Card payments are on a path of tremendous growth: in 2022, global card networks processed a whopping 624 billion transactions, marking a growth of 7.5% compared to 2021. Today, payment cards reign supreme as the preferred method for in-store purchases worldwide, accounting for over 50% of all transactions, and cash is starting to disappear in certain parts of the world.
The backdrop for this transformation takes us back to the challenging days of the Great Depression in the 1930s. Faced with economic hardship, enterprising U.S. merchants devised a solution by extending credit to customers through store-cards and charge plates, where a single card operated exclusively within one department store or a specific gas station chain.
Fast forward to 1950 in New York, where businessman Frank McNamara's forgetfulness led to a pivotal moment. Left without his wallet during a restaurant dinner, McNamara's wife drove into town and settled the bill. This incident sparked the idea of creating a way to pay with a card at eateries, giving birth to the Diners Club credit card. Unlike its predecessors, this card offered credit at multiple merchants. In 1958, American Express followed suit, launching its inaugural credit card.
These early credit cards were not backed by banks, but in response to this new trend, banks began to launch their own credit card programs in the 1960s. Bank of America in San Francisco took the pioneering step with the BankAmericard. Realizing the potential of a unified network, a group of California banks joined forces to create the Interbank Card Association in 1966, which later became Mastercard. Concurrently, other banks adopted BankAmericard, which eventually rebranded as Visa in 1976.
The initial Diners Club cards were crafted from cardboard with printed ink displaying the card details, and those details had to be manually written down by the merchants. American Express introduced plastic cards in 1959 and over time, card details were embossed onto the card's surface, and flatbed imprinting machines were introduced, enabling the recording of embossed card information on carbon paper. These devices acquired the moniker 'zip-zap machines' due to the distinctive sound they generated.
The 1960s brought another innovation as IBM recognized the potential of encoding information onto cards using magnetic tape. Legend has it that the idea of melting the tape onto a badge using a flat iron came from IBM engineer Forrest Parry's wife. This innovation led to the dominance of magnetic stripe (magstripe) cards in the market.
In the mid-1970s, computer chip-equipped cards emerged, capable of complex calculations facilitating improved security protocols. This marked a turning point as magstripe gradually yielded ground to chips. In 2003 the industry had another milestone as American Express launched its Centurion card in a metal form factor, made of titanium.
While chip technology took precedence, embossed card details and magstripes have persisted on cards for many years. However, a transformation began to take shape during the 2010s with flat printing gradually supplanting embossed details, and magstripes will start to disappear from Mastercard cards in 2024.
Our exploration of the card's evolution has now brought us all the way to the present, notably shaped by the COVID-19 pandemic. The crisis accelerated the shift from “contact” payments (inserting or swiping the card) to “contactless” transactions (simply tapping the card on the terminal), reflected by 74% of all Visa face-to-face transactions outside the U.S. now being contactless (contactless payment adoption is growing rapidly in the United States, with 51% of American consumers currently utilizing contactless payment methods).
As we contemplate the future, we cannot overlook how payment cards have continually adapted, reinventing themselves over nearly a century to accommodate technological and societal advances. And how in doing so, they have paved the way for some of today's most iconic and prominent brands.
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