The history of card payments and the terminal that changed commerce

Today you pay with a card or your phone without a second thought: you tap, it beeps, and you're done. But that ease is very recent. For most of the history of commerce, buying meant handing over coins, bills, or, at best, a promise to pay. The idea of a piece of plastic that worked to pay anywhere had to be invented, piece by piece, over several decades.

This is the story of how card payment was born and of the terminal that made it an everyday thing. It involves a forgotten dinner, a clothes iron, and an electronic box that changed the counter in every business in the world.

A forgotten dinner and the first card

The story begins with a slip of memory. As the legend goes, in 1950 a businessman named Frank McNamara was dining at a New York restaurant and, when the check came, realized he'd left his wallet behind. Out of that embarrassment came an idea: what if there were a card that said "I vouch for this customer, you'll bill them later"?

That's how Diners Club came about, considered the first modern card. At first it was made of cardboard, used by about 200 people close to McNamara and accepted at 27 New York restaurants. The idea caught on fast: by 1951 the club already had 42,000 members. For the first time, someone could dine, sign, and pay later, without carrying cash.

The card wasn't born to buy things; it was born so you wouldn't have to carry your wallet.

The bank joins in: BankAmericard

Diners Club was mostly for restaurants and travel. The leap into everyday spending came from a bank. In 1958, Bank of America launched the BankAmericard, the first general-purpose consumer credit card and the first to offer revolving credit, meaning the option not to pay it all at once and carry the balance into the next month.

The launch was bold: the bank mailed tens of thousands of already-active cards to the residents of Fresno, California, without their asking. That caused problems, but it also proved people would use them. That card grew so much that in 1976 it changed its name to become something you recognize instantly today: Visa.

A clothes iron and the magnetic stripe

Up to this point, cards were plastic with raised numbers, and to charge a sale you had to imprint those numbers onto paper with a little manual machine. It worked, but it was slow and easy to forge. What was missing was a way to store and read the information automatically. The solution came from an unexpected place: the ironing room.

Forrest Parry, an IBM engineer, was working in 1960 on a card with a strip of magnetic tape for the United States government. The problem: the glue warped the tape and made it unreadable. Frustrated, he mentioned it at home while his wife, Dorothea, was ironing clothes. She suggested using the iron to fuse the strip onto the card. The heat was just enough to bond it. It worked.

That magnetic stripe, the dark line you still see on the back of many cards, finally made it possible to store data and read it with a machine. It started being added to credit cards toward the late 1960s and 1970s, and opened the door to what came next.

The terminal that changed the counter

Having the magnetic stripe wasn't enough: you needed a machine to read it and ask the bank for authorization on the spot. Before that, the merchant had to check paper lists of stolen cards or call by phone to authorize each sale, which was slow and unreliable.

The change came in 1979, when Visa introduced the first electronic data-capture terminal: a bulky box that read the stripe and authorized the transaction. That same year, magnetic stripes were added to cards on a wide scale. Soon after, a company called Verifone, founded in Hawaii in 1981, launched its ZON terminal series in 1983, which became the standard of the modern counter. A few milestones along the way:

• Before 1979: manual machines that imprinted the card's raised numbers onto carbon paper.
• 1979: Visa launches the first electronic terminal and the magnetic stripe goes mainstream.
• 1981-1983: Verifone is born and popularizes the ZON terminals.
• Late 1990s: chip cards appear, more secure than the stripe.
• The 2000s: contactless tap-to-pay (NFC) arrives.

From the counter to the phone

What began as a heavy box connected by cable ended up fitting into a reader that plugs into a phone or, directly, into the phone itself. The more secure chip card gradually replaced the magnetic stripe, and contactless payment turned the act of paying into a simple tap.

Seen in perspective, each piece solved a concrete problem: the card spared you from carrying cash, revolving credit added flexibility, the magnetic stripe stored the data, and the terminal read and authorized it instantly. None of them alone changed commerce; together, they did.

What this history teaches us

Next time a customer taps their card on your terminal and it beeps, it's worth remembering everything it took to get there: a forgotten dinner, a banking gamble, an iron in a room at home, and an electronic box in 1979. The great transformations of commerce almost never arrive all at once; they're assembled piece by piece, until one day the impossible becomes so normal we don't even notice it.

Sources

• IBM (The magnetic stripe) — https://www.ibm.com/history/magnetic-stripe
• Wikipedia (Forrest Parry) — https://en.wikipedia.org/wiki/Forrest_Parry
• Wikipedia (Payment terminal) — https://en.wikipedia.org/wiki/Payment_terminal
• Capital One — https://www.capitalone.com/learn-grow/money-management/when-were-credit-cards-invented/
• WalletHub (Credit Card History) — https://wallethub.com/edu/cc/credit-card-history/25894