History of
Financial Technology


1400

The Medici Bank was a financial institution created by the Medici family in Italy during the 15th century and was the largest and most respected bank in Europe during its prime. The bank, like any modern one, held deposits and made loans, dealt in bills of exchange, changed money and conducted business abroad. A notable contribution to future financial institutions pioneered by the Medici Bank was the development of the double-entry bookkeeping system in the general ledger for tracking debits and credits.

1782

Opening in Philadelphia, the Bank of North America was the first fractional-reserve and private commercial bank to operate in the United States. It was conceived by Alexander Hamilton and modeled after the Bank of England. The Bank of North America was the first bank in the modern sense of the word. The bank was permitted to accept gold and silver coin for deposit and to issue banknotes in exchange. By 1783, Congress and several states including Massachusetts, enacted legislation allowing Americans to pay taxes with Bank of North America certificates. Within three years, the Bank was considered a creditworthy institution.

1949

Many people might assume that it was Visa or MasterCard, but Diners Club was actually the first credit card. The card was created in 1949 by Frank X. McNamara, head of Hamilton Credit Corporation. The Diners Club card evolved from a simple idea—that it would be nice to have a substitute for cash or a checkbook that could be used at more than one place. The card functioned in what is referred to as a ‘closed-loop’ system, made up of the consumer, the merchant, and the issuer of the card. In this system, the issuer authorizes and handles all aspects of the transaction and settles directly with both the consumer and the merchant.

1959 - 1960

Stanley Dashew’s Databosser was a radical expansion to charge card embossing technology. Prior to his invention, creating embossed credit card plates was strictly a manual process where the operator used the keyboard to select individual characters at speeds from fifty to one hundred plates per hour. With the Databosser, production was up to one thousand embossed plates per hour made directly from punch cards or punch tape and later computers.

1966

The general-purpose credit card was born in 1966, when Bank of America established the BankAmerica Service Corporation that franchised the BankAmericard brand (later to be known as Visa) to banks nationwide.

1970 - 1980

In late 1969 IBM created the first ISO based standards for the density and tracks for the magnetic strip. The first usage of a credit card with a magnetic strip occurred in 1970 during a joint pilot project by American Express, American Airlines and IBM at Chicago's O'Hare Airport. American Express issued hundreds of these new cards to frequent travelers in the Chicago area to make electronic payments for tickets and other services.

However it was not until 1980 that Bankamericard/Visa and MasterCharge adopted this technology to a large degree. The extra cost of $2 per card was justified by the growing rate of credit card fraud.

2004

Earlier investment by Europe in chip technology leads to card transactions that can be approved at the point of purchase instead of over telecommunications networks. Known as Chip-and-PIN, it is the most secure type of credit card technology of its kind with over 80 countries offering the system. Instead of a signature being used for identity verification, it requires the card user to enter a four-digit Personal Identification Number (PIN) that must correspond to information contained in a computer chip embedded within the card.

Today

Ongoing advancements in today’s financial technology allow banks to offer their customers convenient, time-saving and more economical methods to utilize financial services—such as the change from checks to debit/credit cards and automatic payments. The ongoing refinement of e-banking (electronic banking) and mobile banking provides a variety of attractive possibilities with worldwide connectivity for around-the-clock remote access to facilitate account inquiries, transaction services, and easy access to transaction data.