Category Archives: History of Credit Cards

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Apple Pay Lands on Monday and Here’s What You Need to Know

Natalie Gagliordi reports for ZDNet a few of the details made public about Apple Pay–the tech company’s foray into payment processing. What you need to know:

– Apple Pay will roll out Monday, October 20

 Apple has signed 500 banks to support the platform

– Banks have not been named yet

– Apple Pay utilizes NFC for contactless payments.

– Apple Pay also features a dedicated chip called the Secure Element

– This allows it to integrate with Apple’s Passbook app, which launched with iOS7

– Users will be able to set up and control their wallets via their iTunes accounts

So how will it work? Last month for CNet, Sharon Profis summarized that Apple Pay would be contactless and featured a degree of tokenization:

At the register, you’ll tap the top edge of your phone to the credit card terminal, which is where the NFC chip is located. Your iPhone will then prompt you to scan your finger on the Touch ID button. The phone will then access the secure element to generate a random, 16-digit number that mimics your “real” card number. That information gets sent back to the NFC chip, which sends it to the POS. From there, the payment finishes processing as usual.

When it launches Monday, Apple Pay will accepted everywhere from Panera Bread to Foot Locker.

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Decoding Credit Card Numbers: What Do Those 16 Digits Mean?

16digits-01If you’ve ever had to manually key a credit card number into an automated phone system, you’ve probably wondered why the number is so long. Actually, each digit in a credit card number is important for validation, security and identification during credit card processing. Take a moment to learn what each of these digits means.

The Origin of the 16 Digits on Credit Card Numbers

Card numbers have been standardized according to ISO/IEC 7812-1:2006 since 1989. This document is from the International Organization for Standardization, and it is this standardization that allows consumers to use some credit cards anywhere on the planet.


16digits-02Digits 1 – 6: Issue Identifier Number

  • First digit: This identifies the major industry that produced the credit card. For example, a 4, 5, or 6 in the first digit identifies banks and financial institutions
  • Digits 2 – 6: Along with the first digit that identifies the industry, the first six digits provide a unique identifier for a particular institution. Some institutions may have more than one unique identifier for different lines of business. For example, you might notice that your debit card begins with a different digit than your credit card from the same bank.

Taken together, the first six digits are called the issue identifier number, or IIN. In the past, these numbers were called the bank identification number, or BIN. Since not all issuers are banks, this name changed, but you might still see references to a BIN or bank identification number in some references. In any case, credit card issues register their unique IIN numbers with the American National Standards Institute.


16digits-03Digits 7 – 15: Unique Personal Identifier

These numbers uniquely identify the person holding the account. The card issuer allocates them, and they are unique for the issuer that generates them. You could have a different identifier for different cards from the same issuer.


Digit 16: Check Digit

The last digit is called a check digit, and it is used to verify card 16digits-04numbers for accuracy. Because it is calculated according to a public domain formula called the Luhn algorithm, it is not intended to protect against malicious attacks against merchant services of POS systems. In fact, the patent for the Luhn algorithm dates back to 1960, and examples of computer code to calculate the final digit are freely available online.

Rather, this last digit is only intended to verify that a credit card number was not accidentally typed in wrong when making phone or online payments, and that is how it is used in credit card processing today.

 

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The History of Credit Cards, Part 3: The Evolution of True Digital Credit Card Systems

Today’s ecommerce depends heavily on digital credit card processing solutions and efficient, reliable, secure merchant services. While business is booming with brick-and-mortar companies relying upon digital POS systems, these digital systems have actually been evolving for over 30 years.

ABTK-small-blog-image-ccPart3-02The First Online Shopping Cart

According to ”Internet – Technical Development and Applications,” the first online shopping cart system was demonstrated by a British entrepreneur named Michael Aldrich in 1979. Because of this, Aldrich is actually credited with the invention of online shopping. In other words, he developed the first system that made it possible to conduct online transactions between customers and businesses.

Even though this was the first true “ecommerce” system, that word had not yet been coined. Most people did not really even know that online shopping was possible way back in the late 1970s and even the 80s. In fact, the first internet browser, simply called the WorldWideWeb, was not invented until 1990.

One might also imagine that today’s internet security experts would be horrified by how vulnerable and transparent these first online payment systems actually were. But basic technology has to be developed and demonstrated before it can evolve into the truly useful and secure systems we rely upon today.

In 1992, two years before Amazon emerged, an article called Visionary in Obscurity reported that a bookstore moved their old dial-up BBS system to the internet as Books.com, and it attracted half a million visitors a month at its peak. The owner of the bookstore, Charles Stack, reported feeling very moved because his first online customer told him that he was a blind person who was able to make his own purchases with computer aids for visually impaired people.

Even then, true POS systems had not been developed, and the process of taking credit card information from the online system was partially manual and usually relied up a traditional store’s merchant account. This is similar to the fact that the first mobile merchant accounts actually relied upon sending text messages that needed intervention in order to get processed as transactions.

ABTK-small-blog-image-ccPart3-01Early Mobile Payments

You might be surprised to learn that Coca-Cola innovated mobile payments in 1997. They introduced a few vending machines that allowed thirsty customers to send a text message to the machine with payment information. In that same year, Merita Bank introduced a similar system that accepted text messages with payment information for purchases.

No-Contact Payments

Radio frequency identification, called RFID, describes systems that are able to help customers make purchases with a chip and antennae embedded into electronic devices. Most commonly, these devices are smartphones. The customer just needs to wave their phone over a payment terminal in order to make a purchase. ABTK-small-blog-image-ccPart3-03In some cases, the system might request a PIN number, but this is usually only for very large purchases or in cases where the automated system detects unusual payment activity for a specific customer.

The first example of this was Speedpass, a product from Mobil that allowed gas station customers to wave a small key ring fob over a payment panel in order to pay for gasoline. Today, ExxonMobil still accepts a Speedpass, and other companies have also adopted this technology.

The Future of Digital Merchant Services

At Abtek, we have provided secure, innovative and reliable ways for consumers to make online payments since 1986, and we continue to keep up with advances in digital technology and security. We thrive in this competitive business with a combination of futuristic solutions and a timeless commitment to customer service.

Besides providing basic credit card processing, we offer mobile merchant accounts, POS terminals and other aspects of today’s digital commerce. Our main commitment is to make certain that our services make our merchant affiliate’s businesses more productive and profitable. Contact us to learn why Abtek can provide the right solutions for your business.

Read more in this series:
The History of Credit Cards, Part 1: How Did People Pay Before Credit Cards?
The History of Credit Cards, Part 2: Processing Before ECommerce

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The History of Credit Cards, Part 2: Processing Before eCommerce

Today, sophisticated merchant services and mobile POS systems rely upon digital information transfers via the internet or phone lines. To those of us who have watched this technology develop, the existence of mobile merchant accounts that allow businesses to accept payments via smartphones from almost anywhere in the world almost seem like a miracle.

In order to get a picture of how far merchant services have come, it is interesting to take a look back at more primitive processes, which eventually evolved into the fast and worldwide credit card processing solutions that we provide to our current customers.

ABTK-small-blog-image-history2-01Early Manual and Semi-Automated Credit Card Processing Solutions

Most credit card transactions today are processed digitally by sophisticated electronic POS systems. Before that, accepting credit required quite a bit of manual effort, and most of the processes were at risk for errors and outright fraud. It may be that the development of reliable and safe electronic processes paved the way for the boom in worldwide credit card use by average consumers.

Store Credit Processing With Charge Plates

Before the 1950s, the ancestor of the modern plastic charge card was made of solid metal, flimsy paper or cardboard stock. Processing paper credit cards was an entirely manual effort with employees recording transactions and customer information on forms that got sent off for manual processing.

ABTK-small-blog-image-history2-02In the 1930s and 40s, some stores issued charge plates to customers, perhaps the first example of semi-automated processing. These were simply small metal plates with a customer’s name and address engraved on the face. When a customer wanted to use their credit plate to make a purchase, a store employee would run it through a small machine that used an inked ribbon, sort of like an old typewriter ribbon, to make an impression on a sales slip with carbon copies.

After filling in the totals, the employee would hand a copy to the customer as a receipt. In order to keep track of each customer’s debts and mail statements, the original form and other copies got retained by the store to be processed manually.

Customers were expected to visit the store or mail money to make prompt payments by the end of the billing cycle. Some stores employed “collection carts” that traveled door to door to collect overdue debts.

Interestingly, charge plates are not entirely worthless today; many collectors are interested in them for their historical or artistic value.

ABTK-small-blog-image-history2-03How Was the First Plastic Processed?

Even after plastic credit cards became common, processing did not change that much. Until a few years ago, many stores ran credit cards through small machines to produce an imprint on special forms. Copies of these forms still served as receipts and documents used to manually process and record credit transactions.

The biggest difference in the latter part of the 20th century, and early 21st century, was the that credit card processing companies employed data entry people who would manually enter information from these receipts into computer systems, instead of simply recording them in ledger books.

Abtek Moves Merchant Services Into the Future

At Abtek, we work with the latest innovations for safe, fast and reliable credit card processing systems. Though we provide the latest advancements in digital online payments, we also remember the past. One thing that hasn’t changed for our company over the decades is the importance of great customer service, which is why we treat every one of our valued merchant partners as if they are our only customers. Contact us to learn how we can improve your business and protect your bottom line.

Read more in this series:
The History of Credit Cards, Part 1: How Did People Pay Before Credit Cards?

The History of Credit Cards, Part 3: The Evolution of True Digital Credit Card Systems

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The History of Credit Cards, Part 1: How Did People Pay Before Credit Cards?

It might be difficult for consumers, and especially for those involved in sophisticated credit card processing systems, to understand how business got done before credit cards became a pervasive part of life. Of course, this pre-credit card period in history occurred before the internet. Nobody had to worry about safe online payments because ecommerce did not yet exist.

Even now, older generations will probably remember paying for a lot more goods and services with cash and checks in the past, but the concept of credit cards has actually been around for a long time. Certainly, the idea of credit existed for centuries, but it was more associated with specific merchants, unusually large purchases or businesses.

A Short Prehistory of Credit Cards

According to Credit Cards and Payment Efficiency, written for the Federal Reserve, almost all consumer and business purchases were paid with cash and checks during the early to middle part of the 20th century. Some of the first developments that paved the way towards modern credit cards include:

  • Proprietary store charge cards: Early 20th century
  • Gasoline cards: The 1920s
  • Entertainment and travel cards: The 1950s
  • Early bank cards: Late 1940s to 1950s

Proprietary Charge Cards

By the early 1900s, and even the late 1800s, some stores might issue charge cards, coins or tokens for customers to use only in that specific business. These were mostly processed manually, and debt was tracked in a paper ledger. Some larger stores did have a sort of press machine that made an imprint of a charge plate or token, but this still did not really qualify as automated processing.

The first proprietary store cards in the early 20th century did not represent revolving credit as debts were due at the end of the billing month. In fact, some stores hired companies that collected overdue debts by parking in front of customer’s doors with trucks or wagons that had very striking painting on the side, clearly marking them as debt collectors. Since neighbors could see these trucks, embarrassment seemed to be the primary method of enforcing timely payments.

ABTK-small-blog-image-history-01Service Station Gasoline Cards

In the early 1920s, oil companies issued paper courtesy cards to vehicle owners to encourage brand loyalty; this may have been the origin of consumer revolving credit. These were usually limited to a specific brand and even to a specific geographic area, so they couldn’t be used for traveling.

Travel and Entertainment Cards

By the 1950s, more general travel and entertainment cards appeared. Diners Club introduced their card in 1950, and it was the first time that consumers could really use their credit card outside of their own local area, and with any merchant who accepted the cards. American Express issued a similar travel and entertainment card called the “Green Card” in 1958. The bills still came due at the end of the payment period, so these did not represent true revolving credit.

ABTK-small-blog-image-history-02These were also handled very differently than the merchant services that businesses rely upon today. For one thing, it was a “closed loop” system where only the card issuer settled accounts with both consumers and merchants. Also, electronic POS systems did not exist, so all transactions got documented with paper forms and copies that had to be sent to the credit card company for processing. Security was still an issue because these paper forms could get lost, forged or have totals changed during processing.

Early Bank Cards

In the latter part of the 1940s to the 1950s, some banks began issuing their own cards. Typically, cardholders had to have an account with the bank. Also, merchants had to sign up with each individual bank in order to accept the cards, and these were also usually only accepted within the limited geographic region that the bank served.

The Future of Credit Card Processing and Mobile Merchant Accounts

At Abtek, we have worked on the cutting edge of worldwide credit card processing technology since 1986. If you value security, integration and reliability, partner with us as your credit card processing solution of the future. We combine the latest in technology with old-fashioned customer service to deliver value for our merchant partners.

Read more in this series:
The History of Credit Cards, Part 2: Processing Before eCommerce

The History of Credit Cards, Part 3: The Evolution of True Digital Credit Card Systems

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