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The evolution of electronic payments – Part 1

familiar for merchants, and consumers commonly wrote
them for purchases at the POS.

But right about 1983 things started to change. This is
because two years earlier, Visa and Mastercard began
offering discounts for merchants who, for purchases over
$50, swiped mag-stripe data on cards through newly
developed automated technology. But there was a problem:
the early hardware cost about $900 – way too expensive for
the average merchant.
Enter the POS terminal

Thus, numerous developers worked to make this
technology affordable for the average merchant, but one
By Brandes Elitch company figured out how to deploy affordable technology
first: Verifone, which came to market in 1982. By 1984
CrossCheck Inc. the company had developed an affordable ($125) piece of
hardware with the inexplicable name of ZON, and later the
was fortunate to attend the last two Money 20/20 ubiquitous ZON Junior.
shows and speak with a variety of people there:
product managers, startups, large processors, ven- This was a brilliant move on the part of Verifone founder
I dors, fintechs, bankers, corporate executives, venture Jim Melton, and it gave the company a commanding lead
capitalists – you name it. in what became the POS market. Next, the question became
how to sell, program, deliver and install literally millions
It's impossible not to notice that many of the attendees of terminals to the merchant community.
are recent arrivals to the payments ecosystem. By recent,
I mean they entered payments in the last decade, just What was missing was the sales infrastructure to call
before fintech started to appear, and today they are fintech on merchants face to face, sign them up for credit card
oriented. They don't think like traditional ISOs, payment processing, and sell (or lease) them POS hardware to enable
processors, or bankers in the issuing or acquiring business. them to accept mag-stripe card payments. Back then, most
of the top 10 card processors were nonbanks. Banks were
For those of you who are new to the industry and possibly focused on the card issuing business and left the other side,
even reading The Green Sheet for the first time, I thought a called "acquiring," to the nonbanks.
little background material would be in order. You may find
it useful in understanding how electronic payments began. Also at that time, card brands were associations owned
by their respective member banks. To get a merchant
My company started in the check guarantee business back account, a merchant had to send an application in and be
in 1983, when almost every merchant took checks at the underwritten by a Visa or Mastercard "principal" bank.
point of sale (POS). In fact, back then many merchants There weren't a lot of those. Back then, some smaller banks
didn't take credit cards at all. This was partly because of specialized in sponsoring ISOs. But a concerning issue was
the high cost of interchange and partly because processing always underwriting. Sometimes it took weeks for a new
a card transaction was much more complicated than taking merchant to be approved.
a check.

Checks ruled in 1983 If the principal banks didn't have the salespeople to call on
merchants, sign them up for credit card acceptance, and
In the industry's early days, merchants had to put a help them through the process, who did? Stay tuned for
multipart carbon form and a credit card on a plate and slide Part 2 of this article, slated for publication Oct. 28, 2019, in
an attached imprinter across them to capture payment issue 19:10:02.
card data. These devices were typically referred to as Brandes Elitch, director of partner acquisition for CrossCheck Inc., has
"knuckle busters" or a "zip zap" machines. After manually been a cash management practitioner for several Fortune 500 compa-
imprinting the card information onto the forms, merchants nies, sold cash management services for major banks and served as a
gave one copy to the customer, kept one for their records consultant to bankcard acquirers. A certified cash manager and accred-
and sent one out for processing. There is good reason
why these basic machines were called knuckle busters. ited ACH professional, Brandes has a Master's in Business Administration
By comparison, taking a check was easy, comfortable and from New York University and a Juris Doctor from Santa Clara University.
He can be reached at brandese@cross-check.com.
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