Crypto payments are still seen as a form of niche market for a handful of players. There are many proponents in the market, while there are plenty of opinions about the lack of value of the crypto industry on itself.
However, as history repeats itself, credit cards were also seen in the 1950s a very exotic instruments with no future and plenty of issues.
Why credit cards (and crypto payments) were invented?
Although many forms of credit existed centuries ago, the first successful commercial credit card was Diners Club. Entrepreneur Frank McNamara introduced the concept of a small valueless cardboard card that could be used to spend money. According to the legend, the concept came to McNamara when he forgot his wallet and wasn’t able to pay for a diner in New York City. The first Diners Club card was introduced in 1950.
Fast-forward to the early 21st century, and we’re again in the same position: having a way to pay for goods and services without the need to carry cash or bank-linked cards at all. Although many cryptos such as Bitcoin are seen as a store of value (akin to gold), in the white paper of Satoshi Nakamoto it was stated that Bitcoin was, in fact, created as an alternative “peer-to-peer electronic cash system”, therefore, for paying.
The beginnings were difficult.
Although McNamara was well-known and already a successful businessman, initially, there were a lot of scepticism: about 200 cards were given initially to family and friends and only a handful of restaurants accepted them.
Many merchants didn’t see the benefits and many didn’t see the point of using a card instead of cash, paying fees and, on top of that, having a product that competes with their own in-house loyalty cards. Also, cheques were already widespread used, therefore, the concept was considered redundant.
As a relatively new product, crypto payments are facing the same questions that previous generations had. Many merchants don’t see the point of crypto payment gateways when legacy financial instruments can be used instead. Some think that having a “middleman” is unnecessary when one can just process crypto directly.
Regulations came 20 years later.
By 1960 credit cards were widely used, however, there was little regulation about them. Cards were approved or denied for different kind of reasons. Women were normally enquired about their husbands and normally not given cards.
In the US, it was only until the 1970s that the Fair Credit Reporting Act was passed, and credit consumers acquired a full set of rights.
On the crypto world, we’re on the early stages of this.
Many regulations are coming to the crypto industry, however, there are still a lot of questions. As with the credit cards, it’s important, in the early days, to partner with trustable companies until full regulations are applicable everywhere.
Early adopters were rewarded.
After Diners Club, American Express and BankAmericard launched their own cards in 1958, MasterCard came to be as an alliance of banks in 1966, Barclaycard in 1967 and the first payment with Discover was made until 1985.
Some launches like BankAmericard were complete disasters. However, the concept was never abandoned, and early adopters were rewarded.
Early merchants (mostly restaurants) were able to attract a lot more clients, with some companies like Sears rapidly increasing profits and international expansion.
Early consumers were also rewarded with extensive credit histories and able to access more credit limits and cards than people that came to apply for them later.
Payment processors like Visa (which was formed by BankAmericard and others) or MasterCard are today multibillion dollar businesses.
On the crypto payments side, we’re still some way from seeing the success of credit cards. However, if history indicates anything, we are on the verge of a financial revolution where first crypto will be used as a store of value in its own right while payments will become as commonplace as card payments online are today.
At YmplePay we want to share our vision of the future with our users (both consumers and merchants) using the latest technologies and all the experience of the YmplePay team.
Perhaps in a few years we will see back to 2023 when crypto payments were an oddity as the first Diners Club payments in restaurants in New York City in 1950.