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From cards to crypto: the evolution of payment methods over the recent decades

The recent decades have seen quite a few significant changes to payment methods. Once only a dream, sending money between digital bank accounts is now a perfectly mundane thing. With the banking sector more digitalized than ever, the increasingly popular cryptocurrencies allow their users to take the next leap forward: avoid intermediaries such as banks. To understand the importance of this, let’s trace the history of payment methods, from cards to cryptocurrencies.

From card to crypto

At Exeno, we want you to be able to take full advantage of the most cutting-edge, modern solutions. Cryptocurrency, as by far the most advanced payment method, is certainly one of them. That’s why the Exeno store lets you pay for goods directly with cryptocurrencies without FIAT conversion. This approach meets customers’ need to use their crypto for buying products online, without having to submit to redundant and overcomplicated procedures. This is the next step towards shaping the shopping experience of the future, comparable to the introduction of credit cards.

Plastic cards as the (initially) unexpected replacement for cash 

Cash has long been the most versatile and widespread payment method, due to its simplicity and non-reliance on additional identity verification. Yet, it has clear limitations, for instance, the lack of flexibility.

Those drawbacks are precisely why the first credit card, launched by the Diners’ Club, Inc. in 1950, came to be so handy. It was the first card honoured in multiple places and was mainly used for entertainment and travel.  

It functioned as a charge card: unlike a typical credit card, it had no spending limit and required full repayment by the end of the month. 

In 1958, American Express issued its first card. It was quite comparable to the one issued by the Diner’s Club: to be used for travel and entertainment purchases with payments due at the end of the month. Initially, the card was made of paper, but in 1959 it became the world’s first plastic credit card.  

Also in 1958, Bank of America issued its credit card: BankAmericard. Their take on the product was more alike to credit cards of today: it was general-purposed, had a $300 spending limit, and could be repaid later at an additional fee. In 1966, Bank of America started licensing its cards to other US banks, aiming to expand its financial services nationwide. In 1970, BofA fully recognized the magnitude and potential of the project and opted to tighten the alliance between various BankAmericard issuers. This led to the formation of America National BankAmericard, Inc. Renamed Visa in 1976, the company is now operating one of the most popular payment systems in the world.  

The World Wide Web, and the rise of digital payments

Quite like the introduction of credit cards, the launch of digital payments was revolutionary: the technology has hugely simplified many of the processes related to moving money around. After all, life is much easier when one can buy whatever they want in just a heartbeat, or transfer money to another person’s account from a smartphone app. 

The online shift caused by the COVID-19 pandemic caused a boom in digital payment usage: the industry’s value is expected to reach $ 6.6 tn in 2021, a 40 per cent increase over just two years. Yet, the beginnings were humble. It all began in 1994 when Stanford Federal Credit Union started offering online banking services to its customers. Though innovative, Stanford FCU’s digital payment system was not as user-friendly and accessible as the modern equivalents. The use was essentially limited to the computer savvy: to make an online money transfer one had to have some knowledge of encryption and data transfer protocols. The first mobile wallet was launched by Coca-Cola in 1997. Perhaps unexpectedly, it was initially used to… buy drinks from vending machines in Helsinki. Customers could pay for their chosen drink via a text sent from their phones. This concept was adopted by Google in 2011, the year that saw the introduction of Google Wallet. Since then, a vast majority of leading companies have created their versions of mobile wallets. Nowadays, as we all know, technology is immensely popular and used the world over. 

Another important milestone in digital payment development was the 1999 launch of PayPal. Its formation was truly ground-breaking: it was the first company to specialise in online payments. The trailblazers of the platform – including Ken Howery, Max Levchin, Peter Thiel, and Elon Musk – came to be known as ‘the PayPal Mafia’ due to their subsequent enormous influence on consumer-based Internet. 

The digital uprising and the soaring popularity of cryptocurrencies

The history of cryptocurrencies goes back to 1998, when computer engineer Wei Dai was determined to create a payment system based on cryptography and characterised by decentralization. Thus, both the idea of and the name for cryptocurrency were coined. 

After the 2008 global economic crisis, the vulnerability of FIAT currencies became painfully obvious. The world needed an alternative, urgently. In 2009, Satoshi Nakamoto (a pseudonym of a person or a group of people), created Bitcoin, the world’s first cryptocurrency. Bitcoin is based on blockchain technology and is designed for international use that abstains from relying on any institutional intermediaries. Prior, in 2008, Nakamoto released a white paper describing Bitcoin as a Peer-to-Peer Electronic Cash System and emphasizing its independence from banks and other institutions.  

At first, Bitcoin was worth close to nothing: six months after the trade started, its value was less than 14 cents. The price was growing steadily over the next few years. The real breakthrough came in 2017, following a network software upgrade. Within half a year, Bitcoin’s price skyrocketed from $2700 to a staggering $20,000. This astronomical growth demonstrates the increasing popularity of and need for cryptocurrencies.  

The crypto transformation is gaining momentum. Nowadays, there are plenty of cryptocurrencies around Bitcoin, and Ethereum being the most widely used. More and more people discover the benefits stemming from using fully digital currencies, including safety, anonymity, and transaction speed. 

What will the future bring? No one fully knows. If you’d like a glimpse into it, however, be sure to visit us at the Exeno store.

Sources: 

https://www.pymnts.com/news/payments-innovation/2019/ten-years-of-payments-innovation-and-reinvention/

https://usa.visa.com/about-visa/our_business/history-of-visa.html

https://ubuinternational.com/articles/mobile-wallets-payments/history-of-digital-payments/

https://www.cryptovantage.com/guides/a-brief-history-of-cryptocurrency/

https://www.businessinsider.in/slideshows/miscellaneous/the-paypal-mafia-formed-in-the-early-2000s-and-includes-everyone-from-elon-musk-to-the-yelp-founders-heres-where-the-original-members-have-ended-up-/slidelist/72210907.cms

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