Payment Processing

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Payment Processing is a broad and loosely defined term used to describe the method of accepting money electronically.  For businesses of all sizes it is normally the entry point for commerce and basic business transactions.  At Total Merchant Network we break up Payment Processing solutions into 3 key categories. (Click on link below for more information)


Since 1990 the use of electronic payments has been on a steady rise from less than 20% to of 2008, 72% of consumers indicated that had used a debit card in the past year.  What most people don’t know is that electronic funds transfer (EFT) was introduced over 100 years earlier by Western Union.


Early History of Electronic Money

Dating back to the Pacific Telegraph Act of 1860, the first transcontinental telegraph line was developed by Western Union and was the foundation for all means of electronic communication.  In 1871, Western Union introduced actual money transfer and in 1914 the first consumer chard card.  These fist cards colloquially known as “metal money” allowed deferred payment privileges to preferred customers.  In 1918 Federal Reserve Banks began to move currency via telegraph, which some historians mark as the birthplace of electric money.

Throughout the 1920’s and 30’s several more companies began to allow customers to pay using “metal money” including general Petroleum and AT&T.  During this same time an inventory named Luther George Simjian created the Bankmatic automatic teller machine.  However because of a supposed lack of demand reported by then company known today as Citicorp, the project was shelved and did not reemerge until the late 60’s.  The first working ATM was installed in 1973 into the Chemical Bank based in New York City.


Introduction of Plastic

“Plastic Money” takes it roots back in 1950 when Diners Club issues the first credit card to 200 customers who could use it at 27 different restaurants in New York.  A more popular and widespread card was released by Bank of America in 1958.  It was called the BankAmericard which is now today what consumers know as Visa.  In the 60s more cards were issued and marketed as a way to save time rather than a form of credit, but it was not until the 1970’s and the establishment of standards for the magnetic strip that credit cards truly began to become widespread.

Companies such as American Express and MasterCard exploded overnight and led to several regulations by Congress to help moderate the marketing practices of soliciting credit cards.  Previously in 1964 IBM and American Airlines had created a real time transaction processing system of telephone lines connected to terminals fitted at the airport.  This allowed for reservations on the basis of credit for the first time in history.  By the 1970s most branches of banks in Europe and America were linked using mainframes which allowed for the mass growth of the consumer credit card industry.


Advent of the Internet and eCommerce

Although the WorldWideWeb web browser was not developed until 1990 by Tim Bernes-Lee, 1979 Michael Aldrich developed a predecessor to online shopping by connecting a modified TV to a real-time transaction processing computer via a domestic telephone line.  Throughout the 80s varied and similar techniques were used in the UK, France, by car dealers.  With the introduction of the first web browser in 1990 and the first major navigator, Netscape in 1994, electronic payment exploded.  The first online bank opened, Pizza Hut offered order online and everything from flower delivery to Adult subscription became available in that same year.  Additionally in 1994 Secure Sockets Layer (SSL) was adopted to help improve security of payments over internet connections.  1998 marked the year that PayPal was founded and the advent of the eWallet.


2000 and Beyond

Since the beginning of the 21st century technology has developed at a dizzying pace.  Authorities have struggled to keep up and policing today’s electronic commerce world to prevent fraud is a daunting task.  With the development of mobile technology the idea of the eWallet has taken a true mobile form.  In May of 2011 Google release the Google Wallet which combines a software application and near field communication technology to turn a mobile phone into the new consumer payment solution.  It is too soon to tell if this will pioneer the new wave in payment processing, however if history is an indicator, it is likely that a fundamental shift in the way consumers pay and businesses accept is on the not too far distant horizon.

Click Here for a Timeline of Major Events in Payment Processing

Click here to go to Credit Card Processing