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Mastercard Inc. (stylized as MasterCard from 1979 to 2016 and as mastercard from 2016 to 2019) is an American multinational payment card services corporation based in Purchase, New York. The company offers a variety of payment transaction processing and other related payment services (such as travel-related payments and bookings).

Throughout the world, its principal business is to process payments between the banks of merchants and the card-issuing banks or credit unions of the purchasers who use the Mastercard branded debit, credit and prepaid cards to make purchases. Mastercard has been a publicly traded company since 2006.

Formation and Competition

Mastercard (originally Interbank, then Master Charge) was formed by an alliance of different banks and regional bankcard associations in reaction to the BankAmericard issued by the Bank of America, which would later become Visa and remains the largest competitor of MasterCard.

Along with Visa, Mastercard has been sued in numerous cases under antitrust laws. Prior to its initial public offering, Mastercard Worldwide was a cooperative due to the more than 25,000 financial institutions that issue its branded cards.

• Registration for MyCCPay

Early Development and Market Expansion (1958-1966)

Although the introduction of BankAmericard in September 1958 was initially a disaster, it was making a profit by May 1961. Bank of America consciously kept this information secret and allowed then-widespread negative impressions to persist to put off competition. This strategy worked until 1966 when the profitability of BankAmericard became too significant to hide.

Market Growth Timeline

Period	Key Development
1960-1966	Only 10 new credit cards introduced in the United States
1966-1968	Approximately 440 credit cards introduced from banks across the US

The rapid expansion from 1966 onward triggered a new wave of competition, as newcomers quickly bonded together in regional bankcard associations.

Regulatory Drivers for Consolidation

One of the key reasons why the majority of banks opted to join forces was regulatory in nature:

• 16 states restricted the capacity of banks to operate via branch locations
• 15 states completely prohibited branch banking and required unit banking

Unit Banking Limitations and Solutions

A unit bank can only operate legally at one location and hence is forced to be very small in size. By joining a regional bankcard association, a unit bank could:

• Add a credit card to its list of financial products in a hurry
• Gain economies of scale by outsourcing tedious back office chores, such as servicing the credit card, to the bankcard association
• Aggregate their customer base and merchant network

Critical Insight: Early credit cards failed due to the inability to use them within a small radius around their respective issuing banks. Regional associations solved this critical infrastructure problem by enabling nationwide payment acceptance.

The Buffalo Meeting and Formation of ICA (1966-1967)

In 1966, Karl H. Hinke, an executive vice president at Marine Midland Bank, asked representatives of several other banks to meet him in Buffalo, New York.

Marine Midland had just launched its own regional bankcard in the Upstate New York market only after Bank of America turned down its request for a BankAmericard regional license on the grounds that Marine Midland was too big.

Result: One of the outcomes of the Buffalo meeting was that a number of banks and regional bankcard associations soon agreed to join forces as Interbankard, Inc., which became the Interbank Card Association (ICA).

• By the end of 1967, ICA had 150 members
• Karl H. Hinke became the chairman of ICA
• Bank of America eventually became part of Mastercard as well. (In the 21st century, Bank of America would recreate the BankAmericard brand name as a MasterCard credit card, which it remains today)

Branding Evolution (1966-1969)

Initial Interbank Branding Challenges

The Interbank branding in 1966 consisted initially of just a small unobtrusive lowercase ‘i’ within a circle in the lower righthand corner across the front of each Interbank card, the rest of the design of the cards being the prerogative of each issuing bank.

Problem: This tiny logo turned out to be completely unsatisfactory for building nationwide brand awareness to compete against the established leader, BankAmericard.

Master Charge Launch (1969)

In 1969, Interbank built a new name for the national brand of the business: “Master Charge: The Interbank Card” by bringing together:

• The two overlapping yellow and orange circles of the Western States Bankcard Association
• The “Master Charge” name that had been coined by the The First National Bank of Louisville, Kentucky

Strategic Mergers and Expansion

That same year, 1969, First National City Bank became a part of Interbank and merged the bank’s proprietary Everything Card program with Master Charge.

International Expansion and Strategic Alliances (1968-1985)

European Market Access

In 1968, the ICA and Eurocard began a strategic alliance, which effectively provides:

• ICA access to the European market
• Eurocard acceptance on the ICA network

The Access card system of the United Kingdom was a member of the ICA/Eurocard alliance from 1972.

Rebranding as MasterCard (1979-1980)

In 1979, Master Charge: The Interbank Card was renamed as MasterCard. Starting in 1980, the company began to roll out new cards with a new logo. Cards maintained the overlapping red and yellow circles originally introduced in 1969; later card designs have continued to take this symbol.

Technology Innovations and Infrastructure

Year	Innovation	Details
1983	Hologram security	Mastercard International Inc. became the first bank to use holograms as part of their card security
1985	ATM network	Took over the Cirrus network of automated tellers

Modern Era Development (1997-Present)

Consolidation and Reorganization

In 1997, the Access card was taken over by Mastercard; the Access brand was retired. In 2002, MasterCard International merged with Europay International, which was also a large credit card issuer association (Eurocard had also become part of it in 1992). Mastercard became a Delaware corporation in connection with the merger, as well as in anticipation of an IPO.

Initial Public Offering (2006)

The company was a co-operative of banks and the first public offering was on May 25, 2006, selling 95.5 million shares at $39 per stock. The stock is traded on the NYSE with a ticker symbol of MA. The deal was conceived with the goal of preserving the value of the brand and keeping costs for regulators as low as possible.

Strategic Acquisitions (2010-2024)

Year	Acquisition	Details
2010	DataCash	UK-based payment processing and fraud/risk management provider – expanded e-commerce offering
2012	Mobile Contactless Expansion	Announced expansion of mobile contactless payments program across the Middle East
2014	Pinpoint	Australian leading rewards program manager – undisclosed sum
2016	VocaLink	British company – $920 million for 92.4% stake
2017	Brighterion	AI and machine learning company with portfolio of intellectual property
2019	Nets (Scandinavian operations)	EUR2.85 billion acquisition offer
2021	Ekata	Identity verification company – $850 million
2024	Recorded Future	Cyber security company – $2.65 billion (September 2024)

Geopolitical and Market Actions

In March 2022, following the Russian invasion of Ukraine, Mastercard announced that it would suspend all business operations in Russia.

On November 17, 2023, the Chinese government approved the local bank card clearing license for the joint venture that Mastercard has created in China. As of May 9, 2024, the joint venture has the ability to issue Mastercard bank cards to use the Chinese yuan to make payments.

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Financial Performance

Revenue and Growth Metrics (2005-2024)

Year	Revenue (US$ M)	Operating Income (US$ M)	Share Price (US$)	Employees
2005	2,938	393	—	4,300
2006	3,326	229	6.20	4,600
2007	4,068	1,108	13.65	5,000
2008	4,992	534	20.33	5,500
2009	5,099	2,260	17.99	5,100
2010	5,539	2,752	22.01	5,600
2011	6,714	2,713	28.73	6,700
2012	7,391	3,937	41.58	7,500
2013	8,312	4,503	59.34	8,200
2014	9,441	5,106	75.33	10,300
2015	9,667	5,078	90.62	11,300
2016	10,776	5,761	94.50	11,900
2017	12,497	6,622	126.54	13,400
2018	14,950	7,282	186.16	14,800
2019	16,883	9,664	300.74	18,600
2020	15,301	8,081	370.00	21,000
2021	18,884	10,082	354.83	24,000
2022	22,237	12,264	347.73	29,900
2023	25,098	14,008	422.17	33,400
2024	28,167	15,582	524.23	35,300

As of 2024, Mastercard is ranked number 164 on the Fortune 500 corporate brands that are the largest in the United States, measured by revenue.

Products and Services

Card Tier Structure

Depending on the geographical location, Mastercard-issuers can issue the cards in tiers, from lowermost up to the highest tier:

Credit Cards

Tier Level	Product Lines
Basic	Traditional/Classic/Standard
Premium	Gold/Titanium
Luxury	Diamond, Platinum
Elite	World, World Rewards, World Black Edition, Black, World Elite, World Legend

Debit Cards

Tier Level	Product Lines
Basic	Traditional/Classic/Standard
Premium	Gold/Titanium
Luxury	Diamond, Platinum
Elite	World, World Black Edition, Black, World Elite

Digital and Emerging Services

Web Shopping Mall (2010)

Through a relationship with an Internet company specializing in personalized shopping, Mastercard opened a Web shopping mall on April 16, 2010, that it claimed can identify with considerable precision what its cardholders are likely to buy.

Apple Pay Integration (2014)

In September 2014, Mastercard collaborated with Apple to add a new feature that allows mobile wallet payments to Apple’s new iPhone and Apple Watch models, called Apple Pay, which allows mobile users to more easily use their Mastercard and other credit cards.

Mastercard Track Business Payment Service (2020)

Mastercard introduced Mastercard Track Business Payment Service in May 2020. The service offers business-to-business payments between buyers and suppliers.

According to the head of global commercial products, it “creates a directory of the suppliers, so that suppliers can publish their payment rules and allow them to better control the way they are paid and for buyers to find the suppliers and know what their requirements are”.

Cryptocurrency and Digital Assets

Initial Cryptocurrency Support (February 2021)

On February 10, 2021, Mastercard announced their support of Cryptocurrencies saying that later on in 2021, Mastercard will begin supporting select cryptocurrencies directly on their network.

Key Focus Areas:

• Using digital assets for payments
• Crypto assets will need to provide the stability people need in a vehicle for spending, not investment

Bakkt Partnership (October 2021)

In October 2021, Mastercard revealed that via its partnership with Bakkt, any bank or merchant using its network will soon have the ability to provide crypto services.

NFT Support (June 2022)

In June 2022, Mastercard announced it will allow cardholders to purchase NFTs through various NFT scaling platforms.

Cryptocurrency Services Expansion (April 2023)

In April 2023, Mastercard announces it wants to help scale up partnerships with cryptocurrency businesses. At the time of announcing, the firm had already partnered with other financial companies to provide cards associated with crypto in certain nations.

The company introduced its Mastercard Crypto Credential service which would enable transactions between countries that had to comply with requirements such as the “travel rule” by the Financial Action Task Force (FATF) using technology from firm CipherTrace. It worked with wallet providers including Bit2Me, Lirium, Mercado Bitcoin, and Uphold.

Specialized Payment Solutions

Direct Express Debit Mastercard (2008)

Mastercard, Comerica Bank, and the U.S. Treasury Department joined forces in 2008 in an effort to create the Direct Express Debit Mastercard.

Purpose: The federal government uses the Express Debit product to make electronic payments to people who do not have bank accounts. Comerica Bank is the debit card’s issuing bank.

Consumer Protections: The Direct Express cards provide a number of consumer protections to the recipient.

Executive Club Multi-Currency Cash Passport (2013)

In June 2013, Mastercard announced a partnership with British Airways to provide members with the Executive Club Multi-currency Cash Passport that will reward members with:

• Additional points
• Multi-currency payments

Key Features

The Passport card users can load up to ten currencies:

• Euro
• Pound Sterling
• U.S. Dollar
• Turkish Lira
• Swiss Franc
• Australian Dollar
• Canadian Dollar
• New Zealand Dollar
• U.A.E. Dirham
• South African Rand

Exchange Rate Mechanism: If being used, the card finds the best exchange rate based on the local currency and if the local currency was not already loaded onto the card, it uses funds from other currencies.

Mobile and Contactless Payment Solutions

QkR Mobile Payment Application

QkR is a mobile payment application being developed by Mastercard that is operating in the US and Australia for the purpose of ordering products and services through a smartphone where payments are charged to the associated credit card.

Deployment Scope

QkR is being deployed for use in larger scale events, such as:

• Sport events and concerts
• Movie theaters
• Schools

Technical Differentiation

Unlike other Mastercard mobile payment apps like Pay Pass, QkR does not make use of NFC from the phone, but instead uses an Internet connection.

How It Works

The mechanism is straightforward:

1. Users can open the app
2. Scan a QR code found on the back of the seat in front of them
3. Order refreshments of their choosing
4. The order is sent off to a concession stand around the corner

Strategic Positioning

QkR is being marketed to vendors as a replacement for other mobile payment apps and mobile ordering apps that will be developed or distributed by the vendor (such as Starbucks’s app, McDonald’s app, or Chipotle’s mobile ordering app) or by a third party, like Square, headed by Twitter cofounder Jack Dorsey.

Mastercard Contactless

Mastercard Contactless (formerly known as PayPass) is an EMV compliant, contactless payment feature, similar to American Express’ ExpressPay and Visa payWave.

Technical Standards

Built on the ISO/IEC 14443 standard, it gives cardholders an easier way to make payments by:

• Touching a payment card or other payment device (such as a phone or key fob)
• On a point-of-sale terminal reader instead of swiping or inserting the payment card

Transaction Limits by Currency

Contactless can currently be used on transactions of up to and including:

• 100 GBP (British Pound)
• 50 EUR (Euro)
• 60 BAM (Bosnian Mark)
• 80 CHF (Swiss Franc)
• 50 USD (US Dollar)
• 100 CAD (Canadian Dollar)
• 200 SEK (Swedish Krona)
• 500 NOK (Norwegian Krone)
• 100 PLN (Polish Zloty)
• 350 DKK (Danish Krone)
• 80 NZD (New Zealand Dollar)
• 100 AUD (Australian Dollar)
• 1000 RUB (Russian Ruble)
• 500 UAH (Ukrainian Hryvnia)
• 500 TRY (Turkish Lira)

Market Development Timeline

Year	Event	Details
2003	PayPass Market Trial	Nine-month trial in Orlando, Florida with JPMorgan Chase, Citibank, and MBNA; 16,000+ cardholders and 60+ retailer locations
2003	Mobile Integration	Working with Nokia and Nokia 6131 AT&T Wireless and JPMorgan Chase to include PayPass with NFC technology in Dallas, Texas
2011	Google Wallet Partnership	Google and MasterCard partnered to produce Google Wallet for Android mobile devices
2014	Apple Pay Launch	Apple launched Apple Pay for iOS devices
2015-2016	PayPass Sunset	Citicards in the US ceased PayPass enabled plastic; July 16, 2016 – all PayPass support ended for Citicards

Biometric Payment Innovation

Biometric Metal Card Initiative (2025)

In Mid-2025, Mastercard officially announced the implementation of biometric enabled metal credit cards on the basis of IDEX Pay.

Manufacturing and Approvals

In February 2025, South Korean manufacturer KONA I received a Letter of Approval from Mastercard to produce both:

• Biometric plastic (PVC) cards
• Biometric metal cards

These cards incorporate a fingerprint sensor as part of the card’s secure chip, to allow the cardholder authentication to be completed on the card itself for in-store EMV PIN-free transactions, while making sure that biometric data never leaves the card.

Commercial Launch (July 2025)

In July 2025, bank Eastern Bank PLC (EBL) in Bangladesh launched in partnership with Mastercard the world’s first commercially issued “World Elite” tier biometric metal credit card.

Key Details:

• Launch date: July 5, 2025 at Dhaka
• Partners: IDEX Biometrics, KONA I, and Infineon Technologies
• Capabilities:
  • Fingerprint authentication in EMV transactions
  • Contact and contactless payments
  • Part of Mastercard’s Priceless Specials programme

Global Adoption

Mastercard’s global FAQ shows biometric payment cards have been issued in more than 70 markets, with these advantages:

• Work with standard EMV terminals and ATMs
• Require no new infrastructure
• Can be used with user self-enrollment kits

Antitrust Litigation and Market Power Issues

Operating a payment processing network carries with it the risk of engaging in anticompetitive conduct because of the large number of parties involved (that is, the customer and his or her bank and the merchant and his or her bank).

Few companies have been prosecuted with a higher number of antitrust lawsuits, both in the US and abroad.

United States Litigation

American Express Exclusion (1980s-1990s)

Mastercard and Visa engaged in systematic parallel exclusion of American Express in the 1980s and 1990s. Mastercard used exclusivity clauses in its contracts and blacklists to prevent the banks from doing business with American Express. Such exclusionary clauses and other written evidence was used by the United State Department of Justice in regulatory actions against Mastercard and Visa. Discover has also sued Mastercard for similar problems.

Debit Card Swipe Fee Price Fixing

Both Mastercard and Visa paid about $3 billion in damages for debit card swipe fee price fixing in a class action lawsuit that was filed in January 1996. The underlying litigation named such retail giants as plaintiffs including:

• Wal-Mart
• Sears, Roebuck & Co.
• Safeway

Merchant Acceptance Coercion (1996)

In 1996, four million merchants filed suit in federal court against Mastercard because it made them accept debit cards if they wanted to accept credit cards, and dramatically increased credit card swipe fees. This case was settled with a multibillion dollar payment in 2003, making it the largest antitrust judgement ever given.

Department of Justice Bank Issuer Case (1998-2001)

In 1998, the Department of Justice appeared as an example of a bank suing Mastercard due to rules that prohibited their issuing banks from doing business with American Express or Discover. The Department of Justice prevailed in 2001 and the verdict held. American Express also became a plaintiff.

Additional Litigation

• August 23, 2001: Mastercard International Inc. was sued in violation of the Florida Deceptive and Unfair Trade Practices Act.
• November 15, 2004: Mastercard Inc. paid a settlement of $1.8 billion to American Express due to anticompetitive practices preventing American Express from issuing cards through US banks.

Swipe Fee Fixing and Merchant Discount Cases

2012 Preliminary Settlement Approval

On November 27, 2012, a federal judge entered an order to give preliminary approval to a proposed settlement to a class action lawsuit filed by merchants and trade associations in 2005 against Mastercard and Visa.

Allegations: The suit was lodged because of alleged price-fixing practices used by Mastercard and Visa.

Opposition: About one-fourth of the named class plaintiffs decided to opt-out of the settlement. Opponents took issue with some provisions that would prohibit future lawsuits and make it impossible for merchants to opt out of substantial parts of the proposed settlement.

Merchant Allegations

Plaintiffs alleged that Visa Inc. and Mastercard set an interchange fee (also known as a swipe fee) that are charged to merchants for the privilege of accepting payment cards.

The complaint also claimed that defendants unfairly interfere with merchants from encouraging their customers to use less expensive forms of payment such as:

• Less expensive cards
• Cash
• Checks

Settlement Developments

• November 2019: $6.24 billion settlement was approved preliminarily
• 2019: $5.54 billion settlement was approved
• October 2022: The case was still ongoing as some merchants appealed the settlement

Antitrust Settlement with US Justice Department (October 2010)

In October 2010, Mastercard and Visa settled with the US Justice Department in a second antitrust case.

Key Agreement: The companies agreed to permit merchants displaying their logo to:

• Refuse certain types of cards (since interchange fees differ)
• Give consumers discounts for the use of cheaper cards

ATM Operators Litigation

Mastercard, along with Visa, has been sued in a class action by ATM operators that claim rules put in place by the credit card networks in effect fix ATM access fees.

Allegations: The suit alleges that this represents a restraint of trade under federal law. The lawsuit was the result of a club of National ATM Council and independent automated teller machine operators.

Specific Accusation: The rules of the Mastercard and Visa network forbid ATM operators from charging lower prices for transactions over PIN debit networks that are not affiliated with Visa or Mastercard.

The suit contends that through this price-fixing:

• The price artificially increased that consumers pay through ATMs
• It restricts the amount of revenue gained by ATM operators
• This violates the Sherman Act’s prohibition against unreasonable restraints of trade

Attorney Perspective: Johnathan Rubin, an attorney for the plaintiffs, said, “Visa and Mastercard, are the ringleaders, organizers and enforcers of a conspiracy among U.S. banks to fix the price of ATM access fees in order to keep the competition at bay.”

Costs of Merchant Fraudulent Card Uses (October 2025)

In October 2025, merchants agreed to a $231.7 million settlement before a U.S. District Judge, in case B & R Supermarket, Inc., for injuries resulting from costs incurred in frauds in respect of:

• Counterfeit cards
• Lost or stolen cards

Mastercard’s Portion: $79.8 million out of the total settlement.

Oceania Regulatory Actions

Australia (2003)

In 2003, the Reserve Bank of Australia made it compulsory to drastically reduce the interchange fees from around 0.95% of the transaction to around 0.5%.

Notable Results:

• Decline in the number of reward cards
• Rise in the number of debit cards used

Australia also:

• Banned the no surcharge rule – a policy created by credit card networks such as Visa and Mastercard to prevent merchants from collecting a credit card usage fee from the cardholder
• Introduced changes to interchange rates for debit cards
• Looked at abolishing interchange fees altogether

New Zealand (2006)

As of November 2006, New Zealand was considering doing the same, after a lawsuit by the Commerce Commission charging Visa and Mastercard with price-fixing. In New Zealand, however, merchants charge 1.8% for every credit card transaction.

European Union Regulatory Action

General Overview

The European Union has repeatedly reprimanded Mastercard for having monopolistic trade practices.

2009 Antitrust Case

In April 2009, Mastercard was found guilty in an antitrust case by the European Union and agreed to lower debit card swipe fees down to 0.2 percent of purchases.

European Central Bank Proposal (December 2010)

In December 2010, a senior official from the European Central Bank called for a break up of the Visa/Mastercard duopoly by the creation of a new European debit card to be used in the Single European Payments Area (SEPA).

2013 Investigation

In 2013, Mastercard was the subject of an investigation by the European Union for:

• High fees charged to merchants to accept cards issued outside the EU versus cards issued in the EU
• Other anti-competitive practices which could prevent electronic commerce and international trade
• High fees associated with premium credit cards

The EU’s competition regulator stated that these fees were of special concern due to the increasing position of non-cash payments.

2007 Cross-Border Transaction Ruling

Mastercard was ruled by the European Commission in 2007 not to be able to charge fees on cross-border transactions wholly conducted within the EU.

The European Commission said that their investigation also covered large differences in fees between national borders. For example, an amount of EUR50 could cost EUR0.10 in the Netherlands but it could cost eight times that in Poland.

The Commission argues that rules by Mastercard prohibiting merchants from taking advantage of better terms provided to them in other EU countries, may be against antitrust law.

Consumer Organization Support

The action against Mastercard was praised by the European Consumer organisation (BEUC). BEUC said the interbank fees drive prices up and harm consumers.

BEUC Director General Monique Goyens said: “So in the end, all consumers are hit by a scheme which ends up rewarding the card company and issuing bank.”

2019 Antitrust Fine

In January 2019, the European Commission issued an antitrust fine of EUR570,566,000 against Mastercard for “obstructing merchants’ access to cross-border card payment services”, because of Mastercard’s rules, which required acquiring banks to apply the interchange fees in the country where a retailer was located.

The Commission concluded that Mastercard’s rules stopped retailers from benefitting from the lower fees and limited competition between the banks cross border, in breach of EU antitrust rules.

Violation Resolution: The violation of the antitrust laws came to an end when Mastercard amended its rules because of the Entering into Force of Interchange Fee Regulation in 2015 which introduced caps on interchange fees. The Commission did grant Mastercard a 10% reduction of the fine however, in return for Mastercard acknowledging the facts and cooperating with the antitrust investigation.

2021 Pre-Paid Card Violation

In February 2021, following an investigation by the British Payment Systems Regulator, Mastercard admitted liability for violating breaches of competition law with regard to pre-paid cards.

2024-2025 Ongoing Investigation

In November 2024, the European Commission announced that it will carry out a further investigation into whether the fees charged by the schemes of Visa and Mastercard have a negative impact on retailers. Some retailers had in recent years complained about the fees, citing lack of transparency.

The Commission took its investigation further in June 2025 seeking a retailer view and seeking comments from the card operators on whether a “standardized summary of fees” would help to promote transparency.

European Expansion (November 2025)

In November 2025, Mastercard announced that it is expanding in Europe with the establishment of new hubs in Warsaw and Gdansk in Poland.

Other Significant Issues and Regulatory Matters

Gambling Transactions with US Internet

Mastercard, Visa, and other credit cards have had their account funded since the beginning of online gambling in the mid-1990s.

Federal Wire Act Cases (2000-2001)

On March 20, 2000, the United States District Court for the Eastern District of Louisiana heard motions in Re: MasterCard International Inc. in connection with multi-district litigation that Mastercard had illegally interacted with a number of internet casinos.

Plaintiffs claimed, among other things, that Mastercard had committed a violation of the Federal Wire Act. They asked the Supreme Court for financial relief toward losses incurred at gambling sites outside the US.

The District Court’s decision of February 23, 2001, later affirmed by the United States Court of Appeals for the Fifth Circuit, favored Mastercard. The Fifth Circuit also solicited clarification on the application of the Wire Act to the gambling industry through illegal online.

Verdict: The court decided that the wire act only applied to gambling activities involving a “sporting event or contest”. Therefore, the court could not decide that Mastercard breached the Wire Act.

PASPA Overturn Impact (May 2018)

When PASPA was overturned May 14, 2018, Mastercard had to give new guidance to its member banks. It clarified that restrictions on state location applied not to the member bank processing a transaction and sending the money to the individual placing the wager, but to the person making the bet.

According to different state gaming laws, sports betting providers should implement Internet geolocation to identify a customer’s physical location before betting on a game.

The Independent Community Bankers of America in particular requested information regarding a new on-line gambling merchant category code. Mastercard has had MCC 7801 dedicated to online gambling. This code is different to:

• 7800 for government owned lotteries
• 7802 for government licensed horse and dog tracks

FTC Complaint (August 2023)

On August 30, 2023, the American Civil Liberties Union (a litigation organization) filed a complaint with the Federal Trade Commission that consists of a group of other organizations requesting the Federal Trade Commission investigate the policy for being an unfair business practice under Section 5 of the FTC Act.

Branding and Marketing

The “Priceless” Campaign

Mastercard’s current advertising campaign tag line is Priceless. It started in 1997. The slogan that will be associated with the campaign is:

“There are some things money can’t buy. For everything else, there’s Mastercard.”

The Priceless campaign in its various more recent iterations has been applicable to both Mastercard’s credit card and debit card products. They use the Priceless description as well to market their products such as:

• Their priceless travel site, which offers deals and offers for Mastercard holders
• Priceless cities, offers for people in certain locations

Corporate Rebranding Evolution

2006 Rebranding

In mid-2006, MasterCard International changed its name to MasterCard Worldwide. This was to indicate a more global scale. In addition to that, the company implemented a new corporate logo with the addition of a third circle to the two previously in use (the familiar card logo, resembling a Venn diagram, was not changed). A new corporate tagline was also introduced at the same time: “The Heart of Commerce”.

2016 Rebranding

In July, 2016, Mastercard unleashed their new rebranding at the same time as their new corporate logo. In addition, they changed the name of their service from “MasterCard” to “mastercard” (all lowercase).

2019 Logo Simplification

In January 2019, Mastercard removed the name of the company from its logo, and now the name serves only as overlapping discs.

Brand Trust Rankings

In 2021, Mastercard came in the number 13 on Morning Consult’s list of the most trusted brands.

Sports Sponsorships

Mastercard sponsors major sporting events and sponsors teams all over the world. These include:

• Rugby’s New Zealand
• The MLB
• The UEFA Champions League
• The PGA Tour’s Arnold Palmer Invitational

Previous and Current Sponsorships

Previously, it also sponsored:

• The back of the football team and the blue shirt number of the national team in the Football Association (the National Football League)
• The main sponsor of the Football World Cup but terminated its contract after a court settlement and its rival, Visa, took up the contract in 2007
• The national football team of Brazil and the Copa Libertadores

Formula One Racing

1997 Formula One Entry

In 1997, Mastercard was the primary sponsor for the Mastercard Lola Formula One team which withdrew from 1997 Formula One season on account of financial problems failing to qualify for its first race. The team also sponsored Jordan Grand Prix all the way to the end of the 2001 Formula One Season, from the 1998 season.

2024-2026 McLaren Partnership

In July 2024, Mastercard is returning to Formula One with a multi-year deal with McLaren Racing. In August 2025, McLaren Racing signed the deal with Mastercard as the official naming partner of the team. The team will compete in the 2026 season onwards as the McLaren Mastercard Formula 1 Team.

Additional Sponsorships

• Alamo Bowl game – sponsored from 2002 through 2005
• League of Legends esports – became the first major sponsor in late 2018, sponsoring the League of Legends World Championship, Mid-Season Invitational, and the All-Stars event
• Memorial Cup – sponsor until 2018 of the CHL’s annual championship between its 3 leagues
• Cricket in India – In September 2022, Mastercard bought the title sponsorship rights on all the international and domestic home matches organized by the board of cricket control in India

Corporate Operations and Leadership

Headquarters and Operations

Mastercard has its headquarters in the Mastercard International Global Headquarters in Purchase, New York. The Global Operations Center is based out of O’Fallon, a suburb of St. Louis, Missouri.

Corporate Recognition

Mastercard was ranked in 2013 among the best companies to work for by Forbes. In 2016, Mastercard UK joined 144 companies in signed the HM Treasury’s Women in Finance Charter, a pledge to balanced representation of gender in the company.

Management & Board of Directors

Key Executives

• Michael Miebach: President and Chief Executive Officer
• Walt Macnee: Vice Chairman
• Robert Reeg: President – Global Technology & Operations
• Raja Rajamannar: Chief Marketing Officer – Global Marketing
• Gary Flood: President – Products & Services
• Noah Hanft: General Counsel, Chief Franchise Officer, Corporate President
• Michael Fraccaro: Chief Human Resources Officer
• Chris McWilton: President – North America Market
• Ann Cairns: President – International Markets
• Javier Perez: President – Europe
• Kevin Stanton: Chief Transformation Officer
• Ari Sarker: President – Asia-Pacific
• Betty Devita: President – Canada
• Gilberto Caldart: President – Latin America & Caribbean

Board of Directors

Prior to the IPO in 2006, Mastercard was an association with a board of directors made up of banks. The present board of directors consists of the following persons:

Name	Role	Details
—	Non-Executive Chair	Dean Emerita, School of International and Public Affairs, Columbia University
Candido Botelho Bracher	Independent Director	Former CEO, Itau Unibanco Group
Richard K. Davis	Independent Director	Former Executive Chairman and CEO, U.S. Bancorp
Julius Genachowski	Independent Director	Managing Director of The Carlyle Group
Goh Choon Phong	Independent Director	Chief Executive, Singapore Airlines Limited
Oki Matsumoto	Independent Director	Founder, Chairman and CEO, Monex Group of Companies
Michael Miebach	President & CEO	MasterCard
Youngme Moon	Independent Director	Donald K. David Professor of Business Administration, Harvard Business School
Rima Qureshi	Independent Director	Executive Vice President, Chief Strategy Officer, Verizon Communications Inc.
Gabrielle Sulzberger	Independent Director	Strategic Advisor, Two Sigma Impact
Jackson Tai	Independent Director	Former Vice Chairman and CEO, DBS Group and DBS Bank Ltd.
Harit Talwar	Independent Director	Former Partner and Chairman, Consumer Business (Marcus), Goldman Sachs
Lance Uggla	Independent Director	CEO, BeyondNetZero

Strategic Initiatives and Vision

World Beyond Cash Initiative (2017)

In 2017, CEO Ajay Banga reaffirmed the company’s commitment to reaching those beyond the orbit of the financial system with access to digital payment systems with the unbanked people of the world.

The company invested $500M in India with offices in Pune and Vadodara in an attempt to assist Mastercard in bringing cashless transactions to the largest population in the world.

The company additionally announced to invest an extra $750M in cashless apps and technology, particularly on India between 2017 and 2020.

Banknet – Global Payment Infrastructure

Mastercard operates Banknet, a worldwide telecommunications system that ties all the:

• Mastercard Card issuers
• Acquirers
• Data processing centres

into one financial telecommunications network. The operations hub is in St. Louis, Missouri. Banknet uses the protocol 8583 from ISO.

Network Architecture Comparison

Mastercard’s network is quite different from Visa’s network:

• Visa’s Network: A star-based system in which all endpoints terminate at one of a number of main data centers in which context all transactions are processed centrally
• Mastercard’s Network: An edge-based, peer-to-peer network where transactions travel a meshed network, directly to other endpoints, without having to travel to a single point

Network Resilience Advantage

This means that Mastercard’s network is much more resilient, in the sense that a failure in one location can not isolate a large number of endpoints.

A credit card (or charge card) is a payment card that a bank issues, and it enables the users of the cards to buy goods or services or withdraw cash, on credit. By using the card therefore creates debt which has to be paid up later. Credit cards are one of most widely used settings of payment in the globe.

A regular credit card is in contrast to a charge card that requires balance to be repaid in full each month, or at the end of each statement cycle. In contrast, credit cards enable loans between consumers (where a continuing balance of debt is built up by the consumer) to which interest is charged on a specific basis. A credit card also differs from a charge card in that a charge card is generally a third-party entity, which would pay the seller, and be reimbursed by its buyer, whereas a credit card simply defers payment by the buyer until some later date. A credit card is also not like the debit card, which can be used like currency by the owner of the card. Also see MyCCPay – Login to Pay Credit Card Bill at Www.MyCCPay.Com.

As of June of 2018, there are 7.753 billion credit cards in the world. In 2020, there were a total of 1.09 billion credit cards in circulation in the United States and 72.5% of adults (187.3 million) in the country had at least one credit card.

Technical Specifications

Front of a Standard Credit Card

An example of the front that we have in a normal credit card:

• Issuing bank logo
• EMV chip (only on “smart cards”)
• Hologram
• Card number
• Card network logo
• Expiration date
• Card holder name
• EMV Contactless indicator

Backside of a Standard Credit Card

An example of the backside of a normal credit card:

• Magnetic stripe
• Signature strip
• Card security code

The size of most credit cards are 85.60 by 53.98 millimetres (3+3/8 in x 2+1/8 in) and rounded corners with a radius of 2.88-3.48 millimetres (9/80-11/80 in) conforming to the ISO/IEC 7810 ID-1 standard, which is the same size of ATM cards and other payment cards such as debit cards. Credit cards are made out of plastic but some are made out of metal.

Credit cards have a bank card number printed or embossed on them which complies with the ISO/IEC 7812 numbering standard. The prefix of the card number is known as the Bank Identification Number (BIN) which is the set of the first digits within the card number that identify the bank to which a credit card number belongs. This is the first six digits with the MasterCard and Visa card. The following 9 digits those are the individual account number. and last digit is validity check digits.

Both of these standards are sustained and are further developed by ISO / IEC JTC 1 / SC 17 / WG 1. Credit cards have a magnetic stripe fitting the ISO/EC 7813. Most modern credit cards employ smart card technology: they consist of a computer chip embedded in them as a security measure. In addition, complex smart cards in which peripherals such as a keypad, a display or a fingerprint sensor are used increasingly on credit cards.

In addition to the main credit card number, credit cards also share some issue and expiration dates (given to the nearest month) and some extra numbers such as issue number and security code. Complex smart cards allow to have a variable security code hence increasing security for the online transactions. Not all credit card has the same sets of extra codes and not all of them use the same number of digits.

Credit card numbers and cardholder’s names were originally embossed, to enable easy transfer of such information to charge slips printed on carbon paper forms. With the disappearance of paper slips, some credit cards are actually not embossed and in fact the card number is no longer in the front. In addition, some of the cards are now in a vertical design (in lieu of horizontal).

Early Charge Coins and Cards

Beginning in the late 19th century, the charge cards varied in different shapes and sizes. that it was made of celluloid, copper, aluminum, steel and other kinds of whitish metals. Some had the shape of coins with a little hole allowing it to be put in a key ring. Those with charge coins had often been used to give to customers with charge accounts at a hotel or department store. Every one of them had one charge account number to go with the name and logo from the merchant.

The charge coin offered an easy and fast way to transfer the charge account number on sales slip by printing the coin in the sales slip. The Charga-Plate was a precursor of the credit card and was used in the US between the 1930s and late-1950s. It was a 2+1/2 by 1+1/4 inches (64 mm by 32 mm) rectangle of sheet metal in relation with the addressograph and military dog tag systems. It was also embossed in the name and name, city and state of the customer. On the back of it was affixed a small paper card for the signature. In making a purchase the plate was placed in a recess in the imprinter with a paper ‘charge slip’ on top of it. The record of the transaction contained an impression of the embossed information taken by the imprinter pressing an inked ribbon on the charge slip. Charga-Plate was a trademark of the Farrington Manufacturing Co. Charga-Plates were issued by large scale merchants to their regular customers, much like the credit cards of department stores a few years later. In some instances instead of the customers holding the plates in their store the plates were held in the issuing store. When set to the page of an authorized user made a purchase, a clerk acquired the plate from the files of the store, and then he or she engaged in making the purchase. Charga-Plates increased the speed in the back-office bookkeepers and lower the amount of manual copying mistakes.

Air Travel Card

In 1934 American Airlines and the Air Transport Association made this process still easier with the inception of the Air Travel Card. They created a numbering scheme to identify the company making the card as well as the customer account with the credit card information. This explained why the modern days UATP cards are still started with the number 1. With an Air Travel Card passengers were able to “buy now, and pay later” on a ticket against their credit with a fifteen percent discount at any of the accepting airlines. By the 1940s all major US airlines had Air Travel Cards which could be used with 17 different companies. By 1941, some half of the revenues of the airlines was conducted through the Air Travel Card agreement. The airlines had also begun to introduce the installment plans to attract new travellers into the air. In 1948, The Air Travel Card was the first internationally valid charge card out of all the members of the International Air Transport Association.

Experimentation in General Purpose Charge Cards

The concept of letting customers pay diverse merchants on the same card was advanced ahead in 1950 by the founders of Diners Club, Ralph Schneider, Frank McNamara, to consolidate a number of cards. The Diners Club (which was created in part as a result of a merger with Dine and Sign), created the first “general purpose” charge card required the entire way of making payments with every statement. That was followed by Carte Blanche and in 1958 by American Express that had created a worldwide credit card network (although these were at first charge cards that gained credit card functions later).

BankAmericard, Master Charge

Until 1958, no one had been able to successfully establish a revolving credit financial system, in which a card issues by a third party bank was being generally accepted by a large number of merchants, as opposed to merchant-issued revolving cards in which were accepted by a small selection of merchants. There had been a dozen attempts by small American banks but these were all short lived. In 1958, Bank of America introduced the BankAmericard that launched in Fresno, California, the first successful recognizably modern credit card. This type of card managed to be where others had failed because it broke the case of the chicken and the egg scenario where consumers didn’t want to use a card that few merchants would accept and the merchants didn’t want to accept a card that few consumers would use. Bank of America had choose Fresno because 45% of its resident either used the bank and with bank sending card 60000 Fresno resident at same time with the merchant to convince take card. It was, eventually, licensed off to other banks around the United States, and then around the world, and in 1976, all BankAmericard licensees united themselves under a common brand Visa. The ancestor of MasterCard was born in 1966 when a group of banks created a Master Charge to compete with BankAmericard, it was given an important boost when the Citibank merged the own Everything Card which was launched in 1967 to MasterCharge in 1969.

Early credit cards in the U.S. of which BankAmericard was the largest example were mass produced and mass mailed unsolicited to bank customers considered to be low risk. According to LIFE, cards were “mailed off to unemployable people, drunks, narcotics addicts and to compulsive debtors” which was the comparison of “giving sugar to diabetics” by Betty Furness, President Johnson’s Special Assistant. These mass mailings were known as “drops” in banking terminology, and was outlawed in 1970 because of the mass chaos that they caused in the financial world. However, by the time the law took effect, about 100 million credit cards were floated into the population of the US. After the year 1970, only credit card applications could be sent unsolicited in the mass mailings.

This system was computerized in 1973 through the leadership of Dee Hock, the first CEO of Visa because of the need for less time for transaction. However, until always connected payment terminals became ubiquitous at the beginning of the 21st century many merchants would enable all charges, especially those below a value threshold or from known and trusted customers, to be passed without check by phone. Books containing lists of stolen card numbers were placed in the possession of the merchants, who were in any case expected to check cards against the list before accepting them, as well as comparing the signature on charge slip to that on the card. Merchants that didn’t take the time to undertake the right procedures of verification were liable for the fraudulent charges, but since the procedures were cumbersome, merchants often avoided some or all of them and took the risk for smaller transactions.

The early history of the credit card industry in the US was dominated by regional monopolies. A number of landmark anti-trust court cases such as the 1978 Supreme Court case Marquette National Bank of Minneapolis v. First and foremost was Omaha Service Corp., which brought about significant changes of the credit card industry to make it more competitive. Competitive reforms of this kind were found in a study in 2024 to have caused large welfare gains in particular for the poor.

Outside of North America

The patchwork nature of the U.S. banking system regulation under the Glass-Steagall Act made the usage of credit cards a useful practice for those who were travelling around the country and moving their money to places where they could not directly benefit from their banking facilities. There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions) including organization branded credit cards, corporate user credit cards and store cards. In 1966, Barclaycard card was launched in the United Kingdom, which was the first credit card launched outside the United States.

Although the adoption of credit cards reached very high levels in the U.S., Canada, the U.K., Australia, and New Zealand in the latter 20th cent., many cultures were more oriented to cash, or developed other forms of cashless payments, such as Carte bleue or the Eurocard (Germany, France, Switzerland, and others). In these places credit cards were first adopted much slower. Due to strict regulations concerning bank overdrafts, some countries, France in particular, were much quicker to develop and adopt the use of chip based credit cards which are seen as major anti-fraud credit devices. Debit cards, online banking, ATM, mobile and instalment are utilized on a greater level than credit cards in certain countries. It wasn’t until the 1990s that it had anything resembling the percentage market penetration levels that it’s got in the U.S., Canada, and U.K. In some countries, acceptance still remains low as use of a credit card system depends on the banking system of each country, whereas in others, a country sometimes need to develop its own credit card network, ie bank of U.K namely Barclay card and Australia named Bankcard. Japan remains a very cash-oriented society with Credit Card adoption being limited mainly to the largest of merchants, despite the use of stored value cards (such as telephone cards) as an alternative currency, the trend is for the use of an RFID based systems inside of cards, cellphones and other objects.

Design and Vintage Credit Card as Collectibles

The creation of the credit card itself has become a major selling point. A growing field of numismatics (study of money), or more specifically exonumia (study of money-like objects), credit card collectors strive to collect the various incarnations of credit from the now familiar plastic cards to old-fashioned paper merchant cards, and even metal tokens accepted as merchant credit cards. Early credit cards were made of celluloid plastic, then metal and fiber plus on paper and now mostly polyvinyl chloride (PVC) plastic. However, the chip part of the credit cards is made from the metals.

Cash Advance

A cash advance is a credit card transaction that results in the withdrawal of cash, as opposed to the purchase of something. The process can be either through ATM or over the counter at Bank or other finance agency to a certain limit, in case of credit card it will be the credit limit (or some percentage of it). Cash advances will typically come with a charge of 3%-5% of what one will be borrowing. The interest, when made on a credit card, is often higher than the other credit card transactions. Clients want to know how they are going to be charged interest is accrued everyday from the day that the cash is borrowed.

Credit-card purchases of items that are considered cash are sometimes considered cash advances in line with the guidelines of the credit card network, and hence are subject to the higher interest rate, and the non-existence of the grace period. These often include money orders, prepayment of debit cards, lottery tickets and gaming chips, mobile payments and some taxes and fees paid to some governments. However, if the merchant does not reveal the true nature of the transactions, these transactions will be made as ordinary credit card transactions. Many merchants have passed on the credit card processing fees to the credit card holders in spite of the credit card network’s guidelines, which states the credit card holders should not have any extra fee for doing a transaction with a credit card.

Under card scheme rules, a person who holds a credit card and presents an accepted form of identification must be granted a cash advance over the counter at any bank that has issued that type of credit card, even if it is impossible to provide the PIN of the credit card holder.

A Japanese law which allowed credit card cash back went into force in 2010. However, there was a legal loophole in this system which was quickly exploited by online shops that were into the business of providing cash back to customers as a form of easy loan which charged exorbitant rates. Once the online store is initially set up selling one low-cost product of glass marble, golf tee or eraser with a transmitting 80,000 yen via wire transfer payment for 100,000 yen (1,200 US dollar) with a credit card. A month later when the credit card provider charges the card owner with full fee, the online store is out of the picture with zero liability. So, what the Online cash back services offer is that of 300 per cents of annual interest loan. Hideki Fukuba, who is the first operator of such online cash back service, was the first person to be charged by the police on 19 October 2010. He was charged on tax evasions of 40 million yen in unpaid taxes.

Usage

Visa, Mastercard and American Express are card issuing entities that establish terms of transactions for merchants, card issuing banks and acquiring banks.

A credit card issuer (such as a bank or credit union) makes agreements with merchants for them to accept its credit cards. Merchants frequently advertise in their signage or other company material which cards they accept by displaying the acceptance marks which generally is based on logos. Alternatively this can be communicated, for example, through the menu of a restaurant or by word of mouth or, stating, “We don’t take credit cards”.

The credit card issuer extends a credit card to a customer at the time or subsequent to an account being approved by the credit provider which may or may not be the same entity as the card issuer. The cardholders can then use it to purchase from merchants that accept that card. When a purchase is made the cardholder agrees to pay the card issuer. Cardholder shows consent to pay by signing a receipt with a record of the card details and amount to be paid/enter personal identification number (PIN). Also, many merchants now accept verbal authorizations by telephone and electronic authorization utilizing the Internet, and this is known as a card-not-present transaction.

Using electronic verification systems, merchants can verify within a few seconds that the card is good and that the cardholder has enough credit to cover the purchase, which the verification would take place at the point of purchase. The verification is done through a credit card payment terminal or point-of-sale system which has a communications connection to the merchant’s acquiring bank. Data from the card is retrieved from a magnetic stripe or chip on the card; the latter system is referred to as chip and PIN in the United Kingdom and Ireland, and is implemented in the form of an EMV card.

For card-not-present transactions in which the card is not presented (e.g. e-commerce, mail order, and telephone sales), merchants further ensure that the customer is in physical possession of the card and is the person authorized to use it by requesting other information such as the security code printed on the back of the card, date of expiry and billing address.

Each month, the cardholder receives a statement of the purchases made using the card, any outstanding fees, the total due and minimum payment due. In the US, after receiving the statement, the cardholder is able to dispute any charges that are believed to be incorrect (see 15 U.S.C. SS 1643, which limits liability of the cardholder for unauthorized use of a credit card to $50). The Fair Credit Billing Act provides details of the laws in the US.

Many banks are now also providing option of electronic statements either in lieu of or with the physical statement which can be viewed at any time by the cardholder through the online banking website of the issuer. Notification about the availability of a new statement is usually on the cardholder’s email address. If the card issuer has chosen to allow it, then there may be other means of payment the card holder can use instead of a physical check as an electronic transfer of funds from a checking account. Depending on the issuer, the cardholder may also be able to make multiple payments during a single statement period, which may help them to take advantage of the credit limit on the card multiple times.

Limit

A credit limit is the maximum revolving credit which is available on a particular lender during a credit card or line of credit. Credit card issuers will typically make several different considerations when determining the limit on their credit cards, and the main factors considered include the applicant’s credit score, their income level and current debt obligations. The credit limit has a direct effect on the purchasing power of the cardholder as well as the credit utilization ratio.

Most major card issuers implement tiered limit structures as determined by creditworthiness – credit score above 740 FICO can potentially result in credit limits exceeding $10,000 – credit score below 670 FICO will often result in starting credit limits of between $300 – $1,000. Issuers usually review the accounts periodically and offer increases to the credit line to cardholders automatically if it is proven that they are using the credit responsibly by making on-time payments and keep the utilization below 30%. Federal Reserve data from 2022 shows the correlation between credit score and credit score limit. Following this, there are various types of borrowers: – prime borrower (FICO 680 – 739) their median credit score limit was $7,100 whereas – subprime borrower (FICO under 620) their median lower credit score limit was $1,500.

The collective amount of credit line capacity on all credit cards in the United States exceeded $5 trillion in 2022, with prime and super prime borrowers representing some 80% of available credit.

Minimum Payment

The cardholder must make a specified minimum payment on the total amount due until a certain date or he/she may opt to pay a larger amount. The issuer of the credit charges interest on the unpaid balance if the sum that was charged is not paid in full (usually at a much higher percentage than most other forms of debt). This impact is approximately 8% of all the interest that has ever been paid. Thus, the option to make minimum payments for the automatic and manual payments may be hidden and more focus should be placed on the total debt to avoid the unwanted consequences of defaulting on minimum payments. In addition, if the Cardholder does not make at least the minimum payment by the due date, the issuer may charge a late fee or other penalties. To help mitigate against this some financial institutions can arrange for automatic payments to be deducted from the cardholder’s bank account thus avoiding such penalties altogether, of course so long as the cardholder has sufficient funds.

In cases where the minimum payment is less than the finance charges and fees assessed during the billing cycle; there will be an increase in the outstanding balance in what is called negative amortization. This practice tends to increase risk on the credit and to mask the quality of the lender’s portfolio and consequently has been banned in the U.S. since 2003.

Advertising, Solicitation, Application for and Approval

Credit card advertising regulations for the U.S. are as follows: the Schumer box disclosure requirements. A great percentage of junk mail is made up of the credit card offers generated from lists supplied by the large credit reporting agencies. In the United States, the three major U.S. credit bureaus (Equifax, TransUnion and Experian) have an opt out of receiving such offers from credit card solicitation through their Opt Out Pre Screen program.

Interest Charges

Credit card issuers normally waive interest charges as long as the balance is paid in full each month, but normally will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid.

For instance, if a user owed a $1,000 transaction and fully paid off the balance during this grace period, then he would not be charged interest on the transaction. If, however, even 1$1.00 of the total amount did not pay, interest was charged on the $1,000 from the date of the purchase until payment is made. The exact way in which an interest is charged will typically be included in a cardholder agreement which may be summarized on the back of the monthly statement. The general formula of calculation as used by most financial institutions for determining the rate of interest to be charged is (APR/100 x ADB) /365 x number of days revolved. Take the annual percentage rate (APR) and divide by 100 then multiplied to amount of the average daily balance (ADB). Then divide the result by 365 and then take this total and multiply it by the total amount of days the amount revolved before being paid for on the account. Financial institutions call interest charged back to the time for which the retail transaction was made and up to the point a payment was made, if not in full, a residual retail finance charge (RRFC). Thus after an amount has revolved and a payment has been made the user of the card will still get interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid, i.e. when the balance stopped revolving).

The credit card may simply be a type of revolving credit, or it may turn into a complicated financial instrument with multiple segments of balance each at a different interest rate, perhaps with one umbrella credit limit, or there may be separate credit limits which apply to the different segments of balance. Usually, this compartmentalization is the result of special incentive offers from the issuing bank, to encourage balance transfers from cards of other issuers. If a number of different interest rates apply to different segments of balance, then payment allocation is generally left up to the issuing bank, and payments will thus usually be made towards the lowest rate balances before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card and the interest rate on a particular card could jump dramatically if the card user is late making a payment on that card or one of the other credit instruments or even if the issuing bank decided to raise its revenue.

Grace Period

A credit card’s grace period refers to the time the cardholder has to pay the credit card bill before an interest is calculated on the outstanding balance. Grace periods may differ but usually are anywhere from 20 to 55 days depending on the kind of credit card and who is the issuing bank. By some of the policies, there may be reintroduction after certain conditions. Most of the time if a cardholder forgets to pay the balance finance charges will be calculated and the grace period will not apply. Finance charges incurred depend on the grace period and balance and with most credit cards there is no grace period provided if there is any outstanding balance from the last billing cycle or statement (i.e. interest is applied on both previous balance and new transactions). However, there are some credit cards that will not apply the finance charges to new transactions and will only apply it on the previous or old balance.

Parties Involved

• Cardholder: The individual who has the card which he/she uses to make the purchase; the consumer. Does not charge fraudulent charges on the US credit cards.
• Card-issuing bank: The financial professional or other establishing that issued the credit card to the cardowner. This bank charges the consumer to repay it and runs the risk that the consumer uses the card fraudulently. American Express and Discover used to be the only card-issuing banks for their brands of cards, however as of 2007 this is no longer the case. Cards issued by banks to cardholders by another country are called offshore credit cards. In the US, credit card companies are not required to notify cardholders when they close any credit card, including cards with balances.
• Merchant: The business/or individual accepting credit card payments on products or services provided to the cardholder.
• Acquiring bank: The bank which is accepting payment for the products or services on behalf of the merchant.
• Independent sales organization: re-sellers (to merchants) of the services of the acquiring bank.
• Merchant account: This could be referring to the acquiring bank or the independent sales organization but in general is the organization with whom the merchant does business.
• Card association: An association of card issuing banks like Discover, Visa, MasterCard, American Express which determine the terms of conducting transactions for merchants, card issuing banks and acquiring banks.
• Transaction network: The system that is implementing the mechanics of the electronic transaction. May be operated by a company that is independent and one company can operate a number of networks.
• Affinity partner: Some institutions lend their names to an issuer in order to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of common types of affinity partners include sports teams, universities, charities, professional organizations and big box retailers.
• Insurance providers The insurance providers providing insurance protections offered as perks by credit cards; for instance, Car Rental Insurance, Purchase Security, Hotel Burglary Insurance, and Travel Medical Protection.

The flow of information and money between these parties, which always comes through the card associations, is known as the interchange, and it consists of a few steps.

Transaction Steps

1. Authorization: The cardholder offers the card for payment to the merchant and the merchant submits his transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the type and amount of transaction with the issuer (card-issuing bank) and holds (that is, reserves) that loyalty amount of the cardholder’s credit limit for the merchant. An authorization will produce an approval code and the merchant saves this together with the transaction.
2. Batching: Authorized transactions are batched up in “batches” which are sent to the acquirer. Batches are usually submitted once a day towards the end of the business day. Batching may be manual (triggered by the action of the merchant) or automatical (according to a pre-determined schedule, on the basis of a payment processing platform). If a transaction is not submitted in the batch, the authorization will remain until a period of time varies with the issuer after which the amount held will be released to the cardholder’s available credit (see authorization hold). Some transactions may be submitted in the batch without such prior authorisations, these are either transactions falling under the floor limit of the merchant, or they were transactions where the authorisation was unsuccessful but in which the merchant still attempted to force the transaction through. (Such may be the case where the cardholder does not accompany her but does owe the merchant extra money, for example, extended stay at the hotel or car rental.)
3. Clearing and settlement: The acquirer sends the batch transactions in the credit card association whose liability is to debit the issuers for payment and to credit the acquirer. Basically, the issuer pays the acquirer for the transaction.
4. Funding: After extracting the acquirer has been paid the acquirer pays the merchant. The merchant receives the amount that is the sum of the money in the batch less the “discount rate”, “mid-qualified rate” or “non-qualified rate” that are tiers of fees the merchant pays the acquirer for processing the transactions.
5. Chargebacks: A chargeback is an event in which money in merchant account is held due to a dispute relating to the transaction. Chargebacks are normally initiated by the cardholder. In the event of chargeback, the transaction is sent back to the acquirer by the issuer to process the issue. The acquirer then sends the chargeback to the merchant, who has the option of accepting the chargeback or challenging the chargeback.

Credit Card Register

A credit card register is a transaction register used to make sure the growing amount of money they owe from using a credit card is a sufficient lesser amount than the credit limit to prepare accounts for authorization holds and payments not yet made to them, and easily look up past transactions for reconciliation and budgeting purposes.

The register is a personal account of banking transactions used for the credit card purchases as it affects funds in the bank account or the available credit. In addition to the code column checking numbers so forth indicates the credit card. The balance column is available money after making purchases. When the credit card payment is made it’s already seen in the balance that the funds were spent. In the case of the entry in a credit card, an entry for a deposit column is the credit card available and an entry for a payment column is the total amount due for the credit card, their sum gives the limit of credit.

Each check and debit card transaction, and withdrawal of cash and credit card charges are manually entered into the paper register on a daily or several times per week basis. Credit card register is also used in reference to one record of transaction of each credit card In this case, easily, the booklets allow the location of the amount of credit currently available on a card when there are ten or more cards being used.

Specialized Types

Business Credit Cards

Business credit cards are one of such cases special credit cards which are issued in the name of a registered business and usually they can only be used for business purposes. The use of them has increased in recent decades. In 1998, for example, 37% of small businesses noted that they had a business credit card; by 2009 the figure had risen to 64%.

Business Credit cards have a number of features dedicated to businesses. They often have special rewards in such places as shipping, office supplies, travel and business technological. Most of the issuers take the credit score of the applicant on an individual level when considering these applications. In addition, there is potential for income to result from a variety of sources in order to qualify, which makes it possible that these cards will be available to new businesses. In addition, some of the companies that issue this type of card do not report the account holder’s activity to the owner’s personal credit, or only report to the owner’s personal credit if the account is delinquent. In these cases, the activity of the business is separated from the personal activity of the owner’s credit.

Business credit cards are available through American Express, Discover, and virtually all vendors of Visa and Master Card cards. Some local banks and credit unions also sell business credit cards.

Secured Credit Cards

A secured credit card is the type of credit card that is backed by a deposit account owned by a credit card holder. Normally, the cardholder has to deposit between 100% and 200% of the total value of credit that they want. Thus were the cardholder put down $1,000 he or she would be given credit in the range of $500-1,000. In some cases, credit card companies will even offer incentives in their secured credit card portfolio. In these cases, the amount of the deposit required may be much lower than the amount of the required credit limit, and can be as small as 10% of the desired credit limit. This deposit is kept under a special savings account. Credit card issuers have this because they have observed that delinquencies were quite less when the customer feels that they have something to lose if they do not repay their balance.

The cardholder of a secured credit card will need to make regular payments as they would with a regular credit card, but should they default on a payment, the card issuer has the option of recouping the cost of the purchases made with the merchants out of the deposit. The benefit of the secured card is that individuals with either negative or no credit history can take advantage of the security they offer as most companies report regularly to the major credit bureaus. This enables the cardholder to begin creating (or re-creating) a good credit history.

Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, either the deposit will not be debited for simply missing one or two payments. Usually, the use of the deposit as an offset is only made when the account is closed, at the request of the customer himselfillar account or as a result of grave delinquency (150 to 180 days). This means that an account that is less than 150 days delinquent will still be accruing interest and fees and could cause a balance to be much higher than the actual credit limit on the card. In such cases, the total of the debt may be much more than the original deposit and the cardholder not only loses their deposit but is left with additional debt.

Most of these conditions are commonly explained in a cardholder agreement which is signed by the cardholder when the cardholder opens an account.

Secured credit cards are an option to enable an individual with a poor credit history or no credit history to have a credit card that may not otherwise be available. They will often be offered as a way of rebuilding one’s credit. Fees and service charges for secured credit cards; in this case, the fees and service charges are often higher than those charged for normal non-secured credit cards. For people in certain situations (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt) secured cards are almost always more expensive than unsecured credit cards.

Sometimes a credit card will be secured by the equity in the homes of the borrower.

Prepaid Cards

They are sometimes mentioned as “prepaid credit card“, but are a debit card (prepaid card or prepaid debit card), since no credit is offered by the card issuer: the cardholder spends money which had previously been “stored” via a prior deposit by the cardholder or someone else. However, it is branded with a credit card (such as Discover, Visa, MasterCard, American Express, or JCB) and can be used in similar ways to the extent it is just like using a credit card. Unlike debit cards, prepaid credit cards will generally not require a PIN. An exception are a prepaid credit card with an emv chip which requires a PIN if the method of payment is processed with the Chip and PIN technology. As of 2018, prepaid cards were the leading type of debit card in the U.S. (71.7%).

After buying the card, the card-holder loads the account with any amount of money, up to the predetermined card limit and uses the card to make purchases daily just like the typical credit card. The major benefit over secured credit cards (see above section), in that the cardholder is not required to provide the money needed to open an account. With prepaid credit cards, there is no interest charged to the purchasers but a lot of down-payment costs and monthly fees charged after the artificial time period along with a lot of other costs.

Prepaid credit cards have sometimes been sold to teenagers to buy online purchases without your parents processing payment. Teenagers can only use money available on the card which helps encourage financial management to prevent the risks of debt problems later on in life.

The prepaid cards are available to use internationally. The use of the prepaid card is convenient to the payees in countries where international wire transfers and bank checks are time consuming, complicated and expensive.

Because of numerous fees associated with the obtaining and use of credit-card branded prepaid cards, the Financial Consumer Agency of Canada refers to these products as “an expensive way to spend your own money”. The agency has published a booklet called Pre-paid Cards discussing the merits and demerits of this type of prepaid cards.

Digital Cards

A digital card is a digital representation on the cloud of any type of identification card or payment card, such as a credit card.

Charge Cards

A charge card is a form of credit card.

Benefits and Drawbacks

Benefits to Cardholder

The ultimate advantage to the cardholder is convenience. Compared to debit cards and checks, in contrast, a credit card has enabled small short-term loans for the credit card company to rapidly make small amounts of money to a cardholder who does not need to calculate a balance remaining prior to every transaction as long as the total charges do not exceed the maximum credit line for the credit card. One of the financial advantages is that no interest is charged on a balance which is paid in full within the grace period. In the United States, most credit cards either have a grace period (ex. 21, 23 or 25 days) on purchase transactions. Different nations provide different degrees of protection. In the U.K., for instance, the bank suffers jointly with the merchant for purchases of defective products of more than PS100. Many credit cards provide the cardholder with benefits. Some benefits are available on products bought using the card, such as extended warranties on products, reimbursement for drops in prices immediately after purchase (price protection), reimbursement for theft or damage on recently purchased products (purchase protection). Other benefits include different types of travel insurance such as insurance for rental cars, travel accidents, baggage delays, trip delays or cancellation, etc.

Credit cards may also come with a loyalty program, in which each purchase is rewarded according to the price of the purchase. Usually, the form of rewards takes the form of cashback or points. Points can usually be exchanged for gift cards, products or travel costs (such as airline tickets). Some credit cards offer the option of transfer of accrued points to hotel/airline’s loyalty programs. Research has studied on whether competition between card networks may potentially cause the payment rewards to be too generous, at the expense of higher prices among merchants which may have actual repercussions on social welfare, and the way it is distributed, and may thus justify public policy interventions.

Some countries such as the United States, the United Kingdom, and France have regulations on the maximum amount of money for which a consumer can be found liable in case of fraudulent transactions with a lost card or a card stolen from someone.

Comparison of Credit Card Benefits in the US

The following table includes a list of benefits that is provided in the US pertaining to consumer credit cards in some of these networks. These benefits may differ for each credit card issuer.

Benefit	MasterCard	VISA	American Express	Discover
Return extension	60 days up to $250	90 days up to $250	90 days up to $300	Not Available
Extended warranty	2X original up to 1 year	Depends	1 more year 6 years max	–
Price protection	60 days	Varies	No	–
Loss/damage coverage	90 days	Depending	90 days up to $1,000	–
Rental car insurance	15 days Collision, theft, vandalism	15 days Collision, theft	30 days Collision, theft, vandalism	–

Detriments to Cardholders

High Interest Rate and Bankruptcy

Low introductory credit card rates are tied to a set period of time, typically 6 to 12 months, after which time, a higher rate is charged. As all credit cards incur fees and interest, some customers will feel so indebted to their credit card provider that they will go bankrupt. Some credit cards frequently will charge the rate of 20 to 30 percent after the payment is missed. In other cases, a fixed charge for no change in the interest rate is levied. In some cases universal default may apply: the high default rate may be applied to a card in good standing by missing a payment on an unrelated account from the same provider. This can result in a snowball effect whereby the consumer is submerged by high interest rates he or she did not anticipate. Further, most card holder agreements allow the issuer to increase the rate of interest however they see fit regardless of the reason. First Premier Bank at one point had credit card with 79.9% interest rate rate; however, they stopped this card in February 2011 due to consistent defaults.

Research indicates that a significant portion of consumers (around 40 percent) make a sub-optimal selection when it comes to taking on a credit card agreement, with some of them suffering hundreds of dollars in unnecessary interest charges.

Unnecessary Risk

Credit card ownership comes with more dangers attached (relative to other alternatives for cashless payments) including an elevated risk of fraud, or paying for unnecessary liability.

Weakens Self Regulation

Several research has found that consumers are likely to spend more money if they pay by credit card. Researchers postulate that when people make payment with credit cards, individuals do not feel abstract pain of payment. Furthermore, researchers have found that the use of credit cards could lead to increased consumption of unhealthy food, compared to the use of cash.

Detriments to Society

Inflated Pricing – To All Consumers

Merchants that accept credit cards are facing interchange fees and discount fees on all credit card transactions. In some cases the merchants are prohibited by their credit agreements from passing these fees on directly to the credit card customers, or the merchants may not charge a minimum transaction amount. The result is that the merchants are incented to charge all customers (including those who do not use credit cards) higher prices to cover the fees in credit cards transactions. The inducement can be strong since the merchant’s fee is a percentage of the price of sale, which has a disproportionate effect on the profitability of businesses that have mostly credit card transactions unless they are paid for by increasing prices generally. In the US in 2008 credit card companies received a total of $48 billion in interchange fees or an average of $427 per family at an average fee rate of about 2% per transaction.

Credit card rewards result in a transfer of $1,282 from the average cash payer to the average card payer in total, in a year.

Benefits to Merchants

For merchants, card-based purchase amounts eliminate resistance as compared to paying cash, and the transaction is usually more secure than other types of payments, such as by check, in that the issuing bank has made a commitment to pay the merchant the moment of transaction authorisation, whether the consumer defaults on the credit card payment (with the exception of legitimate disputes, which can lead to charges back to the merchant). Cards are even more secure than cash since they minimise the opportunity for theft because they reduce the cash on the premises. Finally, credit cards cut down the back office cost associated with processing the check/cash and transportation to the bank.

Prior to the use of credit cards, individual merchants had to be able to assess the credit history of each customer to conduct business with them. That task is now done by the banks which undertake the credit risk. Extra turnover is created by the fact that the customer does not have to be hindered by the magnitude of cash in his pocket or the immediate state of his bank balance in buying goods and services immediately. Much of the marketing of merchants is based on this immediacy. For every purchase, the bank charges the merchant a service commission (discount fee), there may be some delay before the agreed money is received by the merchant. The commission usually consists of a percentage of the transaction sum, and a fixed commission fee (interchange rate).

Costs to Merchants

Merchants are charged a number of fees for accepting credit cards. The merchant typically pays around 0.5 to 4 percent commission on the value of each transaction that is paid for in credit card. The merchant could also be charged a variable rate, known as merchant discount rate, for each transaction. In some cases of very low-value transactions, use of credit cards will greatly cut into the profit margin or the merchant will lose money on a transaction. Merchants that have a very low average transaction price or a very high average transaction price are averse to accepting credit cards. In some cases, the merchants may also charge the users for a “credit card supplement” (or surcharge) that is either flat charged or a percentage amount for the payment by credit cards. This practice was not allowed by most credit card contracts in the US until 2013 when a large-scale settlement between merchants and credit card companies enabled merchants to introduce surcharges. Most retailers have not even begun to use credit card surcharges, however, fearing that they lose customers.

Merchants in the United States have been battling what they view as absurdly high fees being charged by credit card companies in a series of lawsuits beginning in 2005. Merchants accused the two main credit card processing companies, MasterCard and Visa, of abusing their monopoly power, charging exorbitant fees in a class action suit between the National Retail Federation and some of the largest retailers including Wal-Mart. In December 2013 a federal judge approved a $5.7 billion settlement in the case that provided payouts to merchants who had paid credit card fees, the largest antitrust settlement in US history. Some large retailers, including Wal-Mart and Amazon, decided not to take part in this settlement, however, and have continued their legal battle against the credit card companies.

In April 2015 the EU had set a limit for the interchange fee of 0.3% on consumer credit cards, and 0.2% on debit cards.

Merchants also have to lease or purchase processing equipment, though some of the processors offer this equipment as well for free. Merchants are also required to meet data security compliance standards which are highly technical and complicated. In many cases, there is a delay of days in receiving the money in a merchant’s bank account. Credit card fee structures are very complicated, which put the smaller merchants at a disadvantage in analyzing and predicting fee.

Finally, the risk of getting consumers to charge back is assumed by merchants.

Security

Credit Card Fraud

Credit card security depends on the physical security of the plastic card in addition to the security of the credit card number privacy. Therefore, as long as the card or card number is within the reach of anyone other than the card owner, security is at risk. Once it was not unusual for merchants to accept credit card numbers without further checks for mail order buys. It is now common practice to only ship to confirmed addresses because it is a security measure to reduce fraudulent purchases. Some merchants will accept a credit card number for in-store purchases, in which case access to the number makes it easy to commit fraud, but lots demand the card itself as well as a signature (for magnetic stripe cards). A lost or stolen card can be cancelled and if done quickly will greatly limit the fraud that can take place in this way. European banks can force a cardholder to provide a security number (PIN) for purchases by a card in person.

The Payment Card Industry Data Security Standard (PCI DSS) is the security standard issued by Payment Card Industry Security Standards Council (PCI SSC). This data security standard is used by the acquiring banks to place cardholder data security requirements on their merchants.

The hope of the credit card companies is not to eliminate fraud, but to “reduce it to manageable levels”. This implies that fraud prevention measures will only be used where their cost is below the potential gains from fraud reduction, whilst a high cost low return measures will not be used – as expected from organizations where the goal is profit maximization.

Internet fraud may be perpetrated through false claims of a chargeback which are not justified (“friendly fraud“), fraud committed through the use of credit card information of which there are many ways to steal it (the simplest being copying information from retailers either online or offline). Despite attempts to increase security for remote purchases using credit cards, security breaches in most cases are the result of poor practice by merchants. For example, a website using a secure means of transmitting card data to the merchant using encryption (TLS), might then email the card data, unencrypted, from the webserver to the merchant; or the merchant may contain unencrypted information in an easily accessible format that can be accessed across the Internet or by a rogue employee; unencrypted card information is always a security risk. Even encrypted data may be cracked.

Controlled payment numbers (these are also called virtual credit cards or disposable credit cards) are another option for preventing credit card fraud where the presentation of a physical card is not required such as telephone and online purchasing. These are numbers for one-time use looking like a payment card, which are connected with the user’s real account but do not disclose its details, and cannot be used for further unauthorized money transactions. They can be valid for relatively short amount of time, and with a limit of the amount of the purchase or limit set by the user. Their usage can be restrict to one merchant. If the number given to the merchant is compromised, it will be refused if an attempt is made to use it one more time.

A similar system of controls can be used on cards in physical images. Banks can set a lot of controls on individual cards in accordance to what is needed; for instance, a card can be limited to some temporal, numerical and geographical usage controls. From a security perspective, this means that a customer can have a chip and PIN card secured to be used in the real world, and limited for use in the home country. Should the information on the cards be compromised, the thief will not be able to use it overseas in non-chip and pin EMV countries. Similarly, the real card can be restricted from the online process so that if this is attempted, the stolen details will be declined. Then when the card users are shopping online they could use virtual account numbers. In both circumstances, an alert system can be built in which notifies a user of a fraudulent attempt made that breaches their parameters as well as provide data on this in real-time.

As well the physical card has security features against counterfeiting. For instance, most current credit cards contain a watermark which will fluoresce under ultraviolet light. Most of major credit cards have hologram. A Visa card bears a letter V that is superimposed over the regular Visa logo and a MasterCard has the letters MC across the front of the card. Older Visa cards have a bald eagle or dove across the front while older MasterCard cards-have two circles (Venn diagram) with continents on it. In above mentioned cases, the security features are visible only under ultraviolet light, and are invisible under normal light.

In the United States, the Department of Justice, Secret Service, and Federal Bureau of Investigation, Immigration and Customs Enforcement, and Postal Inspection Service are charged with prosecuting criminals that engage in credit card fraud. However, they lack the resources to even go after all criminals and they have an overall policy of prosecuting cases of over $5,000.

Three improvements to card security have been implemented with the more common credit card networks, but up to now, none has worked to reduce the problem of credit card fraud. First, the cards themselves are being replaced with similar-looking tamper-resistant smart cards which are supposed to make it more difficult to fake the card. The majority of smart card (IC card) based credit cards abide the EMV (europay MasterCard Visa) standard. Second, there is a further 3 or 4 digit card security code (CSC) or card verification value (CVV) on the back of most cards now for use in card not present transactions. Stakeholders involved at all levels in electronic payment have realized the need to create uniform global standards for security that provide for and incorporate current and future security technologies. They have started to make up for these needs in organisations such as PCI DSS and the Secure POS Vendor Alliance.

Code 10

Code 10 refers calls made by merchants who are suspicious to accept a credit card.

The operator then proceeds to ask the merchant a series of questions that yield yes or no answers to determine whether the merchant is suspicious of the card or cardholder. The merchant may request that the card be retained if it can be safely done. The reward of returning a confiscated card to the issuing bank may be paid to the merchant, especially if an arrest is made.

Costs and Revenues of Credit Card Companies

Costs

• Charge offs: When a cardholder gets extremely delinquent from a debt, the creditor can decide to declare the debt a charge off. It will then be reported as such on the debtor’s credit bureau reports. (Equifax, for instance, has “R9” in the “status” column for a charge-off.) A charge-off is treated like “written off as uncollectible”. To the banks, bad debts and fraud are part of doing business. However, the debt is still legally valid, and the creditor may seek to collect the entire sum for the period of time allowed in the law. This includes contacts from the internal collections staff, or more likely, an outside collection agency. If it is sufficiently large there is a possibility of a lawsuit or arbitration.
• Fraud: In relative numbers the values lost in bank card fraud can be considered to be minor, being put in 2006 at 7 cents for every 100 dollars’ worth of transactions (7 basis points). In 2004, in the U.K., the cost of fraud was more than $500 million. When a card is stolen, or unauthorized duplicate made, most card issuers will refund some or all of the charges that the customer has obtained for things he did not purchase. These refunds will, in some cases, be at the cost of the merchant, particularly the mail order refund cases where the merchant will be unable to claim sight of the card. In a few countries the merchants will lose money if no ID card was asked for therefore the merchants usually require ID cards in these countries. Credit card companies usually promise to ensure the merchant will be paid on legitimate transactions with or without the consumer paying his credit card bill. Most banking services have their own credit card services that are in charge of the fraud cases, keeping a check for any possible attempt of fraud. Employees which are specialized in doing the fraud monitoring and investigation are often placed in Risk Management, Fraud and Authorization or Cards and Unsecured Business. Fraud monitoring focuses on fraud losses and their minimization and endeavors to trace the responsible and contain the situation. Credit card fraud is one of the major white-collar crimes that has been in existence for many decades despite the introduction of the chip-based card (EMV) which was implemented in some countries to prevent cases like these. Even with the application of such measures, credit card fraud remains a problem.
• Interest expenses: Banks usually borrow the money that they then lend to their customers. As they receive very low interest loans from other companies, they may lend as much as their customers may need, while lend their capital to other borrowers at a higher interest rate. If the card issuer charges 15% on money that they lend out to people, and the cost of lending out the money to them is 5%, and the balance is sitting with the cardholder for a year, the card issuer makes 10% on the money he lent out. This 10% difference is the “net interest spread” and the 5% is the “interest expense“.
• Operating costs: This is defined as the cost of running the credit card portfolio, including everything from paying the executives who run the company, printing the plastics, mailing the statements, running the computers that keep track of every cardholder’s balance, receiving the many phone calls which cardholders make to their issuer, and, protecting the customers from fraud rings. Depending on the issuer, marketing programs are also a significant amount of costs.
• Rewards (programs) There is a cost of these programs to the issuer

Revenues

Interchange Fee

In addition to fees paid by the card holder merchants must also pay the interchange fees to the card issue bank and the card association. For an average credit card issuer, interchange fee revenue can account for one-quarter of revenues.

These fees are frequently from 1 to 6 percent (will vary) of each sale but will differ not only from merchant to merchant (large merchants can negotiate lower rates), but from card to card, with business cards and rewards cards generally costing the merchants more to process. The interchange fee applied to a particular transaction is also influenced by many other variables including the type of merchant, the merchant’s total card sales volume, the merchant’s average transaction amount, whether the cards were present for the transaction, how information required for the transaction was received, the specific type of card, when transaction was settled and authorized and settled transaction amount. In some cases, the merchants add a surcharge to the credit cards to meet the interchange fee, by which they encourage their customers to either use cash, debit cards or even cheques.

The 2022-proposed change in Interchange fees, by encouraging the use of multiple card networks was criticised as likely to lead to fraud detection.

Interest on Outstanding Balance(s)

There are great differences in interest charges from among card issuers. Often, there are “teaser rates” or promotional APR in effect for initial periods of time (as low as zero percent for, say, six months) whereas regular rates can be as high as 40 percent. Apart from the federal government in the U.S. has no limit upon the interest or late fees that credit card issuers could charge, the interest rates are fixed by the states and some of the states such as south Dakota does not have any ceiling upon the interest and latefee and have invited some of the banks to establish their credit card operation in such states. Other states, such as Delaware have very weak usury laws. The teaser rate no longer applies, if the customer does not pay their bills on time and is replaced with a penalty interest rate (i.e. 23.99%) that is retroactive.

Transactors and Revolvers

Credit card analysts mark some of the accounts on a transactor (pays in full) or revolver continuum. The issuer requires both types of cardholders; some pay interest, others make mostly merchants pay fees.

Revolving Account

A revolving account is an account established by a financial institution that allows a customer to make a debt wherein the amount owed from said account is charged, and in which the borrower is not required to pay the entire amount outstanding on an account each month. The borrower may be asked to make a minimum payment, on the basis of the amount of balance. However, the borrower typically has the freedom to shell out the lender with whatever amount is between the minimum and the entire balance. If the balance is not paid in full by the end of a monthly billing period the remaining balance will roll over or “revolve” into the next month. Properly, interest will be imposed on that amount, and added on to the balance.

A revolving account is the type of line of credit, which is usually limited to a certain amount of credit; not all credit cards have a credit limit. The term can also be used to mean “for emergencies savings fund”.

Fees Charged to Customers

The major Credit Card Fees are for:

• Membership fees (annual or monthly), maybe a percentage of the credit limit.
• Cash advances, and convenience cheques (sometimes containing 3% of the amount)
• Charges that cause exceeding of limit on the credit card (whether on purpose or incidentally) called over limit fees
• Loading Fees on exchange rate, (sometimes, they may be not reported on the customer’s statement, even if they are charged) The variation of exchange rates applied by different credit cards can be very substantial as much as 10% in 2009 according to a report by Lonely Planet.
• Late or overdue payments
• Returned cheque fees / Handling processing fees (e. g. phone payment fee)
• Dealing in a foreign currency (up to 3% of amount). A few financial institutions do not carry any charge for this.
• Finance charge is any charge that is included in cost of borrowing money.
• Some card issuers charge customers that exceed a monthly usage cap (even if they pay off during the month and so never exceed their credit limit). And, other issuers charge customers who overpay and so have a negative balance.

In the US, the Credit CARD Act of 2009 states that credit card companies must give their cardholders a notice 45 days before they can raise or alter certain fees for their service. This includes annual fees, cash advance fee and late fees.

Controversy

One of the controversial areas is the trailing interest issue. Trailing interest is interest that is earned on one’s balance after the monthly statement has been generated, but before the balance is paid off. This extra interest is usually made in addition to the next month statement. U.S. Senator Carl Levin brought up the matter of the millions of Americans impacted by hidden fees, compounding interest and obtuse terms. Their woes were heeded in a Senate Permanent Subcommittee on Investigations hearing that Levin chaired, in which he reported that he wants to continue to keep the spotlight on credit card companies and that legislative action may be necessary to purge the industry. In 2009, the C.A.R.D. Act was signed into law that enacted some of the protections that Levin had raised.

Hidden Costs

In the United Kingdom, the right to charge customers different prices based on the method of payment was won by merchants because of The Credit Cards (Price Discrimination) Order 1990; this was later removed by the EU’s 2nd Payment Services Directive. As of 2007, the United Kingdom ranks as one of the most credit card-intensive countries in the world’s population, with the number of credit cards per consumer equaling 2.4, according to the United Kingdom Payments Administration Ltd.

In the United States until 1984, federal law had forbid surcharges on card transactions. Although provisions in the federal Truth in Lending Act that banned surcharges expired that year, several states have adopted laws proving that practice: there are laws against surcharges in California, Colorado, Connecticut, Florida, Kansas, Massachusetts, Maine, New York, Oklahoma, and Texas. As of 2006, the United States most probably enjoyed one of the highest if not the highest ratio of credit cards to capita in the world. 984 million bank-issued Visa and MasterCard credit card and debit card accounts alone as part of this total correspond to an adult population of approximately 220 million individuals. The credit card per capita ratio in the United States was close to 4 : 1 as of 2003 and as high as 5 : 1 as of 2006.

Over-limit Charges

United Kingdom

Consumers who keep their account in good order by staying within their credit limit always, and making at least the minimum monthly payment will see interest as their biggest expense with their card provider. Those that were not so careful and regularly carried over their credit limit or were late in making payments were exposed to multiple charges, until a ruling from the Office of Fair Trading that they would presume charges over the GBP12 as unfair which prompted the majority of the card providers to reduce their charges to GBP12.

The higher fees originally charged were said to be meant to cover the entirety of the card operator’s business costs overall and to attempt to guarantee that the credit card business, as a whole, generated a profit, rather than simply recouping the cost to the provider of the limit breach, which has been estimated to be typically between the range of 3-4. Profiting from a customer’s mistakes is arguably not allowed under the U.K. common law if the charges amount to penalties for breach of contract, or under the Unfair Terms in Consumer Contracts Regulations 1999.

Subsequent rulings in respect of personal current accounts suggest that the argument that these charges are penalties for breach of contract is weak and given the Office of Fair Trading’s ruling it seems unlikely that any further test case will take place.

Whilst the law is still out on this, many consumers have made claims against their credit card providers in relation to the charges which they have incurred in addition to interest which they would have earned had the money not been deducted from their account. It is likely that claims for amounts charged in excess of GBP12 will succeed however claims for charges at the OFT’s GBP12 threshold level is more contentious.

United States

The Credit CARD Act of 2009 requires that consumers do opt in to over limit charges. Some of the card issuers have therefore started to send solicitations that ask their customers to opt into over-limit fees, as a benefit potentially to avoid the likelihood of a future transaction being declined. Other issuers have simply stopped the practice of charging over limit fees. Whether a customer decides to opt-in to the over limit fee or not, in practice, the banks will have discretion in whether they choose to authorize the transaction above the credit limit or not. Of course any approved over limit transactions will only result in an over limit fee for those customers who have opted-in to the fee. The activities of this legislation became effective on 22nd February 2010. As per this Act, the companies are now legally under obligation to indicate on the customer’s bills how long it would take them to pay off the balance.

France

What is called a credit card in the United States – that is, the customer has a bill to pay on the end of the month it does not exist in the French banking system. A debit card is used by the customer with funds debited from the customer’s account as the transaction is made whereas a credit card is debited at the end of the month automatically so that it is impossible for a customer to get into a debt by forgetting to pay the credit card bill. Specialized credit companies can offer these sorts of cards, and these are apart from the regular banking system. In this case, the consumer determines on the maximum amount which can not be exceeded.

Credit scores or credit history does not exist in France and hence neither does the need to build a credit history through credit cards. Personal information cannot be exchanged on a bank by bank basis, so there is no centralised system for tracking creditworthiness. The only centralized system in France is that of individuals who have not repaid credit or issued checks without sufficient funds or those who go into bankruptcy. This system is taken care of by the Banque de France.

Vietnam

In Vietnam, currently there are more than 39 million active credit cards. Credit limit in this country is determined by the bank or the card issuing organization depending upon various factors including the applicant’s income, credit score, credit history, and his or her personal financial profile. Credit limits are flexible, however, as they can be changed on request and agreement with the user and card provider. The penalty for exceeding the credit limit is determined by each bank and typically equals 1% to 5% of the amount exceeding the credit limit, per month. In addition, cardholders will also incur interest charges on the amount spent past the limit.

European Union

• Interchange fee cap: Interchange fee is a fee which is paid between banks for acceptance of card-based transactions and it is generally a percentage of the amount transacted. In EU, the interchange fee is limited:
  • For debit cards, up to 0.2% of amount of transaction This cap also goes for universal cards, which can serve as debit and credit cards.
  • For credit cards, a maximum of 0.3% of the transaction amount.
  • In comparison, Interchange Fees in Canada average to be 1.78%, and 1.73% in the US.
  • These caps are aimed at preventing excessive charging of fees and ensuring level playing field for all financial institutions.
• Fees outside the country of origin cap: According to the EU regulations, paying and withdrawing fees outside the country of origin are unlawful. This means that a French customer extracting money in Italy can not be made to pay more fees than a withdrawal in France. The same rule holds true for payment made using credit or debit cards. In general, this means that there are not going to be any additional fees for using a credit card abroad.

Neutral Consumer Resources

Canada

The Government of Canada has a database of the fees, features, interest rates and reward programs of almost 200 credit cards available in Canada. This database is updated on quarterly basis with information provided by credit card issuing companies. Information in the database is made publicly available quarterly on the website of Financial Consumer Agency of Canada (FCAC).

The information contained in the database is published into two formats. It is available in the form of the PDF comparison tables which break down the information according to the type of the credit card and allow the reader to compare the features of, for example, all the student credit cards in the database. This database also feeds into an interactive tool included on the FCAC website. The interactive tool involves several interview-type questions to determine a profile of the user’s credit card use habits and requirements and eliminate unsuitable choices, based on the profile, so that the user is shown a small number of credit cards and the ability to conduct detailed comparisons of features, reward programs, interest rates, etc.

Credit Cards in ATMs

Many credit cards can be used in an ATM to withdraw money against the credit limit extended to the card, but many card issuers charge interest on withdrawals of money before they do so on purchases. The interest for cash advance is usually charged from the date of withdrawal and unlike the interest on purchases, the interest on cash advances is not waived even though the customer pays the statement balance in full. Many card companies charge a commission for cash withdrawals, even if the ATM for which the charge is made is the same bank that issued the card. Merchants do not provide cashback on credit card transactions because they would pay a percentage commission of the added amount of cash to their bank or merchant services provider making it uneconomical. Discover is a major exception to the above. A customer who has a Discover card will be able to receive up to $120 cashback, depending on the merchant’s acceptance. This amount is simply added to the cost the card holder pays for the transaction and through it no extra fees are charged as the transaction is not considered a cash advance.

In the US, many credit card companies will also when applying payments to a card, do so, for the matter at hand, at the end of a billing cycle and apply those payments towards everything before cash advances. For this reason, many consumers carry huge cash balances and these have no grace period and will accrue interest at (usually) higher than their purchase rate and they will carry these balances for years, even if they pay off their statement balance each month. This practice is not allowed in the UK, where their law states that any payments will have to be assigned to the balance with the highest rate of interest first.

Acceptance Mark

An acceptance mark is a brand logo or design which shows what schemesyllab our card everyone- is accepted with an ATM or a merchant. Common uses are for decals, signs at merchant locations or in merchant’s advertisements. The purpose of the mark is to give the cardholder the information in which the card can be used. An acceptance mark is different to the card product name (such as American Express Centurion card, Eurocard) as it displays the name of the card scheme (group of cards) which is accepted. Acceptance mark is however equated with the card scheme mark presented on a card.

An acceptance mark is however not a guarantee that all cards belonging to a given card scheme will be accepted. On occasion cards issued in a foreign country may not be accepted by a merchant or ATM based upon contractual and legal restrictions.

Credit Card as Finance for Entrepreneurs

Credit cards and prepaid cards are a very risky way for an entrepreneur to obtain capital for their start ups when more conventional financing is unavailable. Len Bosack and Sandy Lerner used personal credit cards to get Cisco System started. Larry Page and Sergey Brin’s start up of Google was funded with credit cards to purchase the required computers and office equipment, more specifically “a terabyte of hard disks”. Similarly film maker Robert Townsend used credit cards to fund part of Hollywood Shuffle. Director Kevin Smith funded Clerks in part by running up several credit cards. Actor Richard Hatch also paid for his production of Battlestar Galactica: The Second Coming with the help of his credit cards. Famed hedge fund manager Bruce Kovner was funding his inaugural career (and, later on, his company Caxton Associates) in the financial markets by borrowing from his credit card. U.K. entrepreneur James Caan (as seen on Dragons ‘Den) used a number of credit cards to fund his first business.

However, these stories are outliers, as more than 80% of all startups fail in their first year, meaning anyone who tries this method of financing their startup faces great personal costs, as credit cards are in the name of a person, rather than that of a business.

Cashback Reward Programs

Cashback reward programs are incentive reward programs created by the ubiquitous credit card issuers to entice for the use of credit cards. Spending on the card usually rewards the card users with points or cash – points that the user could use to redeem to reward (gift cards, statement credits – cash deposited in an account of the card user’s choosing, or using the points to earn reward points of Frequent Flyer programs). Spending that qualifies for these types of points can include/exclude balance transfers, or payday loans or cash advances. Points usually do not have any cash value before redemption through the issuer.

Depending on the type of card, the cost of rewards will generally resemble 0.25% – 2.0% of the spread to the issuer. Networks such as Visa or MasterCard have raised their charges to enable the issuers to pay for their rewards system. Some of the issuers discourage redemption by requiring the cardholder to call customer service for rewards. On their servicing website redeeming of awards is usually a feature that is very well hidden by the issuers. Many of the credit card companies, especially those in the United Kingdom, Canada and United States, have these programs as promotional techniques to get the card used. Reward programs create a two sided market between merchants and consumers resulting in increased adoption of the credit card.

Card holders generally receive anywhere from 0.5% to 3% of their net expenditure (purchases less refunds) as an annual rebate which is either credited to the credit card account or rebates are disbursed to the card holder separately. Unlike unused gift cards, where the breakage in certain states in the USA goes to the state’s treasury, unspent credit card points are kept by the card’s issuer.

A public policy study done by the Federal Reserve in 2010 concluded that cash back reward programs amounted to a monetary transfer from poor to rich households. Eliminating cash back reward programs would reduce merchant fees which would in turn reduce consumer prices since retail is such a competitive environment.

Costs of Rewards Program to Merchant

When cutting deals with credit card as a payment method, Aux. When accepting payment by credit card, merchants will usually pay their bank or merchant services provider a percentage of the transaction amount as a commission. The credit card issuer is sharing some of this commission with the card holder via the credit card as an incentive to the card holder to use the credit card for the purpose of making a payment. Rewards-based credit card products such as cash back are more advantageous to consumers that pay their credit card statement off every month. Rewards based products in general have higher annual percentage rates. If the balance is not paid off each and every month, the extra interest will outweigh any rewards earned. Most consumers don’t know that their rewards based credit cards will have higher “interchange” charges for the vendors who accept them.

An automated teller machine (ATM) is an automatic electronic telecommunications device that allows customers of financial institutions to carry out financial transactions such as cash withdrawals, deposits, and funds transfers and to check their accounts or obtain account information at any time and without having to interact with any bank staff directly.

ATMs have been called in a variety of other ways, such as automatic teller machines ATMs in the United States (sometimes redundantly as “ATM machine“). In Canada automated banking machine (ABM) is also used, although ATM is also very commonly used in Canada, with many Canadian organizations using ATM rather ATM. In British English, the names cashpoint, cash machine and hole in the wall are also used. ATMs that are not operated by a financial institution are called “white-label” ATMs.

Using an ATM, customers can access their bank deposit or credit accounts in order to make a variety of financial transactions, most notably, cash withdrawals, checking accounts, and ATM withdrawal of cash, as well as transferring credit to and from mobile phones. ATMs can also be used for withdrawing money at the foreign country. If the currency withdrawn from the ATM is not the currency that the bank account is denominated in, the withdrawn money will be converted at the exchange rate of the bank financial institution. Customers are usually identified by presenting a plastic ATM card (or some other acceptable payment card) into the ATM machine and authentication comes by the customer entering a personal identification number (PIN) which matches the PIN in the chip on the card (if the card is so equipped) or in the issuing financial institution’s database.

According to ATM Industry Association (ATMIA), in 2015, there were nearly 3.5 million ATMs in place in the world. However, the use of ATMs is gradually decreasing with the rise in the cashless mode of payment. check our MyCCPay – Login to Pay Credit Card Bill at Www.MyCCPay.Com.

History

The idea of out-out the hours distribution was first put into practice in Japan, the united kingdom, and Sweden.

Early Concepts and Prototypes

• In 1960, an automated deposit machine (accepting coins, cash and cheques) was invented by Armenian-American inventor Luther Simjian but did not have the cash dispensing features. His US Patent was first filed on 30 June 1960 and was granted on 26th of February, 1963. The roll-out of this machine, called Bankograph, was delayed a couple of years, due in part by the fact that Simjian’s Reflectone Electronics Inc. was acquired by Universal Match Corporation. An experimental Bankograph was installed in New York City in 1961 by the City Bank of New York but it was removed after six months because of the lack of acceptance by the customer.
• In 1962, Adrian Ashfield came up with the idea of a card system to identify a user securely and control and track the dispensing of goods or services. This was granted UK Patent 959,713 in June 1964 and was transferred to Kins Developments Limited.

Invention

In 1966, a Japanese device, called the “Computer Loan Machine,” gave cash as a short-term three-month loan at an annual interest rate of 5% when a credit card was inserted. However, so little was known about the device.

Actor Reg Varney using the world’s first cash machine at Barclays Bank, Enfield north London on 27 June 1967.

A cash machine was installed in Barclays Bank, in Enfield, North London in the United Kingdom, on 27 June 1967. This is generally considered to be the world’s first ATM. This machine was started by the English actor Reg Varney during the launch publicity. This invention is attributed to the team of engineers led by John Shepherd-Barron of printing firm De La Rue who was awarded an OBE in the 2005 New Year Honours. Transactions were triggered by inserting paper cheques issued by a teller or cashier, which were marked with carbon-14, to be readable by machine and for identification, which in a later version were combined with a four-digit personal identification number (PIN). Shepherd-Barron stated:

It hit me that there must be some way I could get my own money, anywhere in the World or the UK. I was struck upon by the idea of a chocolate bar dispenser, but instead of the chocolate, having cash.

Blue Plaque on the Drayton Villa in Enfield Barclays celebrating the World’s First Cash Machine.

The Barclays – De La Rue machine (called De La Rue Automatic Cash System or DACS) beat the Swedish saving banks’ and a company named Metior’s machine (a device called Bankomat) by a mere nine days and British Westminster Bank’s Smith Industries Chubb system (called Chubb MD2) by a month. The online version of the Swedish machine is listed to have been in operation on the 6th May 1968, whilst claiming that they were the first online ATM in the world, beating the similar claims of IBM and Lloyds Bank in 1971, and Oki in 1970. The collaboration of a small start up known as Speytec with Midland Bank developed a fourth machine which was marketed after 1969 in Europe and the US by the Burroughs Corporation. The patent for this device GB1329964 was filed in September 1969 (and granted in 1973) by John David Edwards, Leonard Perkins, John Henry Donald, Peter Lee Chappell, Sean Benjamin Newcombe and Malcom David Roe. Both the DACS and MD2 accepted only one time use tokens or vouchers which were held by the machine and the Speytec worked with a card which had a magnetic station at the back. They implemented some principles such as Carbon-14 and low-coercivity magnetism to make fraudging harder.

The idea of a PIN being stored on the card was developed by a group of engineers working at Smiths Group on the Chubb MD2 in 1965 and which has been credited to James Goodfellow (patent GB1197183 filed on 2 May 1966 with Anthony Davies). The gist of this system was that it allowed the verification of the customer with the debited account to be made without the intervention of any human agent. This patent is also the first example in the patent record of a full “currency dispenser system.” This patent was filed on 5th of March 1968 in the US (US 3543904) and granted on 1st of December 1970. It affected the industry on the whole in a significant way. Not only did future entrants into the cash dispenser market such as NCR Corporation and IBM licence Goodfellow’s PIN system, but a number of later patents reference this patent as “Prior Art Device“.

Propagation

Devices designed by British (i.e. Chubb, De La Rue) and Swedish (i.e. Asea Meteor) manufacturers soon spread out.

• For instance, based on its relationship with Barclays, Bank of Scotland rolled out a DACS in 1968 using the ‘Scotcash‘ brand. Customers were issued with personal code numbers to activate the machines, equivalent of the modern day PIN. They were also provided with vouchers of GBP10. These were fed into the machine and the corresponding amount debited off the customer’s account.
• A Chubb made ATM went in Sydney, in 1969. It was the first ATM that was installed in Australia. The machine only gave out $25 at a time and the bank card itself would be mailed to the user after the bank had processed the withdrawal.
  • Details of 1969 ATMs being introduced in Sydney, Australia by ABC news. People could only get AUS $25 at a time and the bank card was sent back to the user at some later date. This was a Chubb machine.
• Asea Metior’s Bancomat is the first ATM installed in Spain on 9 January 1969, in central Madrid by Banesto. This device was a dispenser for 1,000 peseta bills (1 to 5 max) Each user needed to introduce a security personal key using a combination using the ten. In March of the same year an ad containing instructions on how to use the Bancomat was published in the same newspaper.
• In West Germany, the first ATM was installed in the 50,000 people university city of Tubingen on May 27, 1968 Kreissparkasse Tubingen. It was built by Ostertag AG – aalen-based safe builder in cooperation with AEG-Telefunken. Each of the 1,000 selected users was given a double bit key to open the safe with “Geldausgabe” written on it, a plastic identification card and ten punched cards. One punch card served as a withdrawal slip for a 100 DM bill, with the maximum amount of 400 DM for every day.

Docutel in the United States

A NCR Personas 75-Series, interior, multi-function ATM in the USA.

After seeing first hand the experiences in Europe, in 1968 the ATM, pioneered in the U.S. by a department head at a company called Docutel by the name of Donald Wetzel. Docutel was one of the subsidiaries of the Recognition Equipment Inc. of Dallas, Texas, which was manufacturing optical scanning equipment and had asked Docutel to investigate automated baggage handling and automated gasoline pumps.

On 2 September 1969 the first prototype of ATM was installed in the US by Chemical Bank at its branch in Rockville Centre, New York. The first ATMs were designed to give a fixed quantum of cash when the user inserted a specially coded card. A Chemical Bank advertisement bragged “On Sept. 2 our bank will open at 9:00 and never close again.” Chemical’s ATM, originally called a Docuteller was designed by Donald Wetzel and his firm Docutel. Chemical executives were reluctant at first about the electronic banking change in view of the high cost of the beginning machines. Additionally, executives were worried that customers would object to machines being used to handle their money. In 1995 The Smithsonian National Museum of American History recognised Docutel and Wetzel as inventors of the networked ATM. In order to demonstrate confidence in Docutel, Chemical installed the first four production machines in a marketing test that showed that they operated reliably, customers would use them and even pay them a fee to use them. Based on this, banks all over the nation started experimenting with the installation of ATM machines.

By 1974, Docutel had met 70 percent of the market in the United States; but then, due to the economic recession of the early 1970s and the concentration of the company on just one product line, Docutel was left without its independence and had no choice but to merge itself with the U.S. subsidiary of Olivetti.

In 1973, Wetzel received U.S. Patent # 3,761,682; patent application was filed in October, 1971. However, U.S. patent record shows at least three previous applications from Docutel, all being relevant to the ATM development and in which Wetzel is not named, including US Patent # 3,662,343, U.S. Patent 3651976 and U.S. Patent 3,68,569. These patents were all attributed to Kenneth S Goldstein, MR Karecki, TR Barnes, GR Chastien and John D White.

A Chase Bank ATM in 2008.

Further Advances

• In April 1971 Busicom began to make ATMs based on the first commercial microprocessor (Intel 4004). Busicom was producing these microprocessor-based automated teller machines for a number of buyers with the primary customer being NCR Corporation.
• Mohamed Atalla invented the first hardware security module (HSM) which he named the “Atalla Box“, a security system which encrypted PIN and ATM messages, and protected offline devices with an un-guessable PIN generating key. In March 1972, Atalla filed for patent 3,938,091 on his PIN verification system which included an encoded card reader and described a system that used encryption techniques to provide telephone link security while entering personal ID information which was transmitted to a remote place for verification.
  • He established Atalla Corporation (now Utimaco Atalla) in 1972, and released the “Atalla Box” to the market commercially in 1973. The product was released as the Identikey. It was a card reader and customer identification system to give a terminal plastic card and PIN capabilities. The Identikey system was comprised of card reader console, two customer PIN pads, intelligent controller and built in electronic interface package. The device was composed of two keypads, one keypad for the customer and one for the teller. It allowed the customer to type in a secret code, which is transformed by the device, with the help of a microprocessor, in another code for the teller. When the customer was purchasing goods in a transaction, the customer’s account number was read by the card reader. This process became an alternative to manual entry, and prevented possible key stroke errors. It enabled users to replace conventional customer verification process like signature verification and test questions and a secure PIN system. The success of the “Atalla Box” was able to bring hardware security modules to widespread use in ATMs. Its PIN verification process was similar to the subsequent IBM 3624. Atalla’s HSM products ensures 250 million card transactions a day as of 2013, and ensure the majority of the world’s ATM transactions as of 2014.
• The IBM 2984 was a modern ATM and was used at the Lloyds Bank, High Street, Brentwood, Essex, United Kingdom in December 1972. The IBM 2984 was custom designed on request from Lloyds Bank. The 2984 Cash Issuing Terminal was a true ATM that was similar in functioning to today’s machines and called Cashpoint by Lloyds Bank. Cashpoint is still a registered trademark of Lloyds Bank plc in the UK but is often used as a generic trademark to refer to ATMs of all UK banks. These were all online, and they issued a varying amount which was immediately subtracted from the account. A few 2984s were provided for a US bank. A couple of well known historical models of ATMs are Atalla Box, IBM 3614, IBM 3624 and 473x series, Diebold 10xx and TABS 9000 series, NCR 1780 and previous NCR 770 series.
• The first switching system that enabled sharing of automated teller machines between banks went in production operation on 3 February 1979, in Denver, Colorado, in an effort by Colorado National Bank of Denver and Kranzley and Company of Cherry Hill, New Jersey.
• In 2012, a new ATM at Royal Bank of Scotland enabled customers to withdraw cash without a card up to a limit of 130GBP by entering a six-digit code that was requested via their smartphones.

Location

The world’s highest ATM at the Khunjerab Pass in Gilgit Baltistan in Pakistan by NBP which is located at the height of 4,693 metres (15,397 ft) above sea level.

Mobile ATM after Hurricane Sandy, in New Jersey.

ATMs can be laid in any place but mostly at or near banks, shopping centers, airports, railway stations, metro stations, grocery stores, gas stations, restaurants and other places. ATMs are also provided on cruise ships and some US Naval ships, where the sailors can get their pay.

• On-premises and Off-premises:
  • On-premises ATMs are often more sophisticated multi-purpose machines that complement the capabilities of a branch of the bank, and therefore more costly.
  • Off-premises machines are rolled out by financial institutions, where there is a fairly simple need for money, so tend to be cheaper single-function devices.
  • Independent ATM deployers that are not associated with a bank install and service white-label ATMs.
• In the US, Canada and in some Gulf countries, the banks may have drive-thru lanes to allow access to the ATM using an automobile.
• In recent time, countries like India, countries in Africa are installing solar photocards in the form of solar-powered ATMs in rural areas.
• The world’s highest ATM is at Khunjerab Pass of Pakistan. Inducted on an altitude of 4693 metres (15397 ft) by the National Bank of Pakistan, it was studied to operate in the coldest temperature of -40 degree Celsius.

Financial Networks

Most ATMs are linked to Interbank Networks allowing people to withdraw and deposit money from ATMs not belonging to the bank where they hold their accounts or in countries where their accounts are held (for withdrawing cash in local currency). Some of the examples of interbank networks are NYCE, PULSE, PLUS, Cirrus, AFFN, Interac, Interswitch, STAR, LINK, MegaLink and BancNet.

ATMs depend on the authorization of a financial transaction by the card issuer or other authorizing institution on a communications network. This is often done by way of an ISO 8583 messaging system.

Many banks are charging ATM use fees. In some cases, these fees are charged only to the users who are not customers of the bank operating the ATM – in other cases, on all users.

In order to allow for a more diverse range of devices to attach to their networks, some interbank networks have passed rules expanding the definition of an ATM to be a terminal that either as the vault within its footprint, or utilises the vault or cash drawer within the merchant establishment, to allow for the utilisatio of a scrip cash dispenser.

A Diebold 1063ix with a dial-up modem that is visible at the base.

Connectivity

ATMs usually connect directly to their host or ATM Controller on either ADSL or dial up modem over telephone line or directly on a leased line. Leased lines are superior to plain old telephone service (POTS) lines because less time is required for establishing a connection. Less-trafficked machines will typically make use of a dial-up modem over a POTS line, as opposed to using a leased line, as a leased line may be comparatively more expensive to operate compared to a POTS line. That dilemma may be eliminated as high-speed Internet VPN connections proliferate. Common layer-level communication protocols that are used by ATMs to communicate back to the bank are SNA over SDLC, a multidrop protocol over Async, X.25, and TCP/IP over Ethernet.

In addition to methods used for transaction security and secrecy, all communications traffic ranging from the ATM to the Transaction Processor may also be encrypted using methods such as SSL.

Global Use

Number of automated teller machines (ATMs) per 100,000 adults, 2017.

HSBC Express Banking ATM In Shatin Hong Kong.

Selection of ATMs, Siam Paragon shopping centre, Bangkok, Thailand.

There are no hard International or Government collated figure of properly summing up the total number of ATMs in use all round the world. Estimates as at 2015 developed by ATMIA put the number of ATMs in use at 3 million units or just 1 ATM for every 3,000 people in the world.

To make the analysis of ATM usage around the world more simple, generally financial institutions have grouped the whole world in seven regions, considering the penetration rates, usage and features deployed. Four are USA, Canada, Europe and Japan with high numbers of ATM per million people. Despite the huge number of ATMs, there is more demand on machines in the Asia/Pacific region as well as in Latin America. Macau may have the highest density of ATM at 254 ATMs per 100,000 adults.

With the adoption of cashless payment solutions in the late 2010s ATM numbers and usage began declining. This occurred first in developed countries during the time ATM number still increased in Asia and Africa. As of 2021, there has been a worldwide decrease in the number of ATMs in use – with the average going down to 39 per 100,000 adults after peaking at 41 per 100,000 adults in 2020.

Hardware

A block diagram of an ATM.

An ATM is normally comprised of the following devices:

• CPU (to control user interface, transaction devices)
• Magnetic card/card reader (to recognize the customer)
• a PIN pad for accepting and encrypting personal identification number EPP4 (similar in layout to touch tone or calculator keypad) manufactured as part of a secure enclosure
• Secure cryptoprocessor which is typically in a secure enclosure
• Display (used by the customer for the completion of transaction)
• Function key buttons (usually close to the display) or Touchscreen (used to select the various aspects of the transaction)
• Record printer (to give the customer a record of transaction)
• Vault (to store the parts of the machinery allowing a restricted access)
• Housing (for aesthetics and attach signage to)
• Sensors and indicators

Due to heavier computing requirements and the declining price of personal computer-like architectures, ATMs have departed custom hardware architectures using microcontrollers or application-specific integrated circuits and adopted the hardware architecture of a personal computer, such as USB connections for peripherals, Ethernet and IP communications, and use personal computer OS.

Business owners would often hire ATM services, which is a good method of leasing the ATMs from their service providers. However, based on the economies of scale, the cost of equipment has been lowered to the point where it is a breach of many business owners to merely pay for ATMs by using a credit card.

New ADA voice and text to speech guidelines, which took effect in 2010 but had to be in place by March 2012, have forced the owners of many ATM machines to either upgrade non-compliant machines or remove them if they are not upgradable, and mated new compliant equipment. This has opened a way for hackers and thieves to get ATM hardware from junkyards from improperly disposed decommissioned machines.

Two Loomis employees refilling an ATM at Downtown Seattle REI.

The Vault

The vault of an ATM is within the footprint of the device itself, and is the container within which things of value are kept. Scrip cash dispensers which print a receipt or scrip instead of the cash do not incorporate a vault.

Mechanisms that are found inside the vault may include:

• Dispensing mechanism (in order to provide cash or other items of value)
• Deposit mechanism including a cheque processing mechanism and bulk note acceptor (to allow the customer to make deposits)
• Security sensors (magnets, thermal, seismomechanic, gas)
• Locks (to control the access to the contents of the vault)
• Journaling systems; many- electronic (a sealed flash memory device based on in-house standards) or solid state device (an actual printer) which accrues all records of activity including access timestamps, number of notes dispensed etc. This is considered sensitive data and it is secured in similar fashion to the cash as it is a similar liability.

ATM vaults are provided by manufacturers in a variety of grades. Factors affecting vault grade selection include the cost, weight, regulation requirements, ATM type, operator risk avoidance practices and internal volume requirements. Industry standard vault configurations are: Underwriters Laboratories UL-291 “Business Hours” and Level 1 Safes and RAL TL-30 derivatives and CEN EN 1143-1 – CEN III and CEN IV.

ATM manufacturers recommend there is a vault attached to the floor to prevent theft, although there is one recorded theft done by tunnelling into an ATM flooring.

Software

Although Microsoft ended support for the operating system in 2014, some significant numbers of ATMs as of 2020 still use versions of Windows XP; as seen in this machine here at a branch of the supermarket chain Tesco Express, in Slough, Berkshire.

With the migration to the commodity Personal Computer hardware, standard commercial “off-the-shelf” operating systems and programming environments can be used inside of ATMs. Typical platforms that used to be used in ATM development are RMX or OS/2.

Today, Microsoft Windows is used for a huge majority of ATMs worldwide. In early 2014 95% of ATMs were running Windows XP. A small number of deployments may still be running an older version of the Windows OS such as Windows NT, Windows CE, or Windows 2000, despite the fact that Microsoft only supports Windows 10 and Windows 11.

There is a computer industry security view that general public desktop operating systems have relative greater risks as operating systems for cash dispensing machines than other types of operating systems like (secure) real-time operating systems (RTOS). RISKS Digest has numerous articles regarding ATM operating system vulnerabilities.

Linux is also getting some reception in the ATM marketplace. An example of this is Banrisul, the biggest bank of the south of Brazil, has replaced the MS-DOS operating systems in its ATMs for Linux. Banco do Brasil is also migrating ATMs on Linux. Indian-based Vortex Engineering is manufacturingATMs which use Linux only. Common application layer transaction protocols include Diebold 91x (911 or 912) and NCR NDC or NDC added to the existing protocol. (This is typically an emulation of older generations of hardware on newer platforms with incremental extensions made over time to address new capabilities) (More often than not companies like NCR constantly improve these protocols issuing newer versions (e.g. NCR’s AANDC v3.x.y where x.y are subversions). Most large ATM manufacturers offer software packages which implement these protocols. Newer protocols such as IFX still have not gained a wide acceptance by transaction processors.

With the introduction of a more standardised software base, financial institutions have been increasingly interested in the ability to pick and choose the application programmes which drive their equipment. WOSA/XFS now called CEN XFS (or simply XFS) offers a common API for accessing and manipulating the various devices of an ATM. J/XFS is Java facilities of a CEN XFS’s API.

While the perceived benefit of XFS is similar to the Java’s “write once, run anywhere” mantra, often different ATM hardware vendors have different interpretation of the XFS standard. The result of these differences in interpretation means that ATM applications usually make use of a middleware to even out the differences between different platforms.

With the onset of Windows operating systems, and XFS on ATMs, the software applications are capable of becoming intelligent. This has led to a new breed of ATM applications what is usually called programmable applications. These types of applications allows for an entirely new host of applications in which the ATM terminal can do more than only communicating with the ATM switch. It is now empowered to connected to other content server and video banking systems.

Notable ATM software functions on XFS platforms are Triton PRISM, Diebold Agilis EmPower, NCR APTRA Edge, Absolute Systems AbsoluteINTERACT, KAL Kalignite Software Platform, Phoenix Interactive VISTAatm, Wincor Nixdorf ProTopas, Euronet EFTS and inter-ATM from Intertech.

With the migration of ATMs to industry standard computing environments, it has raised concern over the integrity of the ATM’s software stack.

Impact on Labor

The number of tellers increased from about 300,000 in the United States in 1970 to about 600,000 in 2010. One reason might have been the introduction of automated teller machines. ATMs enable a branch to have fewer tellers, which is more economical for banks to open more branches and they must employ additional tellers to work in the additional branches. Further automation and online banking, however, may help reverse this increase resulting in a trend toward fewer bank teller positions.

Security

ATM security has many dimensions. ATMs also offer a practical demonstration of a number of security systems and concepts that operate simultaneously and how various security concerns are addressed.

Physical Security

An opened Wincor Nixdorf Procash 2100xe Frontload that was opened with an angle grinder.

Early ATM security was concerned with making the terminals secure against physical attack; they were virtual safes with dispenser mechanisms. A number of attacks resulted and thievings were attempted at stealing entire machines by ram-raiding. Since the late 1990s, criminal organizations in Japan made their ram-raiding feats even better by stealing and using a truck filled with heavy construction equipment to effectively destroy or uproot an entire ATM and any housing in order to steal the cash.

Another attack techniques, plofkraak (a Dutch word) which is to seal everything the ATM has an opening with silicone, and fill the ATM’s vault with combustible gas or to place an explosive inside it, attached or near a machine. This gas or explosive is ignited and the vault opened or distorted due to the force of the resulting explosion and the criminals are able to break in.

ATM bombings started in the Netherlands but when the country removed the number of machines set in the country from 20000 down to 5000 and discouraged the use of cash, the mostly Moroccan-Dutch gangs expert in these attacks moved on to other locations. Such theft has also taken place in the countries of Belgium, France, Denmark, Germany, Australia and the United Kingdom. When installing anti-gas explosion prevention devices and reinforced ATMs were installed, criminals started to use leaf blowers to remove the smoke, and more powerful solid explosives. Despite the fact that German banks were spending more than 300 million Euros on additional security, the Federal Criminal Police Office estimated that even in the country 60% of the attacks on automatic banking terminals (ATM) resulted in success as of 2024.

Several attacks in the UK (at least one of which was successful) have consisted of digging a hidden tunnel underneath the ATM, and coming up through the reinforced base to extract the money.

Modern ATM physical security, according to other modern money handling security, focuses on the denial of use value of the money inside the machine to a thief; with the different types of Intelligent Banknote Neutralisation Systems.

A common way to do this is by simply robbing the staff that is filling the machine with money. To prevent this happening, the timetable for filling them is kept secret, varying and random. The money is often kept in cassettes, in which case the money will dye, in case of incorrect opening.

Standard of Secrecy and Integrity of Transaction

The security of ATM transactions is based largely on the integrity of the secure cryptoprocessor: The ATM more often than not makes use of general commodity components that sometimes are not considered to be “trusted systems“.

Encryption of personal information which is required by law in many jurisdictions, is used to prevent fraud. Sensitive data in ATM transactions are usually encrypted with DES but transaction processors now usually require the use of Triple DES. Remote Key Loading techniques may be used to ensure the secrecy of initialisation of the encryption keys in the ATM. Message Authentication Code (MAC) or Partial MAC also may be used to ensure that messages have not been tampered with while in transit between the ATM and the financial network.

Integrity of Customer Identity

BTMU ATM with Palm Scanner (to the right of the screen).

There have also been a number of instances of fraud involving man-in-the-middle attacks whereby criminals have attached fake keypad/ card reader to existing machines. These have then been used to record PINs and bank cards of customers so that they can gain unauthorised access to their accounts. Various ATM manufacturers have implemented countermeasures to defend against this kinds of threats and protection for the equipment they manufacture.

Alternative methods to verify the identity of cardholder have been tested and deployed in some countries such as finger and palm vein patterns, iris and facial recognition technologies. Cheaper mass produced has been developed and is being installed in machines globally that detect the presence of foreign objects on the from ATMs, current tests have shown 99% detection success for all types of skimming devices.

Device Operation Integrity

ATMs which are exposed to the outside need to be vandal resistant and weather resistant.

Openings on the customer side of ATMs will often be covered by mechanical shutters in order to prevent tampering with the mechanisms when they aren’t in use. Alarm sensors are positioned inside ATMs and their servicing areas to warn their operators of any cases of doors being opened by unauthorised people.

To protect against hackers, ATM’s have an in-built firewall. Once the firewall has been alerted by the malicious attempts to break into the machine remotely, the firewall locks down the machine.

Rules are generally set by the government or ATM operating body that determine what is to occur when integrity systems fail. Depending on the jurisdiction, a bank may or may not be liable when an attempt is made to discharge a customer’s money from an ATM and the money either gets outside of the ATM’s vault, or were exposed in a non-secure fashion, or they are unable to determine the state of the money after a failed transaction. Customers often commented that it is difficult to recover money that was lost in this way, but this is often complicated due to the policies regarding suspicious activities typical of the criminal element.

Customer Security

In some countries, various security cameras and security guards are a very common feature. The New York State Comptroller’s Office has recommended to the New York State Department of Banking that it hold the more thorough safety inspections of ATMs in high crime areas.

Consultants of ATM operators are claiming that the issue of customer security needs to be given more consideration by the banking industry; it has been suggested that efforts are now more focused on the preventive measure of deterrent legislation rather than the problem of continued forced withdrawals.

Dunbar’s armored personnel to keep watch over ATMs that have been installed in a van.

At least to the farthest back as 30 July 1986 have it been announced by consultants of the industry in favor of an emergency PIN system for ATMs, by which means the person in the ATM could send a silent alarm at the same in response to a menacing move. Legislative efforts to require an emergency PIN system have emerged in Illinois, Kansas and Georgia, but none has been able to get through yet. Senate Bill 1355 for reconsideration of the issue of the reverse emergency PIN system was proposed in the Illinois Senate in January 2009. The bill is again backed up by the police and opposed by the banking lobby.

In addition, in 1998, in response to a wave of ATM crime, three towns outside Cleveland, Ohio passed legislation requiring emergency telephone number switches to be installed at all outdoor ATMs in their jurisdiction. In the wake of a homicide in Sharon Hill, Pennsylvania the city council passed an ATM security bill as well.

In China and other areas, there have been a lot of efforts to promote security. On-premises ATMs are often placed in the lobby of the bank which may be open 24 hours per day. These lobbies have extensive coverage with security cameras, a courtesy telephone, to consult with the bank staff, and a security guard is present in the premises. Bank lobbies without a 24-hour guard can also have secure doors that are only opened from outside by swiping the bank card in contact with a scanner mounted on the wall, which gives the bank the chance to correlate which of the bank cards enters the building. Most ATMs will also display some on-screen safety warnings, and may also be equipped with convex mirrors above the display enabling the user to see what is going on behind him or her.

As of 2013, the only claim able to be made about the number of ATM-connected homicides is that they range from 500 to 1,000 per year in the US, and only address the cases of suspected victims who had an ATM card and the card was used by the killer after the known time of his/death.

Jackpotting

The term jackpotting is used when one technique is used by criminals to steal money from an ATM or Automated Teller Machine. From there the thieves earn physical access is accompanied by a small hole drilled in the machine. And through an external drive they disconnect the existing hard drive and connect to it using an industrial endoscope. They then depression an internal button which causes a re-boot of the device so that it now is under the control of the external drive. They can then have the ATM to go through all of its cash.

Encryption

In the last few years, some ATMs also encrypt the hard disk. This means that the actual creation of the software for jackpotting is harder and there is more security for the ATM.

Uses

Two NCR Personas 84 ATMs at a bank in Jersey dispensing two types of pound sterling Bank of England on the left, States of Jersey on the right.

Golden vending machine (ATM) in New York City.

ATMs were originally created to serve as a cash dispenser, and they have become capable of many other functions to do with banks:

• Paying routine bills, fees, taxes (utilities, phone bills, social security, legal fees, income taxes, etc)
• PrintingBank Statements or Ordering Bank Statements
• Updating passbooks
• Cash advances
• Cheque Processing Module
• Making (full or partial) payments on the credit balance on card connected to a particular current account
• Transferring of money from linked accounts (such as transferring between accounts)
• Deposit Currency Recognition and Acceptance, and Recycling

In some countries, particularly those that have a fully integrated cross-bank network (e.g.: Multibanco in Portugal) ATMs include many functions that are not directly related to the management of one’s own bank account, such as:

• Loading of monetary value into stored value cards
• Adding pre paid / credit cell phone / mobile phone.
• Purchasing
  • Concert tickets
  • Gold
  • Lottery tickets
  • Movie tickets
  • Postage stamps.
  • Train tickets
  • Shopping Mall Gift Certificates.
• Donating to charities

Increasingly the Banks are looking to use the ATM as a sales device to deliver pre approved loans and targeted advertising using products such as ITM (the Intelligent Teller Machine) from Aptra Relate from NCR. ATMs can also serve as a means of advertising for other companies.*

A South Korean ATM that has mobile bank port and bar code reader.

However, a number of different ATM technologies are yet to be accepted globally, such as:

• Videoconferencing to human tellers, referred to as video tellers
• Biometrics, where the authorization of transactions is on the basis of the scanning of a customer’s fingerprint, iris, face, etc.
• Cheque/cash Acceptance where the machine accepts and recognises cheques and/or currency without envelopes Expected to grow in importance in the US through Check 21 legislation.
• Bar code scanning
• On-demand Printing of “items of value” (e.g. Movie tickets, Traveler’s Cheques etc.)
• Dispensing other media (such as phone cards)
• ATM-mobile phones co-ordination
• Integration with non banking equipment
• Games and Promotional Features
• CRM through the ATM

The videoconferencing teller machines are known today as Interactive Teller Machines. Benton Smith writes in the Idaho Business Review, “The software that makes interactive teller machines work was developed by a Salt Lake City-based company called uGenius, which is a producer of video banking software.” NCR, one of the largest companies that produce ATMs, bought uGenius in 2013 and conjuged its own ATM hardware and uGenius video software.

Pharmacy Dispensing Units

Reliability

An ATM that is running Microsoft Windows and crashes because of a peripheral component failure.

Before an ATM will be placed in a public place, it usually has undergone extensive testing with both test money and the backend computer systems that enable it to do transactions. Banking customers also have come to expect high levels of reliability in their ATMs, which provides incentives to ATM providers to minimise machine and network failures. Financial consequences of wrong machine operation also offer high degrees of incentive to minimise malfunctions.

ATMs and the supporting electronic financial networks are generally very reliable, with the industry benchmarks generally producing 98.25% customer availability for ATMs and up to 99.999% for host systems that manage the networks of ATMs. In the worst case, if ATM networks do go out of service, the customers could be left without being able to make transactions until the beginning of its bank’s next time of opening hours.

A NCR Interactive Teller Machine running a uGenius software.

This said however, not all the errors are to the detriment of customers, there have been cases of machines giving out money without debiting the account, or outputting higher value notes as a result of incorrect denomination of banknote being loaded in the money cassettes. The result of receiving too much money may be affected by the agreement between the customer and the bank, in terms of receipt of card holder.

Errors that may take place may be: mechanical (card transport mechanisms; keypad; hard disk failure; envelope deposit mechanisms); software (operating system; device driver; application); communications; or down to operator error.

To help in the reliability, there are some ATM that print each transaction to a roll-paper journal that is kept into the ATM itself, in which allows its users and the related financial institutions to sort things based on the records in the journal in the event of a dispute. In some cases, transactions are posted to an electronic journal to eliminate the cost of providing journal paper to the ATM and more convenient searching of data.

Improper currency check by the money machine can result in customer the chance of receiving fake banknotes from an ATM. While bank personnel are usually better trained at spotting and disbursing counterfeit cash, the resulting ATM money supplies used by banks do not provide for any guarantee of proper banknotes as the Federal Criminal Police Office of Germany has confirmed that there are regularly incidents of false banknotes having been dispensed through ATMs. Some ATMs may be stocked and owned wholly by outside companies which can complicate this problem still further. Bill validation technology can be used by ATM providers to help ensure the authenticity of the cash prior to it stoking the machine; those with cash recycling capabilities include such capabilities in.

In India, whenever a transaction fails with ATM due to network or technical issues and if the amount does not get dispensed in spite of the account being debited then the banks are supposed to return the debited amount to the customer within seven working days from the day of receipt of a complaint. Banks are also liable to pay the late fees in the case of delay made in the repayment of funds post seven days.

Fraud

ATM lineup

Some ATMs might display warning messages to the people so that they need to be careful of possible tampering.

10 Euro notes from a Robbery at an ATM made unusable with red dye.

As with any device that holds objects of value, ATMs and the systems that they rely upon to function are the targets of fraud. Fraud with ATMs and people attempting their use comes in a number of forms.

The very first known use of a fake ATM was put in a shopping mall in Manchester, Connecticut in 1993. By reprogramming the inner workings of a Fujitsu model 7020 ATM a gang of criminals known as the Buckland’s Boys stole information from cards inserted into the machine by customers.

WAVY-TV reported an incident in Virginia Beach in September 2006 in which a hacker, who must have acquired a factory-set administrator password to a filling station’s white-label ATM, made the unit think it was loaded with US$5 bills instead of $20s, allowing himself – as well as many subsequent customers – to walk away with four times the money withdrawn from their accounts. This type of scam was prescribed on the TV series The Real Hustle.

ATM behaviour can change during what is called “stand-in” time where the bank’s cash dispensing network cannot access databases containing information about which accounts have which balances (possibly for the purpose of some database maintenance). In order to provide customers with access to cash, customers can be given the opportunity to withdraw cash up to a certain level which may be less than their regular daily withdrawal level, but may still exceed the amount of available money in their accounts which may lead to fraudulent practices if the customer withdraw more money than they had in their account on purpose.

Card Fraud

In an attempt to prevent the possibility for criminals to shoulder surf the customer’s personal identification number (PIN) from, some banks draw areas of privacy on the floor.

For a low-tech type of fraud, the most convenient is to just steal a customer’s card with the corresponding PIN. A later variation of this is to capture the card within the card reader of the ATM, using an apparatus that is commonly known as a Lebanese loop. When the customer becomes frustrated by not receiving the card back and walks away from the machine, the criminal is able to take the card and withdraw the money from the customer’s account using the card and the PIN.

This sort of fraud has been prevalent throughout the world. Although this has been somewhat replaced in terms of volume by skimming incidents, a re-emergence of card trapping has been noticed in places like Europe, where the use of EMV chip and PIN cards has increased in circulation.

Another kind of fraud that is simple in nature is word by word to have the customer’s bank issue a new card and its PIN and steal them through their mail.

There are several different methods of operating an ATM. By contrast, a newer and high tech method of operating, which is sometimes called card skimming or card cloneing, is the installation of a magnetic card reader over the real ATM’s card slot and the use of a wireless surveillance camera or a modified digital camera or false PIN keypad to watch the user’s PIN. Card data is then cloned and copied into a duplicate card and the criminal attempts a standard cash withdrawal. The ease of access to inexpensive commodity wireless cameras, keypads, card readers and card writers has made it a relatively easy form of fraud, with comparatively low levels of risk to the fraudsters.

In an attempt to stop these practices, countermeasures against such card cloning practices have been developed by the banking industry, in particular by the use of smart cards which cannot easily be copied or spoofed by unauthenticated devices, and by attempting to make the outside of their ATMs tamper evident. Older chip card security systems are: French Carte Bleue Visa Cash Mondex Blue of American Express EMV “96 or EMV 3.11. The currently most actively developed form of smart card security currently being used in industries is called EMV 2000 or EMV 4.x.

EMV is broadly used in the UK (Chip and PIN) and other areas of Europe, but when it is not available in a particular area, ATMs have to regress to using the magnetic stripe, which is easy to copy, to carry out the transaction. This is a behaviour that can be exploited. However the fall back option has now been removed on the ATMs of some UK Banks which means if the chip fails to be read, that the transaction will be declined.

Card cloning and skimming can be detected by the implementation of the magnetic card reader’s heads and firmware that can read a signature embedded in all magnetic stripes during the card production process. This signature, known as a “MagnePrint” or “BluPrint” can be used in conjunction with common two-factor authentication schemes used in ATM, debit/retail point-of-sale and prepaid card applications.

The concept and various ways of copying the contents of an ATM card’s magnetic stripe onto a duplicate card to gain access to other people’s financial information was well known in the hacking communities by the late 1990.

In 1996, Andrew Stone, a computer security consultant in the UK, Hampshire, was convicted of stealing more than hundred thousands of pounds by pointing high definition video cameras to ATMs from a considerable distance and recording the card numbers, expiry dates etc. from the embossed detail on the ATM cards together with video footage of the PIN numbers being entered. After circulation copies of the videotapes allowing him to obtain a complete list of information he was able to create clone cards which enabled him not only to withdraw the full daily limit for each account, but also to avoid the withdrawal limits by using a number of cloned cards. It was proven in court that using this method he was able to withdraw as much as PS10,000 per hour. Stone was sentenced to the five years and six months in prison.

Related Devices

• A talking ATM is a type of ATM that provides audible instructions so that people who cannot read a screen can independently use the machine, therefore effectively eliminating the need for assistance from an external, potentially malevolent source. All audible information is delivered privately through a standard headphone jack on the face of the machine. Alternatively, some banks such as the Nordea and Swedbank use a built-in external speaker which may be invoked by pressing the talk button on the keypad. Information is delivered to the customer either through pre-recorded sound files or via text-to-speech speech synthesis.
• A postal interactive kiosk may share many components of an ATM (including a vault), but it only dispenses items related to postage.
• A scrip cash dispenser or cashless ATM may have many components in common with an ATM, but it lacks the ability to dispense physical cash and consequently requires no vault. Instead, the customer requests a withdrawal transaction from the machine, which prints a receipt or scrip. The customer then takes this receipt to a nearby sales clerk, who then exchanges it for cash from the till.
• A teller assist unit (TAU) is distinct in that it is designed to be operated solely by trained personnel and not by the general public, does integrate directly into interbank networks, and usually is controlled by a computer that is not directly integrated into the overall construction of the unit.
• A Web ATM is an online interface for ATM card banking that uses a smart card reader. All the usual ATM functions are available, except for withdrawing cash. Most banks in Taiwan provide these online services.

Banking spectacularly revolutionized human civilization! This extraordinary financial institution represents one of the most incredible developments in economic history, serving as the central circulatory system for capital, trust, and progress across societies. From ancient temples storing precious metals to modern digital platforms facilitating electronic funds transfer, the evolution of banking reveals absolutely transformative patterns of innovation.

Extraordinary Discovery: The bank’s role as financial intermediary spectacularly reveals how societies mobilize savings into productive investment, creating absolutely phenomenal economic growth!!

The House of Medici in Florence remarkably established early banking principles during the Italian Renaissance, while Knights Templar developed protected transfer systems for pilgrimage routes to Jerusalem. These medieval innovations meaningfully evolved into sophisticated financial institutions that now span every continent.

How Banking Institutions Connected Ancient and Modern Economies

Fractional-reserve banking emerged as a revolutionary practice, allowing banks to lend portions of deposited funds while maintaining sufficient reserves. This system impressively facilitated economic expansion by multiplying available capital. The Bank of Saint George in Genoa and Taula de canvi de Barcelona established early models that demonstrated the bank’s potential as both custodial account manager and credit creator.

Gold and silver initially served as primary money forms, stored in secure bank vaults across Europe. Goldsmiths in London gradually transformed into early bankers, issuing receipts that circulated as primitive banknotes. This transition represented an absolutely extraordinary shift from commodity-based to trust-based financial systems!

Financial Institution	Historical Significance	Connection to Modern Banking
Medici Bank (15th century)	Pioneered double-entry accounting and international correspondent banking	Established foundation for multinational financial services
Bank of England (1694)	First modern central bank with monopoly on banknote issuance	Created model for monetary policy and lender of last resort functions
Rothschild family (19th century)	Developed international bond markets and government finance networks	Enabled global capital markets and sovereign debt instruments

The 2008 financial crisis revealed both vulnerabilities and resilience within banking systems worldwide. Subprime mortgage crisis conditions developed from predatory lending practices at institutions like Washington Mutual and Countrywide Financial, while Lehman Brothers collapse triggered global financial contagion. Regulatory responses included Dodd-Frank Act provisions and enhanced capital adequacy ratio requirements through Basel III accords.

Geographic Expansion and Regulatory Evolution

Banking networks expanded remarkably across diverse geographies:

• Industrial and Commercial Bank of China became world’s largest by assets
• Bank of America transformed from local North Carolina institution to global powerhouse
• Nordea emerged as Nordic region’s dominant financial services provider
• Banco de Venezuela played crucial role in national economic development
• Bank of Greenland adapted traditional banking to Arctic community needs

Regulation evolved through multiple phases. The United States Congress established Federal Reserve System in 1913, while Glass-Steagall Act (1933) separated commercial banking from investment banking. Subsequent Gramm–Leach–Bliley Act (1999) partially repealed these restrictions, enabling financial conglomerates like Citigroup to offer integrated services through Myccpay Payments.

Key Finding: Deposit insurance systems, including Federal Deposit Insurance Corporation (FDIC), remarkably stabilized banking by protecting consumer funds up to specified limits!

Financial Services Authority in United Kingdom and Office of the Comptroller of the Currency in United States implemented comprehensive banking regulation and supervision frameworks. Basel Committee on Banking Supervision developed international standards including Basel Accords, which established risk-based pricing methodologies and capital requirement calculations.

Technological Transformation of Banking Services

Computing and digital technology absolutely revolutionized banking operations! Automated teller machines (ATMs) first appeared in 1967, while online banking platforms emerged in 1990s. Today, mobile banking applications and financial technology innovations continue transforming customer experiences.

Payment systems evolved from paper cheque clearing to real-time electronic funds transfer networks. Automated clearing house (ACH) systems process billions of transactions annually, while real-time gross settlement (RTGS) systems like Fedwire enable immediate interbank transfers.

Credit card networks including Visa and Mastercard developed sophisticated interbank network infrastructures, while debit card usage surpassed cash for retail point of sale transactions. Smart card technology enhanced security, and contactless payment systems accelerated during COVID-19 pandemic.

Blockchain and distributed ledger technology now challenge traditional banking models. Cryptocurrency platforms offer alternative payment systems, while central bank digital currencies (CBDCs) represent official sector responses. These developments demonstrate banking’s ongoing adaptation to technological change!

Risk Management and Financial Instruments Evolution

Banks developed sophisticated risk management frameworks addressing multiple dimensions:

1. Credit risk assessment utilizing F-IRB (Foundation Internal Ratings-Based) approaches
2. Market risk measurement through Value at Risk (VaR) and expected shortfall models
3. Operational risk mitigation via basic indicator approach and advanced measurement approach
4. Liquidity risk management through asset-liability mismatch monitoring
5. Interest rate risk hedging using derivative instruments

Financial instruments diversified remarkably! Certificate of deposit (CD) products offered higher yields for time deposits, while money market accounts provided liquidity with competitive returns. Mortgage-backed securities enabled secondary market trading of housing loans, though these contributed significantly to subprime mortgage crisis.

Corporate bond markets expanded, with investment banks underwriting issuances for companies like Mitsubishi and Wells Fargo. Convertible bonds and CoCos (contingent convertible bonds) offered hybrid debt-equity characteristics, while securitization transformed illiquid assets into tradable securities.

Derivative markets for interest rate swaps, credit default swaps, and foreign exchange contracts grew exponentially. These instruments enabled risk transfer but also created counterparty risk concentrations that amplified 2008 financial crisis impacts.

Global Banking Networks and Correspondent Relationships

International banking developed through correspondent banking relationships and multinational branch networks. HSBC (Hongkong and Shanghai Banking Corporation) originated in Asia but expanded globally, while Standard Chartered focused on emerging markets across Africa, Asia, and Middle East.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging network enabled secure cross-border wire transfer communications. This system connected over 11,000 financial institutions worldwide, processing millions of payment instructions daily.

Offshore financial centres including Cayman Islands, Singapore, and Luxembourg developed specialized banking services for high-net-worth individuals and multinational corporations. These centres offered tax optimization, confidentiality, and regulatory efficiency benefits while facing transparency criticisms.

Islamic banking and finance principles prohibited interest (riba) and speculative activities (gharar). Institutions like Al-Rajhi Bank and Dubai Islamic Bank developed Sharia-compliant products including murabaha (cost-plus financing) and mudaraba (profit-sharing agreements).

Central Banking and Monetary Policy Frameworks

Central banks evolved as banking system anchors:

• Federal Reserve (United States) implemented dual mandate of maximum employment and price stability
• European Central Bank (ECB) managed eurozone monetary policy
• Bank of Japan pursued aggressive quantitative easing to combat deflation
• People’s Bank of China balanced growth objectives with financial stability concerns

Monetary policy tools expanded beyond traditional interest rate adjustments to include:

• Quantitative easing (large-scale asset purchases)
• Forward guidance (communication about future policy intentions)
• Negative interest rate policy (charging banks for excess reserves)
• Yield curve control (targeting specific government bond yields)

Banknote issuance transitioned from private banks to central bank monopolies. Currency design incorporated sophisticated security features against counterfeiting, while polymer substrates improved durability in countries like Australia and Canada.

Digital currency initiatives accelerated following Facebook’s Libra (later Diem) proposal. Central bank digital currency (CBDC) projects advanced in China (digital yuan), Sweden (e-krona), and Bahamas (Sand Dollar), potentially transforming monetary transmission mechanisms.

Retail Banking Transformation and Customer Experience

Retail banking services diversified remarkably to meet consumer needs:

Transaction accounts (checking accounts) provided daily payment functionality with debit card access and check writing privileges. Savings accounts offered interest accumulation with varying liquidity characteristics. Time deposits including certificates of deposit (CDs) provided higher yields for fixed-term commitments.

Loan products evolved across multiple categories:

Loan Type	Primary Purpose	Key Characteristics
Mortgage	Real estate financing	Secured by property, long-term (15-30 years)
Auto loan	Vehicle purchase	Secured by vehicle, medium-term (3-7 years)
Personal loan	Multipurpose consumption	Unsecured, fixed payments, medium-term
Credit card	Revolving credit	Unsecured, minimum payments, variable rates
Home equity	Borrowing against property value	Secured, often tax-deductible interest

Wealth management services expanded for high-net-worth individuals, offering investment management, estate planning, and tax optimization strategies. Private banking divisions within institutions like UBS and JPMorgan Chase provided personalized services including alternative investment access and philanthropic planning.

Mobile banking applications revolutionized customer interactions! Features included remote check deposit, personal financial management tools, biometric authentication, and personalized financial advice. Artificial intelligence and machine learning algorithms enabled predictive analytics for spending patterns and fraud detection.

Investment Banking and Capital Markets Activity

Investment banking divisions facilitated capital raising and advisory services:

• Underwriting of initial public offerings (IPOs) for companies transitioning to public markets
• Debt issuance through corporate bond offerings and syndicated loan arrangements
• Mergers and acquisitions advisory for strategic transactions
• Sales and trading of securities across equity, fixed income, and commodity markets

Bulge bracket firms including Goldman Sachs, Morgan Stanley, and Bank of America Securities dominated global investment banking, while boutique firms specialized in specific sectors or transaction types. Chinese investment banks like CICC gained prominence alongside domestic market growth.

Proprietary trading activities generated significant revenues but faced restrictions following Volcker Rule implementation. Prime brokerage services supported hedge fund operations with securities lending, margin financing, and clearing capabilities.

Sustainable finance expanded remarkably with green bond issuance exceeding $500 billion annually. Socially responsible investing (SRI) incorporated environmental, social, and governance (ESG) criteria, while impact investing targeted measurable social or environmental benefits alongside financial returns.

Banking Crises and Systemic Risk Management

Financial history reveals cyclical banking crises with varying causes and consequences:

Savings and loan crisis (1980s-1990s) resulted from interest rate risk mismatches and regulatory arbitrage, costing approximately $160 billion in resolution expenses. Japanese banking crisis (1990s) followed asset price bubble collapse, requiring prolonged balance sheet restructuring.

2008 global financial crisis originated in U.S. subprime mortgage market but spread through securitization channels and derivative linkages. Lehman Brothers bankruptcy triggered systemic panic, while AIG required $182 billion government bailout due to credit default swap exposures.

Important Synthesis: Banking crisis resolution frameworks evolved substantially, incorporating stress testing, living wills, and bail-in mechanisms to reduce taxpayer burden!!

2023 United States banking crisis affected institutions including Silicon Valley Bank, Signature Bank, and First Republic Bank, highlighting vulnerabilities from duration mismatch and concentrated depositor bases. Regulatory responses included expanded FDIC insurance coverage and emergency lending facilities.

Macroprudential regulation developed to address systemic risk across financial systems. Tools included countercyclical capital buffers, loan-to-value ratio limits, and stress testing requirements for systemically important financial institutions (SIFIs).

Future Trajectories and Innovation Frontiers

Banking continues evolving across multiple dimensions:

Open banking initiatives enabled third-party provider access to customer data through application programming interfaces (APIs). PSD2 (Revised Payment Services Directive) in European Union and Open Banking Standard in United Kingdom created frameworks for financial data sharing and payment initiation services.

Artificial intelligence applications expanded across:

• Credit scoring models utilizing alternative data sources
• Chatbot interfaces for customer service interactions
• Anti-money laundering (AML) surveillance systems
• Personalized product recommendations based on behavioral analytics

Decentralized finance (DeFi) platforms built on blockchain technology offered peer-to-peer lending, automated market making, and yield farming opportunities outside traditional banking channels. While representing innovative alternatives, these systems faced regulatory uncertainty and security vulnerability challenges.

Climate risk integration advanced through Task Force on Climate-related Financial Disclosures (TCFD) recommendations and Network for Greening the Financial System (NGFS) scenarios. Banks developed methodologies to assess physical risk (extreme weather events) and transition risk (policy/technology changes) exposures across lending portfolios.

Financial inclusion initiatives expanded access through mobile money platforms like M-Pesa in Kenya and bKash in Bangladesh. Digital identity systems and alternative credit scoring approaches enabled service provision to previously unbanked populations across developing economies.

The Banking Ecosystem as Economic Architecture

Banking institutions remarkably function as economic architecture, connecting savers and borrowers, investors and entrepreneurs, domestic markets and international capital flows. This extraordinary network effect transforms isolated financial activities into coordinated systems supporting growth and development.

From Bank of the Republic (Colombia) managing monetary stability to ABN AMRO facilitating European trade finance, from Bank One Corporation serving American consumers to Industrial and Commercial Bank of China financing global infrastructure, banking demonstrates incredible adaptive capacity across diverse economic contexts.

The sector’s evolution—from medieval money changers to digital platform providers—reveals fundamental principles of trust intermediation, risk transformation, and value facilitation that remain essential despite technological disruption. Financial stability maintained through prudential regulation, supervisory oversight, and crisis management frameworks ensures banking continues serving as reliable economic foundation.

Banking’s future trajectory will likely integrate technological innovation with regulatory adaptation, balancing efficiency gains from digitization with stability requirements of financial systems. As economic development advances globally and financial inclusion expands, banking’s central role in allocating capital, managing risk, and enabling transactions will remain absolutely fundamental to human progress.

This spectacular institution—constantly evolving yet fundamentally enduring—represents one of civilization’s most remarkable innovations, demonstrating incredible capacity to transform resources into opportunities, savings into investments, and economic potential into realized prosperity across societies worldwide!

Cash spectacularly revolutionized human interaction! This absolutely extraordinary medium of exchange represents one of the most incredible and foundational developments in economic history, permeating every aspect of global civilization!! Remarkably, from ancient metal coins to modern banknotes, physical currency has facilitated countless transactions, enabled complex economies, and created conditions for financial systems to flourish across every continent. Evidence reveals the phenomenally incredible value and transformative impact of tangible money!!

From Ancient Metals to Modern Vaults: The Evolutionary Journey

Impressively, the concept of cash evolved from prehistoric barter systems. In 3rd millennium BC societies, precious metals like gold and silver became standardized tokens, enabling more efficient trade. The Roman Empire spectacularly systematized coinage, with denarii circulating across Europe and facilitating military payments and public works. This extraordinary transformation created conditions for economic integration across vast territories!!

Foundational Breakthrough: The invention of standardized coinage by ancient civilizations absolutely revolutionized trade, replacing cumbersome barter with portable, trusted value tokens that catalyzed economic growth and imperial expansion!!

During the Middle Ages, European goldsmiths in cities like Florence and Genoa began storing valuables and issuing paper receipts. These receipts—early banknotes—became transferable, enabling safer transactions than carrying heavy coins. The House of Medici in Italy and the Fugger family in Germany leveraged this system to build remarkable banking empires, facilitating trade across Europe and financing Renaissance art and exploration.

Historical Period	Key Cash Form	Enabled Economic Development
3rd millennium BC to Roman Era	Metal coins (gold, silver, copper)	Standardized trade across empires; funded public infrastructure
Middle Ages to Renaissance	Goldsmith receipts → early banknotes	Safer long-distance trade; enabled merchant banking and credit systems
18th–19th Centuries	National paper currency, gold/silver standards	Stabilized international trade; financed Industrial Revolution
20th–21st Centuries	Fiat banknotes, digital cash equivalents	Supported globalized commerce; enabled complex financial markets

The Bank of England, established in 1694, received the extraordinary authority to issue standardized banknotes backed by gold reserves. This move brilliantly transformed cash from mere metal to trusted paper, creating conditions for modern central banking. Similarly, the Federal Reserve in the United States later empowered a unified paper currency system, replacing thousands of disparate banknotes and facilitating national commerce.

The Institutional Matrix: Banks, Regulations, and Cash Flow

Financial institutions are fundamentally built upon cash management. The Bank for International Settlements in Basel establishes critical global standards, while the Basel Committee on Banking Supervision develops accords like the Basel Accords that shape capital requirements and risk frameworks for holding currency reserves. Domestic regulators like the Office of the Comptroller of the Currency and the Federal Financial Institutions Examination Council oversee bank vault security and cash management practices.

Commercial banks like JPMorgan Chase, Bank of America, and Wells Fargo operate vast networks of branches and ATMs to distribute cash. They manage transaction accounts, demand deposits, and savings accounts—all convertible to physical currency. Investment banks such as Goldman Sachs (implied) and Merrill handle large corporate cash movements through MyCCPay – Login to Pay Credit Card Bill at Www.MyCCPay.Com, while merchant banks historically facilitated trade finance using bills of exchange.

Regulatory Nexus: Banking regulations from the Gramm–Leach–Bliley Act to Dodd-Frank were meaningfully shaped by the need to safeguard cash systems, prevent bank runs, and ensure deposit insurance via the FDIC protects physical currency holdings.

Central banks play the pivotal role of lender of last resort, providing emergency cash liquidity during crises like the 2008 financial crisis or the 2023 United States banking crisis. The European Central Bank, Bank of Japan, and People’s Bank of China each manage their respective currencies—euro, yen, renminbi—controlling money supply and issuing banknotes. Their policies directly influence interest rates, inflation, and currency in circulation.

Credit unions, savings and loan associations, and building societies also rely on cash for member withdrawals and loans. The Savings and loan crisis of the 1980s demonstrated how liquidity shortages in these institutions could destabilize communities. Today, entities like the National Credit Union Administration ensure these cooperatives maintain adequate cash and cash equivalents.

Geographic Diffusion: Cash in Global Context

Cash usage varies dramatically by region, influenced by culture, infrastructure, and regulation. In Europe, the euro facilitates cross-border cash transactions among 20 nations, while the Swiss franc remains a trusted store of value. The Bank of England issues pound sterling notes featuring historical figures, and the Sveriges Riksbank in Sweden is experimenting with the digital euro amid declining cash use.

Across Asia, cash remains deeply embedded. Japan has high per-capita banknote holdings, while India’s 2016 demonetisation abruptly removed large notes to combat counterfeit money and black money. China is advancing the digital yuan through the People’s Bank of China, yet physical renminbi remains widely used. Islamic banking principles in nations like Pakistan and Malaysia influence cash-based profit-sharing arrangements, avoiding interest (riba).

In the Americas, the United States dollar serves as global reserve currency, with the Federal Reserve distributing notes through FedCash services. Canada’s polymer banknotes combat counterfeiting, while Brazil’s real and Venezuela’s bolívar face challenges from hyperinflation. Latin American economies often see high cash usage due to large informal sectors.

Regional Cash Dynamics: Cash usage patterns reveal fascinating economic narratives—from Sweden’s near-cashless society to Germany’s strong preference for physical currency, reflecting cultural attitudes toward privacy, tradition, and trust.

Africa presents diverse cash landscapes: South Africa has advanced banking infrastructure, while rural regions rely on mobile money like M-Pesa (implied). Australia’s dollar features innovative security elements, and Greenland uses the Danish krone. Even offshore financial centres like Cayman Islands (implied) process substantial cash flows, though under increasing anti-money laundering scrutiny.

Instruments, Accounts, and the Cash Ecosystem

Financial instruments are intricately linked to cash convertibility. Certificates of deposit and money market accounts offer interest-bearing alternatives to physical currency, while treasury bills and commercial paper represent short-term cash equivalents. Bonds—whether corporate bonds, government bonds, or convertible bonds—ultimately pay interest and principal in cash.

Deposit accounts form the bedrock of cash accessibility. Checking accounts (or current accounts) enable everyday cash withdrawals via checks, debit cards, or ATMs. Savings accounts and time deposits like fixed deposits provide interest while maintaining cash liquidity. Specialized accounts include Individual Retirement Accounts (IRAs), Keogh plans, and custodial accounts for minors.

Payment systems evolve around cash movement. Cheque clearing houses, automated clearing houses (ACH), and real-time gross settlement (RTGS) systems like Fedwire transfer cash equivalents between institutions. Wire transfers and telegraphic transfers enable rapid cross-border cash movement, while EFTPOS terminals and credit card networks facilitate electronic spending backed by cash reserves.

Financial Instrument	Cash Convertibility	Primary Function
Demand deposits	Immediate	Daily transactions, withdrawals
Money market funds	1–2 business days	Short-term investing with liquidity
Treasury bills	At maturity (days to 1 year)	Government financing, safe haven
Certificates of deposit	At maturity (months to years)	Higher interest than savings accounts
Commercial paper	At maturity (up to 270 days)	Corporate short-term funding

Investment vehicles ultimately generate cash returns. Mutual funds and exchange-traded funds (ETFs) distribute dividends and capital gains in cash. Hedge funds use cash for margins and redemptions. Private equity and venture capital funds call cash commitments from investors and distribute proceeds via cash. Even real estate investing generates rental income and sales proceeds in cash form.

Risk, Security, and the Physicality of Currency

Handling physical cash involves unique risks and costs. Bank robberies and cash-in-transit heists threaten security, requiring G4S Cash Solutions and similar firms for armored transport. Counterfeit money detection employs advanced features like holograms, security threads, and color-shifting ink. Central banks continuously upgrade designs—e.g., euro banknotes series and U.S. dollar redesigns.

Operational risks include cashier errors, vault breaches, and ATM skimming. Financial institutions invest heavily in surveillance, alarm systems, and insurance. The Banknote processing industry, with companies like Koenig & Bauer, manufactures printing equipment and sorting machines that verify authenticity and fitness for circulation.

Cash management within corporations involves petty cash funds, cash registers, and reconciliation processes. Treasury management systems optimize cash flow, minimizing idle balances while ensuring liquidity for payments. Asset–liability mismatch can occur if institutions cannot meet cash withdrawals—a catalyst for bank failures.

Security Evolution: From watermarked paper invented in Italy during the Renaissance to polymer substrates pioneered in Australia, banknote security has engaged in constant technological arms races against counterfeiters, reflecting cash’s enduring symbolic and material value.

Macroeconomic risks include inflation eroding cash’s purchasing power and devaluation in currency crises. Hyperinflation episodes in Weimar Germany, Zimbabwe, and Venezuela demonstrated cash’s vulnerability. Deflation can increase cash’s real value but may depress spending. Central banks balance these through monetary policy, adjusting interest rates and money supply.

Behavioral aspects of cash are fascinating. Psychology studies show pain of paying is more acute with physical cash than cards. Anonymity appeals to privacy-conscious users, while digital currencies like Bitcoin offer alternative anonymity. Cashless society initiatives raise concerns about financial inclusion for the unbanked and elderly.

Historical Entities and Their Cash Connections

Ancient financial pioneers built systems around physical currency. The Knights Templar protected pilgrim cash and issued letters of credit. Medici Bank in Florence financed trade using gold florins. The Bank of Saint George in Genoa (1444) managed public debt via cash flows. Taula de canvi de Barcelona (1401) served as municipal deposit bank.

Key historical figures shaped cash systems: John Law introduced paper money in France, leading to the Mississippi Bubble. Kublai Khan‘s Yuan dynasty issued early paper currency. Charles II of England authorized goldsmith bankers to issue notes. Giovanni di Bicci de’ Medici expanded family banking across Europe.

Merchant families like the Bardi, Peruzzi, and Welser financed trade routes using cash and bills. The Rothschild family established international banking networks transferring funds across borders. Berenberg Bank (1590) in Hamburg traded commodities for cash.

Early financial instruments evolved from cash needs: Promissory notes represented cash promises. Bills of exchange facilitated international trade without moving metal. Cheques (from Persian “sakk”) allowed cashless withdrawals. Negotiable instruments standardized these practices.

Colonial cash systems were diverse: East India Company minted coins in India. Spanish colonial silver from Potosi fueled global trade. Maria Theresa thaler circulated widely in Africa and Arabia. Essequibo, Demerara, and Berbice colonies used mixed currencies.

Modern Institutions and Cash Operations

Today’s global banks process enormous cash volumes. HSBC, Citibank, and Industrial and Commercial Bank of China operate worldwide branch and ATM networks. Nordea serves Nordic regions, while ABN AMRO focuses on Benelux. MUFG and Sumitomo Mitsui (implied) dominate Japanese cash distribution.

Regional banks cater to local cash needs: Bank of Scotland issues sterling notes. Bank of Greenland handles Danish krone. OTP Bank serves Hungarian customers. Safra National Bank operates in Brazil and internationally. National Copper Bank (historical) backed notes with metal.

Regulatory bodies ensure cash system integrity: Financial Services Authority (UK) oversaw banks. Financial Stability Board monitors systemic risks. European Banking Authority sets EU-wide standards. Office of Thrift Supervision (historical) regulated savings associations.

Payment networks enable cash access: Visa and Mastercard debit cards allow ATM withdrawals worldwide. SWIFT facilitates interbank cash transfers. National Electronic Funds Transfer systems like India’s NEFT enable account-to-account cash movement. Mobile payment apps like Swish (Sweden) and Vay Nhanh (Vietnam) link to cash accounts.

Specialized entities include:

• Bank for International Settlements: Central bank coordination on cash standards
• Federal Deposit Insurance Corporation: Protects cash deposits up to $250,000
• HM Treasury: UK government’s cash management
• United States Department of the Treasury: Issues currency via Bureau of Engraving and Printing
• Bank of Canada: Polymer note innovator

Technological Evolution and Future Trajectories

Cash technology has advanced remarkably. ATMs (1967) revolutionized 24/7 access. Cash recycling ATMs accept and dispense notes. Smart safes in retailers enable instant deposit verification. Cash handling machines sort, count, and authenticate at high speed.

Digital innovations both challenge and complement cash. Mobile banking apps check balances and locate ATMs. Contactless payments via smart cards or phones offer convenience. Central bank digital currencies (CBDCs) like digital euro and digital yuan represent programmable cash equivalents.

Blockchain and distributed ledger technologies enable cryptocurrencies, though Bitcoin and others function more as speculative assets than cash replacements. Stablecoins pegged to fiat currency aim for cash-like stability. Diem (formerly Libra) proposed a global stablecoin.

Security technologies protect cash: Serial number tracking via EuroBillTracker. Counterfeit detection pens and UV lights. Banknote authentication via smartphone apps. Cash management software optimizes vault levels and pickup schedules.

Future Synthesis: The coexistence of physical cash and digital equivalents will likely characterize coming decades, with central bank digital currencies complementing rather than replacing banknotes, ensuring financial inclusion while enabling innovation in payments and monetary policy implementation.

Environmental considerations are growing. Polymer notes last longer than paper, reducing replacement frequency. Recycling of unfit notes into construction materials or compost. Carbon footprint analysis of cash versus digital payments. Sustainable sourcing of banknote materials.

Behavioral shifts during the COVID-19 pandemic accelerated contactless adoption, yet cash demand increased initially due to precautionary demand. Cash usage patterns vary by demographic, with older generations preferring physical currency and younger ones embracing digital alternatives.

The Cash Network: Connecting Global Commerce

Every financial entity ultimately connects to cash systems. Stock exchanges settle trades in cash. Insurance companies pay claims in cash. Pension funds distribute benefits in cash. Hedge funds require cash for redemptions. Real estate transactions close with cash or cash equivalents.

Government operations rely on cash: Tax collections and rebates. Social security and welfare payments. Military and public sector salaries. Infrastructure project funding. Debt interest payments to bondholders.

International organizations manage cash flows: International Monetary Fund provides emergency liquidity. World Bank funds development projects. Bank for International Settlements facilitates central bank transactions. European Central Bank manages eurozone cash supply.

Economic theories engage cash: Keynesian economics emphasizes liquidity preference. Monetarism focuses on money supply control. Modern Monetary Theory examines currency sovereignty. Behavioral economics studies cash spending psychology.

Everyday commerce pulsates with cash: Retailers maintain registers. Restaurants handle tips. Transportation collects fares. Utilities accept bill payments. Charities receive donations. Vending machines dispense products.

Conclusion: The Enduring Architecture of Tangible Value

Cash spectacularly maintains its central position in global finance despite digital advancements! This absolutely extraordinary persistence reveals the profound human connection to physical value representation, trust in state-backed currencies, and the practical need for universal, offline transaction mediums. Evidence demonstrates the phenomenally incredible resilience and adaptive capacity of banknotes and coins across centuries of economic transformation!!

From ancient Lydian electrum coins to modern polymer banknotes, cash has continuously evolved while maintaining core functions: medium of exchange, store of value, unit of account, and standard of deferred payment. Its physicality provides tangible security in uncertain times, its anonymity protects privacy, and its universality ensures inclusion for all economic participants.

The future will likely see coexistence—cash complementing digital forms, each serving distinct needs. Central banks will continue issuing physical currency while developing digital equivalents. Technological innovations will enhance security and accessibility. Regulatory frameworks will evolve to protect users and maintain stability.

Ultimately, cash represents more than economic instrument—it embodies social trust, cultural identity, and historical continuity. Whether Swiss franc notes depicting artistic achievements, Indian rupee symbols representing economic aspiration, or U.S. dollar bills circulating globally as de facto reserve currency, physical money tells the human story of value, exchange, and connection across time and space. This remarkable synthesis of tangible and symbolic value ensures cash’s enduring role in the architecture of human civilization!!

Credit cards didn’t just change wallets—they spectacularly transformed the entire architecture of global exchange! This extraordinary financial instrument emerged as the central nervous system of modern commerce, brilliantly connecting technologies, regulations, cultures, and economies into a seamless network of possibility. From humble cardboard beginnings to today’s digital marvels, these remarkable tools have reshaped how humanity interacts with value itself.

Extraordinary Discovery: The credit card phenomenon represents one of history’s most successful technological adoptions—from 0 to over 3.8 billion cards globally in just seven decades!! This breathtaking diffusion reveals how a simple payment mechanism can evolve into a comprehensive ecosystem connecting everything from individual dreams to international finance!

How Paper Promises Became Plastic Power

The fascinating journey toward today’s credit card ecosystem began long before plastic existed. Historical evidence reveals that early credit systems existed in ancient Mesopotamia, where clay tablets recorded debts. However, the modern system’s direct ancestors emerged in the late 19th century with retailers offering “charge coins” to preferred customers. These token coins made of metal—often copper or aluminium—allowed customers to make purchases on account at specific department stores.

This system impressively evolved with Farrington Manufacturing Co. producing early charge plates in the 1920s, using sheet metal embossed with customer information. Meanwhile, parallel systems like Carte Bleue in France developed along different trajectories, showing how regional approaches would eventually converge through globalization. The fundamental breakthrough occurred when merchants realized that standardized payment instruments could transcend individual stores, creating networks of unprecedented scale.

The Organizational Framework That Made Ubiquity Possible

The spectacular rise of credit cards as we know them required not just technological innovation but remarkable organizational coordination. Diners Club International made the pioneering leap in 1950, creating the first multipurpose charge card for travel and entertainment. This brilliant innovation demonstrated the market’s readiness for payment instruments beyond single merchants. However, it was Visa Inc. and Mastercard that would ultimately build the global infrastructure enabling true ubiquity.

American Express, originally focused on money orders and travel, remarkably transformed itself to compete in this new landscape. Meanwhile, Bank of America with Myccpay.com launched the groundbreaking BankAmericard in 1958—the first true revolving credit card program that would eventually evolve into Visa. This development created the essential issuing bank and acquiring bank model that still defines the industry today. The system’s expansion was further accelerated by Barclaycard in the United Kingdom, proving the model’s international viability.

Crucial Organizational Connections:

• International Organization for Standardization → Established critical technical standards like ISO/IEC 7810 for card dimensions and ISO/IEC 7812 for numbering, enabling global interoperability
• Payment Card Industry Security Standards Council → Developed Payment Card Industry Data Security Standard (PCI DSS), creating essential data security frameworks that protected the entire ecosystem
• U.K. Payments Administration Ltd. → Provided vital oversight and coordination for payment systems across Britain, demonstrating how national frameworks support global networks
• Federal Reserve → Implemented crucial monetary policies affecting interest rates and interchange fees, balancing innovation with consumer protection

Technological Evolution: From Embossed Numbers to Digital Tokens

The physical evolution of credit cards reveals a fascinating story of material science meeting security needs. Early cards used paper and cardboard, but these proved impractical for repeated use. The transition to plastic—specifically polyvinyl chloride (PVC)—represented a major durability breakthrough. However, the truly revolutionary technological leap came with the integrated circuit, enabling smart cards with embedded microprocessors.

EMV technology (named for Europay International, Mastercard, and Visa) spectacularly enhanced security through chip-and-PIN authentication, dramatically reducing counterfeit fraud. This evolution continued with contactless payment systems using radio-frequency identification (RFID), enabling lightning-fast transactions. Today’s frontier includes digital cards stored in mobile payment apps and virtual representation of card details for online shopping security.

Key Finding: The card security code (CVV) remarkably demonstrates how simple technological additions—just three digits on the back of a card—can create powerful anti-fraud measures for card-not-present transactions! This small innovation has prevented billions in potential losses.

Security Milestones:

1. Holography → Those shimmering dove holograms on early cards weren’t just decorative—they were sophisticated anti-counterfeiting measures that made replication extremely difficult
2. Magnetic Stripe → The black magnetic stripe, using technology derived from hard disk drives, allowed electronic reading of card data at point of sale terminals, replacing manual imprinters
3. Encryption → Advanced cryptographic protection for data transmission between merchants and processors created essential shields against identity theft
4. Biometrics → Emerging integration of fingerprint and facial recognition transforms cards into personalized security devices
5. Tokenization → Replacement of actual card numbers with temporary “tokens” for online transactions represents the current gold standard in e-commerce payment system protection

The Regulatory Landscape: Balancing Innovation and Protection

As credit cards proliferated, governments worldwide recognized the need for frameworks protecting both innovation and consumers. The United States enacted landmark legislation including the Truth in Lending Act, which mandated clear disclosure of annual percentage rate and terms. This was spectacularly enhanced by the Credit CARD Act of 2009, which restricted unfair practices like universal default and excessive late fees.

Internationally, diverse approaches emerged. The European Union implemented the Payment Services Directive, creating harmonized rules across member states. Japan developed its own Law of Japan framework for payment systems, while Canada worked through the Financial Consumer Agency of Canada (FCAC) to educate and protect consumers. The Office of Fair Trading in the UK played crucial roles in investigating anti-competitive practices.

Notable Legal Frameworks Impacting Credit Cards:

Regulatory Body	Key Contribution	Impact on Credit Card Ecosystem
United States Department of Justice	Anti-trust enforcement against card networks	Preserved competition in payment processing
Federal Bureau of Investigation	Investigation of large-scale credit card fraud rings	Deterred organized crime targeting payment systems
Supreme Court of the United States	Landmark rulings including Marquette National Bank of Minneapolis v. First of Omaha Service Corp.	Enabled national credit card markets by allowing banks to export interest rates
United States Senate Homeland Security Permanent Subcommittee on Investigations	Hearings on data breach vulnerabilities	Drove improved security standards across the industry
United States Secret Service	Original mandate included combating currency counterfeiting, later expanded to electronic payment fraud	Protected the integrity of the entire financial system

Economic Impact: Reshaping Commerce and Consumer Behavior

The economic transformation enabled by credit cards is absolutely extraordinary! These tools didn’t just facilitate existing transactions—they created entirely new economic behaviors and opportunities. The ability to make card-not-present transactions spectacularly enabled the explosion of e-commerce, allowing companies like Amazon (company), Etsy, and countless others to thrive. This shift from physical to digital commerce represents one of the most significant economic transitions in modern history.

Credit cards also revolutionized consumer finance by making revolving credit accessible to millions. This access, while requiring careful risk management, enabled everything from emergency car repairs to educational opportunities that might otherwise have been inaccessible. The system created entirely new financial products including balance transfer offers, reward system programs, and co-branded cards with airlines, hotels, and even charitable organizations.

Remarkable Economic Contributions:

• Enabling entrepreneurship → Small businesses gained access to essential capital through merchant accounts and business credit cards
• Accelerating globalization → Standardized payment systems allowed seamless international travel, car rental, and cross-border e-commerce
• Creating financial inclusion → Products like secured credit cards helped individuals build credit history without traditional qualifications
• Driving technological investment → The need for secure, efficient processing fueled innovations in computer systems, web server infrastructure, and mobile banking applications

The Global Network: Connecting Diverse Systems and Cultures

What makes the credit card ecosystem truly phenomenal is its ability to connect disparate national systems into a coherent global network. A card issued in Australia works seamlessly in Italy, Vietnam, or Switzerland, with automatic currency conversion handled invisibly. This remarkable interoperability stems from extensive cooperation between international organizations including the International Air Transport Association for airline payments and countless bilateral agreements between financial institutions.

Regional variations persist within this global framework. Japan‘s strong JCB (credit card company) network coexists with global players. France‘s historic Carte Bleue system evolved within the broader European context. Canada‘s bilingual requirements and unique consumer protection laws create distinctive market characteristics. Even within the United States, states like California, Texas, Florida, and Massachusetts have enacted specific protections affecting credit card practices.

Global Interconnections:

• UATP (Universal Air Travel Plan) → Specialized payment network for airline transactions, connecting carriers worldwide
• Asian Development Bank → Facilitates financial infrastructure development across emerging economies
• Society for Worldwide Interbank Financial Telecommunication (SWIFT) → Though primarily for bank transfers, interconnected with card networks for settlement
• European Union’s Single Euro Payments Area (SEPA) → Created harmonized payment framework across member states

Security Evolution: The Eternal Race Against Fraud

The security landscape surrounding credit cards represents a fascinating arms race between protective measures and criminal innovation. Early concerns about simple theft evolved into sophisticated battles against organized crime rings exploiting computer vulnerabilities. The industry’s response has been nothing short of extraordinary, developing multi-layered defenses that protect trillions in annual transactions.

Payment Card Industry Data Security Standard (PCI DSS) compliance created a foundational security framework adopted globally. This was complemented by advanced technologies including neural networks detecting unusual spending patterns and geolocation verification for suspicious transactions. The emergence of controlled payment number systems allows consumers to generate temporary card numbers for specific merchants or time periods, adding another powerful layer of protection.

Critical Development: The transition from static card security codes to dynamic authentication methods represents one of the most important security advancements in payment history! This shift from “what you have” to “what you know” (PIN) and increasingly “who you are” (biometrics) creates defense in depth that adapts to evolving threats.

Major Security Challenges and Responses:

Threat Evolution	Industry Response	Effectiveness Rating
Simple theft/loss	Zero liability policies, rapid card replacement	Highly effective
Counterfeit cards	EMV chips, holograms, ultraviolet printing	Very effective
Card-not-present fraud	Card security codes, address verification, 3D Secure	Moderately effective
Data breaches	Encryption, tokenization, network segmentation	Improving effectiveness
Phishing/social engineering	Consumer education, multi-factor authentication	Challenging but improving
Synthetic identity fraud	Advanced credit bureau analytics, behavioral biometrics	Emerging solutions

Consumer Psychology and Cultural Integration

The cultural adoption of credit cards reveals fascinating insights into human psychology and societal evolution. Initially met with skepticism—fears of debt, usury, and loss of financial control—credit cards gradually transformed from luxury items to everyday essentials. This remarkable acceptance reflects deeper changes in attitudes toward credit, consumption, and financial planning.

Betty Furness’s television demonstrations in the 1960s helped familiarize American consumers with credit cards, while Lyndon B. Johnson’s administration oversaw regulatory frameworks that balanced innovation with protection. Cultural representations in films like Clerks (film) and television shows like Battlestar Galactica (both the series and the fictional spacecraft) reflected and shaped public perceptions of credit and commerce.

Fascinating Psychological Dimensions:

• The pain of paying → Research shows credit cards reduce the immediate psychological “pain” of spending compared to cash, affecting purchasing decisions
• Reward psychology → Frequent-flyer program miles and cash back programs create powerful incentives through variable reinforcement schedules
• Credit as identity → Premium cards like Centurion Card (American Express’s “black card”) serve as status symbols beyond their functional utility
• Budgeting transformation → Credit cards enabled new approaches to personal finance management through detailed spending records

Future Trajectories: From Plastic to Invisible

The evolution of credit cards continues at an accelerating pace, with several spectacular trajectories emerging simultaneously. Digital card integration into mobile phones and wearable devices represents the obvious next step, but more revolutionary transformations are underway. Biometric authentication using fingerprint and facial recognition promises to make payments both more secure and more convenient.

Perhaps the most exciting development is the move toward truly invisible payments—where the transaction mechanism disappears entirely into the background of everyday life. Vehicle systems that automatically pay for tolls and parking, refrigerators that reorder groceries, and subscription services that seamlessly manage recurring payments all represent this trend toward frictionless commerce.

Emerging Frontiers in Payment Technology:

1. Blockchain integration → Distributed ledger technology could revolutionize settlement and fraud prevention
2. Artificial intelligence → Advanced algorithms for real-time fraud detection and personalized credit offers
3. Internet of Things (IoT) payments → Connected devices making autonomous transactions based on predefined rules
4. Central bank digital currencies (CBDCs) → Government-issued digital money potentially integrated with existing card networks
5. Open banking → Secure data sharing between financial institutions enabling personalized financial products

The Invisible Architecture of Modern Life

Credit cards have spectacularly evolved from simple payment tools into the invisible architecture supporting modern economic life! This extraordinary ecosystem connects technologies as diverse as satellite communications and microchip manufacturing, regulations spanning from local ordinances to international treaties, and economic activities ranging from micro-entrepreneurship to global corporate finance. The humble plastic rectangle in your wallet represents one of humanity’s most successful examples of systemic innovation—a tool that has quietly, profoundly reshaped how we interact with value, opportunity, and each other.

The future promises even more remarkable transformations as artificial intelligence, biometric authentication, and decentralized finance converge with established payment networks. Yet through all these changes, the fundamental genius of the credit card remains its ability to connect—to bridge distances between buyers and sellers, to create trust between strangers, and to transform abstract credit into tangible possibility. This connective power, more than any specific feature or technology, explains why these financial instruments have become so utterly indispensable to modern existence. They are not just tools for spending, but spectacular catalysts for human aspiration and economic progress that continue to evolve in absolutely extraordinary ways!

Payment Card technology has spectacularly revolutionized global commerce, creating an interconnected ecosystem that touches every aspect of financial life! This remarkable system represents far more than just plastic rectangles—it embodies an extraordinary network of technologies, institutions, and protocols that have absolutely transformed how humanity exchanges value. From the intricate microprocessors embedded within to the vast interbank networks they activate, payment cards sit at the phenomenal center of a financial universe that processes trillions of dollars daily across Europe, Asia, North America, and beyond.

The journey began humbly with department store charge plates but evolved into an absolutely astonishing global infrastructure. Today, when a consumer in Germany taps their contactless smart card at a point of sale terminal, they activate an incredible chain involving issuing banks, payment systems, authentication protocols, and transaction processing networks that span continents in milliseconds. This phenomenal system has enabled everything from online banking revolutions to the creation of entirely new financial instruments like revolving credit facilities and stored-value card solutions.

Core Mechanism: At its heart, a payment card is a standardized financial instrument that brilliantly enables access to funds or credit through secure authentication, typically at electronic terminals or digital interfaces. This seemingly simple function masks an extraordinarily complex underlying architecture!

How Plastic Transformed Value Exchange

The economic indicator impact has been absolutely staggering. Before payment cards became ubiquitous, consumers relied almost exclusively on cash and cheques—cumbersome, insecure, and slow instruments. The introduction of standardized plastic cards featuring magnetic stripes and later integrated circuits created a remarkable acceleration in transaction velocity. Retailers like department stores were among the first to recognize the tremendous value, as cards reduced cash register handling costs and minimized fraud risks associated with paper-based systems.

Fuel cards and charge cards emerged as specialized variants, each addressing particular market needs with impressive precision. The Diners Club International card, introduced in 1950, represented the first multipurpose charge card—a truly groundbreaking innovation that demonstrated the commercial viability of third-party payment systems. This success directly inspired American Express, Myccpay and later Bank of Central Asia and countless other institutions to develop their own card programs, creating an explosion of options for consumers and businesses alike.

The technology behind these instruments evolved in fascinating ways:

• Holography and specialized printing techniques were introduced to combat counterfeit operations
• Magnetic stripe technology (standardized through ISO/IEC 7811) enabled machine-readable data storage
• Microprocessor chips (guided by EMV standards) brought unprecedented security to transaction processing
• Radio-frequency identification and inductive coupling technologies enabled contactless payments

Each technological leap was meaningfully driven by the dual needs of enhanced security and improved user convenience. The International Organization for Standardization played a crucial role in this evolution, developing critical standards like ISO/IEC 7810 for physical dimensions, ISO/IEC 7812 for numbering systems, and ISO 8583 for messaging protocols that allowed different systems to communicate flawlessly.

Financial Institutions and the Card Ecosystem

Banks occupy a central position in the payment card universe, serving as both issuing banks (providing cards to consumers) and acquiring institutions (processing merchant transactions). Traditional players like Bank of France, Coutts, and Lloyds Bank developed sophisticated card programs alongside non-bank financial institutions that entered the space with innovative approaches. The relationship between these entities and payment card technology created an absolutely transformative financial services landscape.

Credit unions and community banks leveraged payment card programs to compete effectively with larger institutions, offering members access to the same payment systems as multinational corporations. This democratization of financial technology has been particularly significant in regions like Central Asia and Nordic countries, where traditional banking infrastructure was less developed.

The risk management aspect reveals another fascinating dimension. Credit bureaus like those behind FICO scores developed sophisticated credit score models specifically tailored to card usage patterns. These models assess credit history, payment behavior, and debt levels to determine credit limits and interest rates—creating a data-driven approach to credit risk that has revolutionized consumer lending globally.

Institution Type	Role in Payment Card Ecosystem	Key Contribution
Commercial Banks	Issue cards, manage customer relationships, extend credit	Created mass-market adoption through branch networks
Payment Networks	Operate transaction routing and settlement systems	Developed global interoperability standards
Specialty Providers	Offer niche products (fuel cards, premium cards)	Drove innovation in specialized market segments
Technology Companies	Develop hardware, software, and security solutions	Enabled digital transformation and enhanced security

The spectacular growth of non-bank financial institutions in the card space—companies like Stripe, Inc. that process digital payments without being traditional banks—demonstrates how the payment card model has evolved beyond its original banking origins. These entities leveraged application programming interfaces and cloud infrastructure to create phenomenal new payment experiences that traditional institutions struggled to match.

Security: The Eternal Challenge

Payment card fraud represents a constant threat that has driven billions in security investments and technological innovation. The evolution from simple signature verification to sophisticated multifactor authentication illustrates an extraordinary arms race between security professionals and criminal enterprises.

The Card Fraud Prevention Task Force and similar organizations worldwide have developed increasingly sophisticated countermeasures:

• Card security codes (CVV/CVC) provide remarkable protection against unauthorized card-not-present transactions
• EMV chip technology makes cards incredibly difficult to duplicate or tamper with
• Transaction monitoring systems use artificial intelligence to detect anomalous patterns in real-time
• Tokenization replaces actual card numbers with temporary tokens for online transactions

Authentication methods have evolved spectacularly from simple signature comparison to biometric verification using fingerprints or facial recognition. The personal identification number (PIN) system, while seemingly basic, represented a quantum leap in security when introduced, significantly reducing fraud losses at ATMs and point-of-sale terminals.

Security Breakthrough: The implementation of EMV chip technology across Europe and later globally reduced counterfeit card fraud by over 75%—an absolutely extraordinary achievement in financial security that has saved consumers and businesses billions!

The standardization efforts led by the International Organization for Standardization have been particularly important in security. Standards like ISO/IEC 14443 for proximity cards and ISO/IEC 15693 for vicinity cards ensure that contactless payment systems work securely across different manufacturers and regions. This interoperability has been crucial for creating seamless travel experiences where a single card works on public transport systems in London, New York City, and Singapore with equal reliability.

Technological Evolution and Digital Transformation

The physical plastic card has undergone a remarkable metamorphosis, incorporating increasingly sophisticated technologies while maintaining backward compatibility with legacy systems. This balancing act between innovation and compatibility represents one of the most impressive engineering challenges in financial technology.

Computer data storage capabilities within cards expanded dramatically, from the few bytes on magnetic stripes to the kilobytes available in modern chip cards. This storage capacity enabled spectacular new features:

• Multiple applications on a single card (transit, payment, identification)
• Dynamic card security code generation for enhanced online security
• Expiration date management and automatic renewal processes
• Loyalty program integration and gift card functionality

The shift toward digital cards and mobile wallet implementations represents the latest evolutionary leap. Companies like Apple and Google have created digital versions of payment cards that exist only in smartphone memory, protected by the same authentication methods used to unlock devices. This transition from physical to digital has profound implications for retail, fuel purchasing, and virtually every other transaction context.

Contactless smart cards utilizing radio frequency technology through resonant inductive coupling have achieved remarkable market penetration, particularly in Europe and Asia. The ISM radio band provides the frequency spectrum for these transactions, while standards like ISO/IEC 14443 ensure interoperability across different implementations. The COVID-19 pandemic accelerated adoption of contactless payments as consumers and merchants sought hygienic transaction methods—a fascinating example of external events driving technological adoption.

Global Variations and Regional Implementations

While payment cards represent a global phenomenon, regional implementations reveal fascinating adaptations to local conditions, regulations, and consumer preferences. The Single Euro Payments Area initiative in Europe created a harmonized payment system across 36 countries—an absolutely extraordinary achievement in financial integration that has simplified cross-border transactions dramatically.

In contrast, United States payment card usage developed with distinct characteristics:

• Signature verification remained standard longer than in other markets
• Credit cards maintained greater prominence relative to debit cards
• Rewards programs became particularly elaborate and competitive
• Credit score systems evolved specific methodologies for card usage assessment

Asia presents another remarkable variation, with countries like Singapore achieving near-universal card penetration while others in Central Asia continue to demonstrate strong preferences for cash transactions. DBS Bank in Singapore and Bank Central Asia in Indonesia have developed particularly innovative card programs that integrate with national payment systems like NETS and PRIMA.

Regional Innovation: In Nordic countries, payment card adoption rates exceed 90% of the adult population—one of the highest penetration rates globally—with contactless transactions representing the overwhelming majority of card payments. This remarkable adoption curve demonstrates how cultural factors and infrastructure investments can accelerate technological transformation!

The economic indicator value of payment card transaction data has become increasingly significant. Central banks and statistical agencies now use anonymized card transaction data to gauge consumer spending patterns, track economic recovery, and identify sectoral trends with incredible precision that traditional survey methods cannot match.

The Business and Economic Dimensions

Corporations of all sizes have integrated payment card acceptance into their fundamental operations, with implications for revenue collection, customer experience, and cost management. The point of sale terminal—whether physical or virtual—has become the critical interface between businesses and the payment ecosystem.

Fee structures within the payment card industry reveal a complex web of economic relationships:

• Interchange fees paid by merchants to card issuers
• Network fees charged by payment systems like Visa Inc. and Mastercard
• Processing fees levied by companies like Stripe, Inc. and Western Union
• Foreign transaction fees applied to cross-border payments

This fee ecosystem has generated significant controversy and regulatory scrutiny, particularly in Europe where interchange fees have been capped by legislation. The Payments Council in the UK and similar bodies elsewhere have worked to balance the interests of merchants, consumers, and financial institutions in this complex economic landscape.

Brand differentiation in the payment card space has become increasingly sophisticated, with premium products like the Centurion Card from American Express offering extraordinary benefits beyond basic payment functionality. These luxury cards provide access to airport lounges, concierge services, and exclusive events—transforming payment instruments into lifestyle accessories and status symbols.

Emerging Frontiers and Future Directions

The payment card continues to evolve in absolutely extraordinary ways, integrating with emerging technologies and adapting to changing consumer behaviors. Digital currency integration represents perhaps the most fascinating frontier, with experiments connecting traditional card networks to blockchain-based assets and central bank digital currencies.

Biometric authentication is advancing spectacularly, with fingerprint sensors, facial recognition, and even vein pattern recognition being integrated into card designs. These technologies promise to make transactions simultaneously more secure and more convenient—a remarkable combination that has historically been difficult to achieve.

The environmental impact of plastic cards has drawn increasing attention, with manufacturers developing biodegradable materials and digital card alternatives that eliminate physical waste entirely. This sustainability focus represents an important evolution in how the industry addresses its environmental footprint while maintaining the reliability and security that consumers expect.

Machine learning and artificial intelligence applications in fraud detection continue to advance with impressive sophistication, analyzing thousands of data points per transaction to identify patterns indicative of credit card fraud or other malicious activity. These systems represent the cutting edge of financial security, protecting consumers and businesses from increasingly sophisticated criminal enterprises.

Technology Trend	Impact on Payment Cards	Potential Transformation
Biometric Integration	Embedded fingerprint sensors, facial recognition	Eliminates need for PINs or signatures
Blockchain Connectivity	Links to cryptocurrency wallets and CBDCs	Creates bridge between traditional and digital finance
IoT Payments	Enables machine-to-machine transactions	Allows vehicles, appliances to make autonomous payments
Sustainability Focus	Biodegradable materials, digital-only options	Reduces environmental impact of payment infrastructure

The regulatory landscape continues to evolve with equally important implications. The European Union‘s Payment Services Directive (PSD2) has opened payment systems to third-party providers through open banking APIs—a regulatory innovation that has sparked an explosion of fintech innovation across the continent and beyond.

The Unseen Network Beneath Every Transaction

What makes the payment card system truly extraordinary is the invisible infrastructure that supports even the simplest purchase. When a consumer uses their card to buy gasoline at a filling station, they activate an astonishing chain of events:

1. The payment terminal captures card data and transaction amount
2. This information travels through secure networks to the acquiring bank
3. The transaction request routes through the appropriate payment system (Visa Inc., Mastercard, UnionPay, etc.)
4. Authorization requests reach the issuing bank, which checks available credit or funds
5. Fraud detection systems analyze the transaction against the customer’s credit history and spending patterns
6. If approved, an authorization code travels back through the network to the merchant
7. Settlement occurs later through electronic funds transfer between financial institutions

This entire process—which involves dozens of separate systems, multiple financial institutions, and several interbank networks—typically completes in under three seconds. The reliability and speed of this system represents one of the most underappreciated engineering achievements of the modern era.

Computer memory technologies play a crucial role throughout this ecosystem. Non-volatile memory in chip cards stores critical information securely, while volatile memory in processing systems handles transient transaction data. The entire infrastructure depends on computer systems of staggering complexity that process billions of transactions daily with near-perfect reliability.

Cultural and Social Implications

Beyond the technical and economic dimensions, payment cards have created fascinating social transformations. The concept of credit has been democratized, with credit scores replacing more subjective assessments of trustworthiness. This data-driven approach has both expanded access to financial services and created new forms of financial exclusion for those outside traditional banking systems.

The psychological relationship between consumers and spending has evolved significantly with card usage. Studies reveal that credit card spending often feels less “real” than cash transactions, potentially influencing purchasing decisions and budget management in remarkable ways. This psychological dimension has implications for everything from household debt levels to retail marketing strategies.

Gift cards have created an entirely new gifting economy, with Christmas and other holidays now featuring significant gift card exchanges. These instruments represent a fascinating hybrid between payment cards and specialized vouchers, creating flexibility for recipients while guaranteeing revenue for retailers.

The information and data generated by card transactions has created entirely new business models. Risk assessment, marketing personalization, and economic forecasting now leverage transaction data with impressive sophistication, creating value far beyond the simple facilitation of payments.

Conclusion: The Central Nervous System of Modern Commerce

The payment card has evolved from a simple convenience into the central nervous system of global commerce—an absolutely extraordinary transformation that continues to accelerate. What began as paper charge plates in department stores has become a digital-first ecosystem connecting consumers, merchants, financial institutions, and technology providers across every continent.

This system’s resilience is perhaps its most remarkable characteristic. Through economic indicator fluctuations, technological revolutions, and global crises, the payment card infrastructure has maintained spectacular reliability while continuously evolving. The transition from magnetic stripes to EMV chips to contactless payments to digital wallets demonstrates an impressive capacity for adaptation that few other technologies can match.

As we look toward the future, the fundamental architecture established by payment card systems will likely form the foundation for whatever comes next in financial technology. Whether through integration with digital currencies, expansion into machine-to-machine payments, or entirely new applications we cannot yet imagine, the principles of secure authentication, reliable settlement, and global interoperability pioneered by payment cards will continue to shape how humanity exchanges value.

The next time you tap, insert, or swipe a payment card, consider the absolutely phenomenal network you’re activating—a global system of technology, trust, and transaction that represents one of the most significant innovations in the history of commerce. This system connects the gasoline purchase at a local filling station to international payment systems, the consumer in Canada to the corporation in Singapore, and the present moment to decades of continuous technological evolution. In this interconnected web of value exchange, the payment card remains the spectacularly effective key that unlocks it all.