From barter to Contactless: The evolution of payment methods

Payment methods have evolved throughout history. Long before coins, goods were exchanged through barter. This method is the origin of today’s economic transactions.

After barter, a method by which people converted their goods into «money-objects», in the 7th century BC the Greeks developed the coin, a method of payment that has survived to the present day. After a «small» leap in history, paper money was created in China in the 7th century AC. However, its introduction in Europe had to wait ten centuries, and thanks to trade with the Asian continent, Europeans began to introduce this form of payment within their borders. Over time, banknotes have incorporated certain security features, which have made them more difficult to counterfeit. Some of the security features currently used in our banknotes are watermarks, embossing or optically variable ink (OVI).

The birth of cards

Cards have probably been one of the biggest revolutions in the world of payment methods, as their lightness and simplicity for people’s use make them an indispensable element in our day-to-day lives. However, like all other methods, they have evolved since 1914, when the first model appeared. In that year, Western Union created a specific card for its most select customers, allowing them to access a line of credit free of charge. In 1949, the credit card as we know it today was born. Frank X. McNamara was in a restaurant and when it was time to pay, he realised he didn’t have his wallet and couldn’t pay the bill. This led to the birth of the Diners Club card, which allowed him to pay at different establishments and collect the charges at the end of each month.

Two key players in the financial sector were born in 1958: Bank Americard (VISA) and Interbank Card Association (MasterCard). However, the first credit cards were launched by American Express and Bank Americard, the latter managed by Bank of America. The credit card arrived in Spain in 1970 thanks to the partnership between Banco de Bilbao and Bank of America, and its use became widespread in the 1980s.

Cards have gradually introduced different technologies to increase their security. The first cards simply contained the cardholder’s name and a series of numbers to identify him or her. Later, in the 1970s, the magnetic stripe was implemented, which contained the card’s encoded information, ready to be read by the payment terminal. In the 2000s, the security of the cards incorporated the EMV chip, a mechanism through which the buyer had to enter the PIN code to pay.

A ground-breaking technology

Contactless payment is based on NFC (Near Field Communication) technology, which began in 2002 when Phillips and Sony were trying to develop a protocol for exchanging information between two terminals within a few centimetres of each other and then processing it.

Their integration for mobile payments was even later. Google was the first to launch a digital wallet in 2011 to digitise its subscriber’s cards, while Apple launched Apple Pay in 2014, making it the first mobile digital wallet that could be used to pay in shops, both physical and online.

At Sipay, a payment platform with more than 25 years of experience in the sector, we know the importance of innovation in payment methods and the relevance of implementing new technologies that improve the security of transactions and the user experience.

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