The Brief History of Electronic Payments


Just imagine that instead of paying for doughnuts by cash or your credit card you put out of your pocket some grains and give it to the backer. Sounds strange, but the backer can use these for backing with the same purpose as money. What’s more he gets the product and doesn’t need to do further actions.

What you just did is called the barter system and it is supposed to be the basement of the modern mass payment system via transactions. Luckily, thanks to the advanced nowadays conditions, you don’t have to be a farmer to be able to provide this system. Now this process is more accessible than ever, but the biggest its advance isn’t really obvious. Why? Electronic payments is the way to simplify any payments using online systems.

A Brief but Important History of Electronic Payments

The history of electronic payments dates back to the 1870s. Giving more details, 1871 was the year when Western Union founded electronic fund transfer (EFT). People quickly got used to the fact that they don’t need to be present at the point-of-sale if they want to purchase a particular kind of product or service. We should realize that without technological development, the progress of this system would be impossible. Thanks to that we can buy what we want by just one click.    Work with streamlining payment methods has been hard-won.

In the next twenty years after the invention, the payments had been partly changed. In the 1910s, the Federal Reserve of America began using the telegraph to transfer money. In the 1950s American Express followed Diner’s Club’s footsteps and became the second independent credit company. This company introduced the first plastic card in 1959.

In 1972, the Automated Clearing House (ACH) was developed to batch process large volumes of transactions. NACHA established operating rules for ACH payments just two years later.

The (Wide, Wide) World Wide Web

When the Internet was invented, ARPANET was launched for improving military connection networks. Clients got access to the online banking services in the 1990s.  

The debut of Web 2.0 started what we know now as e-commerce. World famous Amazon is one of the pioneers of this business. It dates back to 1994.   

When the system was launched it was necessary to have some special equipment and software to buy goods online.  Now, payment acceptance can be integrated into websites, mobile platforms, and at the point-of-sale for scalability amongst merchants big and small.

Keeping Your Private Data Safe

Protecting personal data is what merchants are worried about from the beginning of the new payment system. This trifle has a great influence on financial conditions, and can destroy the organization in a few steps. This area is what has to be protected from hack attacks.   

Payment data receiving is regulated by NACHA and PCI. They also pay attention to its storage, transmitting and processing. It’s vital to identify those who want to damage the business, so PCI processors must stay ahead of them.   

Another stage of encryption to your sales when performing card-present sales was enabled to be added by EMV (aka “chip card”). Thanks to end-to-end encryption we are sure of security level of our entire payment process. SSL web pages are what take the weight off merchants’ mind, because they really help them.   

The Future of Electronic Payments

The Federal Reserve System discovered that this system of payments is 60% of all non-cash payments. What’s more, around 65 million households pay most of their bills online. It’s what all businessmen should pay attention to, to be aware of how to use it for their advantage.     

This system is supposed to get one more push in the near future. By this I mean that technologies such as cryptocurrency and blockchain might be used as well. Involving to that area cryptocurrency will dramatically change the whole payment industry. Everything seems to simplify the transaction and payment system. It will be also influenced by the new trends, such as, for example, PIN on Glass acceptance to allow customers to use their PIN for mobile point-of-sale transactions At least, ACH and APIs are focused on making this process faster and more efficient.

What we have now we got just in 150. Together with further technological and industrial development we will face the progress of payment processing. It is supposed to be high-speeded, and as a result we will have a faster, more secure system which would be better both for sellers and for buyers.

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