master Charge (Interbank) card in 1979 (source: chrisglass.com)
In 1979 the card Master Charge was renamed as MasterCard.
In 1968, ICA and Eurocard (a European credit card service established in Brussels (Belgium), created as an alternative to American Express and operated by EuroPay) signed an operation agreement that allowed the cards of both networks to operate together, becoming a single company (joint venture) called Maestro International in 1992. This alliance allowed the brand to grow internationally MasterCard, the parent undertaking of which was renamed MasterCard Worldwide in 2006.
Poster of name change from Master Charge to MasterCard (source: underconsideration.com)
MasterCard currently operates 234 million cards in the U.S. and 709 million cards in the rest of the world.
More information: Our Story – About MasterCard
Japan Credit Bureau (JCB)
Founded in 1961 as a financial services company in Japan, Japan Credit Bureau (JCB) began to dominate the card market in its home country since 1968, when it merged with Osaka Credit Bureau (OCB).
In 1972 it achieved its first million operational cards.
JCB credit card prototype (source: JCB Global)
Since 1981 JCB has expanded its operation to other countries operating under the concept of subsidiaries, achieving wide acceptance after an agreement in which the use of JCB cards was allowed in the Discover network and vice versa from 2011.
More information: JCB – History
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