The evolution of credit card processing:
- Originally specific businesses issued “charge cards” which enabled customers to charge a purchase and pay at the end of the month
- Then the “Revolving Charge” account was born allowing customers to carry a balance with monthly payments
- Next networks were formed the first being Diners Club then Visa and MasteCard to processes credit card transactions for cards issued by banks instead of individual businesses.
- Cards were issued and put through an imprinter, the customer got a copy and the business kept two copies one for the processor and one for them. The business had a “floor limit” over which they had to call the processor for authorization. They also had a list of “bad accounts” they were supposed to check with each sale.
- Electronic processing came next over phone lines, no more need to call for authorization and less risk to businesses.
- The Internet sped up processing considerably although less secure than phone lines.
- To add security and work against rising fraud pins were added to credit and debit card payments.
- Finally contactless payments to speed up lines using NFC (near field communications) enabling payments using smart phones as well as standard chip embedded credit cards.
- The end of pin numbers is coming and bio metrics will take over. Processors have experimented with everything from finger prints to heart rhythm recognition. MasterCard has been using credit cards in Europe that use fingerprints for some time and they are bringing it to North America. The fingerprint (thumb) is embedded in the card you must have your thumb on the card when it goes into the terminal.
- E commerce will see enhancements to security as the main thrust in the immediate future. Online fraud is rampant and must be addressed. PCI/DSS compliance is important to businesses and businesses should be compliant.
- As the crooks evolve so will the processors always playing catch up.
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