Today is a very important day for us payments nerds. It’s the 60th anniversary of the “Fresno Drop”, the birth of the modern credit card industry. On 18th September 1958, Bank of America officially launched its first 60,000 credit cards in Fresno, California, setting in motion an experiment that changed the American way of borrowing, paying and budgeting.
And, in time, changed everyone else’s way of doing those too.
If you want a good introduction to the history of the credit card, from the Fresno Drop up to the Internet, I’d recommend Joe Nocera’s “A Piece of the Action“, which I read many years ago and still pick up from time to time.
If you want to spend five minutes having a quick look at where the modern credit card business comes from, here’s the short version (courtesy of CNN Money): The most extraordinary episode in credit card history is the great Fresno Drop of 1958. The brainchild of a Bank of America middle manager named Joe Williams, the “drop” (which is marketing-speak for “mass mailing”) was an inventive tactic to give Americans their first highly addictive taste of credit card living. Keep in mind that charge cards in those days–like Diners Club or American Express–were mainly used by jet setters, businessmen on expense accounts, and ladies who lunched… Williams wanted to change that. In September 1958, he mailed out 60,000 credit cards, named BankAmericards, to nearly every household in Fresno. Mind you, these cards arrived in the mailboxes of people who had never seen–let alone applied for–a card like that. But now thousands of ordinary people suddenly found that thousands of dollars in credit had literally dropped into their laps…
There you go. Now you can go ahead and bore at least one person today with the story of the Fresno Drop. I know I will.
As you might expect, I cover this episode in my book Before Babylon, Beyond Bitcoin, where I point out that what is sometimes overlooked from our modern perspective is that the evolutionary trajectory of credit cards was not a simple, straight, onwards-and-upwards path. For the first decade or so, it was far from clear whether the credit card was continue to exist as a product at all, and as late as 1970 there were people predicting that banks would abandon the concept completely. What changed everything was technology: the introduction of the magnetic stripe and Visa’s BASE I online authorisation system. This changed the customer experience, transformed the risk management and cut costs dramatically. Everything changed with automated authorisation.
I can’t resist pointing out that it was the London transit system that pioneered the use of magnetic stripes on the back of cardboard cards in a mass market product (seven years earlier, in 1964). The first transaction was at Stamford Brook station on 5th January 1964, well before BankAmericard (the precursor to Visa) introduced their first bank-issued magnetic stripe card in 1972 in conjunction with the deployment of the BASE I electronic authorisation system in 1973.
As I wrote back in 2008, setting out “I have seen the future, and it is the London mass transit system” theory of payments, we should look at what they were doing to see what banks would be doing in a couple of years time and what they were doing, of course, was contactless, which now accounts for X in Y card payments in the UK. I was reminded of this b
xxx
It’s no exaggeration to say that TfL’s technology has transformed the payments industry, and contactless is quickly becoming ubiquitous
From Digital Currencies And Credit Cards Have Subways To Thank For Their Existence.
xxx
Now I read that Hong Kong MTR, where it all kicked off the with contactless Octopus card, is going to tender for a QR code solution.
Comments
Post a Comment