The evolution of Visa and Mastercard

Regulation and development in Europe

OK, this sounds like something you might be forced to read in a college class, but let me share the opening paragraph of the Press Release with you:

Dmitry Artimovich, who on several occasions had been referred to as a “Russian hacker” by the world’s largest news publications (The New York Times, Associated Press), has published the book “ONLINE PAYMENT SOLUTIONS: The evolution of Visa and MasterCard. Regulation and development of payment systems in Europe”

This is actually two books in one. One is written as a ‘text book’ and would certainly make for a great series of lectures. The world of Credit Cards and online banking is not well known. It is at best a spidery web. I worked in the financial world for a number of years and my head still hurts from the myriad of ways something as seemingly simple as Interest can be calculated.

The other side of the book looks at the history of the modern credit card. Dmitry Artimovich has done a fabulous job of retelling what is often a chaotic and even amusing story. It starts early in the 20th century with large retail stores offering (often) metal embossed tokens to ‘preferred’ customers, allowing them to make purchases and be billed at the end of the month. Although I was not born into rich family I certainly remember how the system worked. My parents were live in help for a retired attorney we lived in a grand palace with so many bedrooms I lost count. Actual money was something I knew nothing about, the baker, butcher, Grocer, Coal Merchant, etc just delivered what was asked and payment was made at the end of the month. At the same time as stores offered a credit system, so did certain high end restaurants. Again it was a privilege reserved for the high end customer.

The next phase of the credit card involved the rise of the automobile. Gas producers saw a way of creating loyalty from their customers, yes you guessed it, a credit card.

The key was to offer the ‘perk’ to only those recognized as reliable customers.

Banks saw the potential of the credit card and went all out on the idea. Banks rarely turn down the opportunity to aid a customer in lightening their wallet. The problem was that the stores and restaurants knew their customers, the banks did not.

The early 70’s saw banks mailing valid cards to anyone and everyone they could find. Today that sounds like gross stupidity, it was the norm. In the UK Access Card was trying to get ahead of Barkleycard, one day the mail man delivered three envelopes, one for Mom, Dad, and me. To activate it, all I had to do is use it. I used it once, I bought an SLR Practika camera, the credit limit was (approx) $107 and my credit limit was $100!

The banks had screwed up. The credit card business was in the toilet. There was no central control.

The problems were many and complex. Dmitry Artimovich covers this well and comprehensibly. While some of you might disagree, I think pop singer Mary Hopkins summed the entire problem up well

The next step was to establish ‘brands’. Two emerged as winners Visa and Mastercard.

This is an interesting book. The ‘birthing’ of both Mastercard and Visa came at a high price. Bank Of America loved Americard and Barclay Bank loved Barclaycard. The fundamental flaw was there was no central point, not to control, rather to assist the flow of traffic.

Online Payment Solutions by Dmitry Artimovich is a great read, I loved the story, others likely will prefer the discussion about the more technical aspects. No technology or organization is free of flaws, Just today I read a paper from MIT talking about hacking tech’s current darling, the Blockchain.

The Visa and Mastercard organizations seem robust and to date attacks have involved the ‘end user’ rather than the vehicle. Can this last?
For the professional involved in the credit card industry this is a must have book, for the naturally curious, it is also a must read.

Be Sociable, Share!