A brief history of merchant accounts

By Kelly Herdrich

Merchant accounts can revolutionize your business by offering more technologically advanced financial services for your customers' ever-changing needs. However, merchant accounts have changed over the years as well. Here's a look at how the merchant account business got to where it is currently.

What are merchant accounts?
Merchant accounts are essentially a line of credit extended to your business by an acquiring bank, enabling you to accept credit cards from customers. Merchant accounts help even small businesses stay up-to-date and accessible to a wide range of clients, especially in today's digital age.

How did merchant accounts start?
In 1958, the first revolving credit card debuted. It allowed cardholders to pay off their card balances in installments, applying a monthly finance charge to the remaining balance. Initially, credit card processing was accomplished with manual imprinters, which many stores keep around today, in case there are problems with their point of sale systems. (It's interesting to note that even then, there were concerns about the security of credit card information.) Later, electronic credit card processing was handled over the phone. This process was lengthy, and updates to the process and system were needed to keep both merchants and customers happy.

How have merchant accounts changed?
As the system improved, merchants and customers saw a marked improvement in credit card processing times. Electronic transactions were improved with the introduction of point of sale terminals, still used by many companies today. The evolution of merchant accounts continued with the addition of debit cards. Eventually, the introduction of the wireless terminal revolutionized the way companies were able to conduct business, allowing vendors at craft shows and fairs, for example, to accept secure credit card transactions, far away from the nearest telephone line.

Merchant accounts have come a long way since the manual imprinters and dial-up services of years ago. Web sites such as PayPal offer businesses large and small the ability to accept credit cards from their own Web sites. In an ever-changing marketplace, the ability to accept credit card payments continues to change as well, and seems poised to do so for the foreseeable future.

Article by Kelly Herdrich

Published: July 8, 2009