A little rectangular piece of plastic, which has important data stored inside a chip, makes it possible for us to pay when grocery shopping, clothes shopping and even in a restaurant – all your have to do is hold your card out and pay.

The concept of cashless payments has long been perceived as surreal. The question is, how did we reach this payment method, which is now so natural to many?

The Diners Club Card

The invention of the first card payment was based on the idea of not being limited when carrying cash.

Many people understand the situation: only when it comes to paying do you realise that you may not have enough cash with you. This is exactly the situation that Frank McNamara was in when he found himself in a restaurant with his wife in New York, and his money in another suit. In order to spare himself and others from the same embarrassing experience, this entrepreneur founded the Diner’s Club without further ado. In 1950, he launched the first universal credit card that we know today.

The Diners Club Card was the first credit card that demanded a small percentage of the invoice amount from the sellers and was universally applicable. It was not long before the concept was adopted by New York’s Franklin Nation Bank (1951) and Bank of America (1958), now known as MasterCard and VISA.

Eurocheque, or ‘EC’, was introduced into Europe in the 1960’s. This was a cross-border, uniform credit cheque system which authorised the issuer with the help of an EC card. Over the course of time, the debit function was added in order to allow the user to withdraw money from an ATM machine.

The German Credit Card

In 1959, the first credit cards were issued in Germany. However, the proportion of the invoice amount was so high that cashless payments were seldom offered by sellers and service providers at the time. It was only with the ‘German Credit Card’ from the German Retail Association (HDE) and the German Hotel and Restaurant Association (DEHOGA) in 1987 that the sales commission was reduced from 8% to 2.7%.

In the end, however, the EC card prevailed, as banks only charged 0.3% of the purchase sum (minimum of 15 pfennigs) from the retailers, which is why acceptance of the EC card increased significantly.

Signature and Magnetic Strip

Card payment security has made significant progress over time. Where a signature used to be the standard of finalising the payment, today we have to provide a PIN. This proved to minimise the risk of fraud and forgery.

At the end of 2010, data security was enhanced with an additional chip using the magnetic stripe.

With the new NFC chip (near field communication), it is now possible to make contactless payments of up to €50. All of your personal data is encrypted, and after the fourth contactless payment, a PIN is then requested to finalise the payment.

The increase of security and the constant development of cashless payments over time has shown us that card payment is becoming more and more important.

What do you think?

Do you prefer to pay with card or cash?