Customers pay when they have the means to do so. However, credit cards developed not just because people did not have any money to pay for purchases but people did not want to carry wads of hard cash with them all the time. It is a lot of convenience and safer to be billed later for purchases then having to carry cash in pocket. Convenience is the primary value proposition for payment cards.
Realizing this, some establishment in the early part of the twentieth century started giving account cards to their trusted customer. This was particularly suitable for companies that had multiple and dispersed outlets such as oil companies.
A motorist could purchase fuel at any station belonging to a particular oil company. The General Petroleum Corporation of California, later Mobil Oil, issued cards to employees and customers in 1924 that could only be used the company’s sales outlets. This was the first store cards.
Towards the middles of the century banks began to think of creative ways to tap this growing market. The Flatbush National Bank in New York introduced a ‘Charge It’ plan in 1947 and a few years later Franklin National Bank was the first to issue credit cards.
But the banking sector in general was slow in developing the new product. Other companies were quicker in realizing the immerse possibilities.
Dinners Club, according to company lore, was the brainchild of two visionaries Frank McNamara and Ralph Schneider. They were dine at a New York restaurant sometime in the year 1950 when to their embarrassment they discovered they did not have any cash.
It is unclear how they resolved the problem but it made a lasting impression on them, and gave birth to a well organized club of friends and colleagues. About the same time, a New York based travel company called American Express was so impressed that it started its own club.
Its merchant base also consisted mainly of restaurant, hotels, transport company, and selected store. In time, American Express outstripped its rival to lay the foundations of a global business that still flourishes to this day.
Brief History of Payment Cards
