I write about history, economics and technology behind payments | Working at a tech startup
Joined December 2022
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Dee Hock explaining what business Visa was in, back in 1966. It was in the business of
1. Identification
2. Data exchange
3. De-Contextualization
Right from the early 1950's when merchants outsourced their card programs, first to independent T&E companies such as Diners/Amex and later to banks, Merchant acquiring industry has continuously evolved with the evolution of new technologies
A thread 馃У 1/7
In the 2000s, Payment service providers such as Stripe and Checkout provided capabilities to accept both card and non-card payment methods
There also emerged merchant and marketplace aggregators such as Square, Shopify to cater to specific offline and online merchants.
6/7
Interesting to see a transparent Interchange+ pricing offered by @finix for processing payments. This definitely saves hundreds of manhours spent by merchants in negotiating rates with PayFacs and Acquirers
Primitives of a good payment system include
馃幆Identification
馃幆Authentication
馃幆Authorization
馃幆Clearing
馃幆Settlement
While systems like Payment cards had different mechanisms to implement each of them, Mobile based Realtime payment (RTP) systems collapses all of them into one
Did you know?
Visa cards start with "4"
Mastercard with "5"
Discover with "6"
A travel and entertainment (T&E) card with a "3" and hence
American Express with "37" and
Diners Club with "38"
Quite incredible how card schemes managed to have the same convention globally!
Payment card technologies differed across countries due to the underlying infrastructure.
While Europe started using Smart/Chip cards, US continued to use Magnetic stripe cards for a long time as it was much cheaper to process transactions through telephone connections in the US
Love the constant updates from J.P.Morgan/ Paymentech regarding the Payment brand/network changes with respect to fees, limits, Merchant Category Code (MCC) etc.
Transparency at it's best. Other large players like Stripe, Adyen et all should also start doing it!
Earlier, credit cards separated lending from banks
Now, mobile phones are separating payments from banks
There is a great unbundling happening. We are in an exciting time!
Money technologies followed the technologies of communication
1. Physical (Commodities like Gold, Paper money and Checks) moving at the speed of transportation systems like Horse, Train and Automobile.
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Recently started reading this book "New Money: How Payment Became Social Media". 50% through the book. Finding it very interesting. It has lot of details on the evolution of payments over the course of last few centuries. Will keep sharing titbits from the book!
It also talks about how new age payment providers like Venmo (which is a social media with social feeds like Facebook), Google wallet, Apple pay (security + privacy) using tokenization, Palantir, WeChat etc.