It’s hard to believe that less than 100 years ago, people had to physically walk to the bank to pay their bills and had no choice but to carry around loose change. Thanks to innovations in technology, banking services have come a long way since then. Ever since the first bank card was introduced in 1946, traditional payments made with cash and checks were starting to be made with debit and credit cards. Today, plastic is no longer a novelty and it plays a huge part in many consumers’ lives — it may even overtake cash one day. Here’s how banking products have evolved — and continue to innovate.
Cash was king, but checks were queen in their time.
Checks were actually considered an exciting new technology back in the day. After World War II, the use of checks skyrocketed to become the most common cashless payment method. However, it was quite the headache to get a check processed and cleared. That was, until 1955 when the Electronic Recording Machine, Accounting (ERMA) was introduced. This system could automatically read and process checks faster and more efficiently.
Before credit cards, people paid for purchases with metal plates that looked like dog tags.
It was not only a pain to carry around loose change, it was potentially dangerous if you were carrying a lot of it. From the 1930s to the 1950s, department stores solved this problem by issuing thin metal charge plates, called Charga-Plates, to select customers. Early versions of the charge plates resembled military dog tags that were sometimes kept by the merchant. They were engraved with a customer’s name and address, and each time a purchase was made, the plates would get pressed and inked onto a sales slip.
At the end of every billing cycle, customers were expected to come into the store to pay what they owed. Gas stations, hotels, and restaurants also caught on to the convenience of charge plates. However, they could only be used at the store that issued it, which made them limiting.
The idea that people should be able to use their card at multiple merchants took hold in the 1950s. Charge plates were replaced by credit cards, which evolved over time to include a numbering system, magnetic stripe, and a chip that required pin verification. Each new upgrade made credit cards more secure and reduced the chances of fraudulent activity. In 1979, 5.3 billion credit transactions were made; by 2000, that number jumped to 15.6 billion.
There was less and less need to talk to a teller, thanks to ATMs.
In 1967, the first automated teller machine debuted in London, offering customers a convenient way to withdraw cash if they couldn’t come in during the bank’s business hours. ATMs soon popped up in the United States in the following years. To operate them, people had to obtain a paper check from a teller, insert it into the machine, and enter a pin. This was not as convenient as most people had hoped, so these cash-dispensing boxes weren’t immediately embraced by the masses.
As cash and check usage declined, the debit card ruled.
It wasn’t until the debit card appeared several years later that the convenience of ATMs truly came to light. Debit cards were appealing for borrowers who had faced a cut to their credit card limit or for consumers who didn’t want to have a debt looming over their heads. With these cards, which were linked to a cardholder’s bank account, people could make everyday retail purchases and withdraw cash from an ATM.
Eventually, the debit card was enhanced with chip and pin technology for extra security. More innovative security features were implemented, such as Wells Fargo’s digital on/off capability, which allows cardholders to use their computer or mobile device to turn off their debit card when it goes missing and back on when it’s found. It gives users a peace of mind and protects them from identity theft and other fraud — plus, there’s no need to close and open a whole new account.
For many households, debit cards were clearly taking the place of cash and checks; in 2015, debit cards were used in 69.5 billion payments compared to 8.3 billion in 2000.
Consumers could do all of their banking in the comfort of their homes.
In 1983, the first online banking system arrived on the scene courtesy of the Bank of Scotland. Customers had to connect a computer terminal to their phone and television. They could perform normal banking tasks, like viewing statements, transferring funds between accounts, paying bills, and even arranging loans. It was far ahead of its time, and not just when it came to banking. This system allowed customers to order retail goods, arrange vacations, and send short electronic messages called “viewlets.” This last feature predated e-mails by more than a decade. Ultimately, electronic banking moved online with the arrival of the internet.
Mobile phones turned into digital wallets.
As smartphones became multifunctional tools that could take pictures, navigate our road trips, and tell us the weather, they also became our virtual wallets. Consumers can send and receive money from friends and family with just a few clicks on their phone. Depositing checks is even easier as customers need only take a picture of it within their bank’s app.
The launch of contactless smart chip technology in 2005 allowed consumers to pay for purchases just by tapping their phone on contactless payment terminals. This meant no swiping or PIN input was required, making transactions much faster and more convenient as there was no need to fumble for one’s wallet or credit cards.
With all these improvements, it doesn’t seem possible that banking can get any easier than this. But it’s only a matter of time before some new technology will have us reminiscing about virtual wallets.