Timeline: The History of the Credit Card
Initially, credit cards featured cardholder name, account number, and card expiration date along with logos of the issuing bank and card network. Over the years, additional features have been added to improve the transaction process and help combat fraud.
1969 Magnetic Strip Embedded with cardholder information, it enabled merchants to swipe the card and increase the speed of the transaction.16
1997 CVV Code (Card verification value) A 3- or 4-digit code, it was added to the back of cards (or front of American Express) to combat Card-Not-Present (CNP) fraud resulting from the growing popularity of online shopping.17
2004 EMV Chip As fraudsters found avenues to steal payment data and create counterfeit cards, Europay®, Visa and Mastercard joined forces to introduce the EMV chip as an additional security feature. Today, almost every credit and debit card in America is embedded with an EMV chip.18 (Learn more about EMV.)
The Credit Transaction Process: How It Works
Cardholder swipes or inserts their credit card into a payment terminal to transfer their information into the merchant’s POS system in-store. For eCommerce payments, the cardholder either enters it manually at checkout or confirms a stored payment option.
The card information is sent electronically to the merchant’s acquiring bank or payments processor (such as First Data), which routes the transaction to the right card network (Visa, Mastercard, Discover or American Express). eCommerce payments also require a “gateway” provider whose role is to connect the merchant’s website to the acquirer.
The network forwards the transaction to the issuing bank. They confirm the card’s validity (to ensure it hasn’t been reported lost or stolen) and confirm the cardholder has available credit.
If the transaction is approved, the issuing bank generates an authorization number and routes it back to the card network, signifying they are willing to fund the purchase on behalf of the cardholder.
The card network then forwards the authorization number back to the acquiring bank or payments processor, which forwards the number to the merchant, who finalizes the transaction with the customer.
1 “The History of the Credit Card,” NerdWallet, 10 February 2017
2 “Charga-Plate in Red Leather Case, United States, 1950's,” National Museum of American History
3 “Who Invented the First Bank-Issued Credit Card?” CardRates.com, 24 May 2018
4 “History,” Diners Club International
5 “Introducing the Modern Credit Card from Bank of America,” About Bank of America, 13 August 2014
6 “The Evolution of the Credit Card: From Paper to Plastic to Virtual,” Relatively Interesting
7 “American Express Company,” The Columbia Encyclopedia, 6th Ed, 2018
8 “We've Been Making History for 50 Years,” Mastercard History & Key Milestones
9 “Visa: A Short History,” CreditCards.com, 30 March 2007
10, 11, 12 “History,” First Data
13 “Apple Announces Apple Pay,” Apple, 31 August 2018
14 “EMV Arrived on October 1, 2015. But It's Not Too Late to Adopt EMV Technology,” First Data
15 “Credit Card Ownership Statistics,” CreditCards.com, 26 April 2018
16 “Magnetic Stripe Technology,” IBM Corporation
17 “Can Credit Card Security Codes Sufficiently Protect Against Fraud?” Chargebacks911, 23 August 2018
18 “EMV Roots Go Deep in Europe,” Bank Information Security, 7 March 2011