ETA Turns 30: Defining the Decades

As the Electronic Transactions Association celebrates its 30th anniversary this year, it’s worth considering just how much the payments industry has progressed over the past three decades.

Since its inception as the Bankcard Services Association in Denver in 1990, the organization has grown along with the industry, renaming itself the Electronic Transactions Association and relocating its headquarters to Washington, D.C. Meanwhile, payments infrastructure evolved from simple transactions with bankcards at points of sale in the early 1990s to the full-blown financial technology ecosystem of today—a system that now includes stored credentials, contactless payments, and the ability of consumers to use a wide variety of technologies to conduct transactions around the globe.

ETA has grown into a worldwide organization with more than 500 member companies from 14 countries. With a full-time staff of 16, ETA has a federal lobbying program, more than 20 committees and councils, professional educational courses, and a certification program—in addition to hosting numerous live and virtual networking and professional development events each year and publishing the latest news, trends, and advice across multiple platforms.

As the organization embarks on its fourth decade, we reflect on the technology that spurred its evolution. Here’s a look at the most influential innovations of the payments industry since ETA’s beginnings 30 years ago, according to staff.

The 1990s

Right around the time of ETA’s founding, technology began to fuel innovation in payments. POS systems integrated into cash registers paved the way for retail establishments to process sales in an increasingly faster and more data-driven way. By the early 1990s, electronic registers, barcode scanners, and PC-based POS systems had become the norm at most large retailers. That, coupled with mag-stripe card technology, ushered in a new era of speed and convenience for authorizations and payment transactions in general.

The mid to late 1990s also saw the birth of what we now know as financial technology companies, or “fintechs.” When Microsoft founder Bill Gates declared in 1994 that “banks are dinosaurs, we can bypass them,” during a speech to a Bank Administration Institute conference, the tech industry readily agreed. During this time, the world welcomed a wave of Big Tech companies to the payments industry.

Chief among the early pioneers was PayPal, which launched in 1998 as an app for handheld devices like PalmPilot. The company (first named Confinity) introduced a new business model to the industry—peer-to-peer (P2P) payments—serving as the middleman mostly for online auctions but also for individuals to pass funds to each other. Users connected their checking or credit card accounts to the service through the PayPal website. It was an immediate hit with online merchants, small businesses, and consumers, inspiring the company—and later, rivals—to expand its services with capabilities for payment on mobile devices and much more.

The P2P model also evolved over those years. More recently, it was adopted by financial institutions, allowing consumers to swiftly transfer money from their bank accounts to those of other consumers at different banks. Today, P2P’s popularity among younger consumers and those looking to conduct instant payments makes it a booming segment of industry.

The 2000s

As PayPal got off the ground and evolved into the next decade, Amazon, which began its reign as a simple, yet transformative, bookseller on the internet in 1994, continued to innovate. A key advancement introduced by the now global online retail behemoth was the concept of “stored credentials.” This innovation enabled a merchant—or a third party working on the consumer’s behalf—to store data from the purchaser, such as a card number or payment token, to process future purchases for the cardholder. It also gave the fledgling electronic payments industry an immense lift: Storing credentials made payments extremely convenient for returning consumers, who were no longer required to re-enter their information prior to checkout. In turn, that boosted revenues for merchants and payments companies by facilitating recurring and one-click payments.

These days, consumers don’t even need to log on to a traditional computer or phone to order goods. The Internet of Things, or IoT, allows for payments by a stored credential, coupled with identity verification in a smart device. IoT technology is now at the head of growth areas such as unattended payments. Vending machines, for example, have become increasingly sophisticated, with features such as touchscreens and the ability to accept multiple forms of payment.

More advanced IoT technology, such as smartphones and watches, internet-connected by refrigerators, fitness trackers, home security systems, and even cars, can enable touchless orders and payments for a wide range of products—ranging from a gallon of milk to concert tickets to a prescription refill.

In 2006, industry players benefitted from a more standardized and secure approach to electronic payments when the Payment Card Industry Standards Security Council (PCI SSC) was formed. The PCI SSC launched to enhance global payment account data security by developing standards and supporting services that drive education, awareness, and effective implementation by stakeholders. Founding members—including American Express, Discover, JCB International, MasterCard, and Visa Inc.—share in governance and execution of the organization’s work. Participating organizations agree to incorporate the PCI Data Security Standard as part of the technical requirements for their respective data security compliance programs, and recognize qualified security assessors and approved scanning vendors qualified by PCI SSC.

Meanwhile, the boom in mobile phones and more sophisticated smartphones during the early 2000s gave way to the introduction of mobile wallets and payments. Starting in 2009, and spanning about the next five years, telecommunications companies tried to gain a foothold in the phone ecosystem by controlling mobile payments with Isis/Softcard. The venture was a collaboration among Verizon Wireless, T-Mobile, and AT&T that utilized near-field communication (NFC) to enable its users to make purchases using only their phones. While its aim was convenience, Softcard required users to load money onto a prepaid card to use it. The endeavor failed to gain consumer attention, and eventually the service unplugged and went dark. However, it set the stage for other tech companies to develop the more advanced general purpose and propriety wallets that we see today. In February 2015, Google announced that its new competing system—Google Wallet—with support from Sprint and MetroPCS, had purchased critical assets from Softcard.

2009 also marked the entrance of fintech industry disrupter Square, which bypassed the traditional merchant acquirer channels and marketed its out-of-the-box payments solutions directly to small businesses and micromerchants. Its simple, plug-and-play “dongle” required little more than a mobile device and internet connection to accept payments, and the company’s customer-friendly approach forced the industry to rethink how it added value to merchant clients’ businesses. As a result, other fintech payment companies, such as Poynt and Clover, followed suit with their own wrinkles on the mPOS transaction, and traditional players innovated.

Today’s mPOS software is cloud-based, so all data is stored remotely and securely. Many merchants appreciate the benefits offered by mPOS because the software also can provide an inventory management system, organize and keep track of loyalty programs, deploy antitheft features, and measure sales reports. This “software-as-a-service” concept is now championed by payment facilitators that add payments acceptance to their vertical suite of software solutions.

The 2010s

With the evolution of smartphone technologies also has come the rise of a series of high-profile “Pay” apps. Apple Pay launched in 2014, followed shortly the next year by Google Pay and Samsung Pay. Since then, mobile payments have continued to grow, with most major phone manufacturers offering a payment solution. Because these market leaders own and control the apps and hardware installed on smartphones, they were deemed integral to the widespread adoption of enabling technologies such as NFC and magnetic secure transmission (MST) to the U.S. market, which continues to lag behind other countries in mobile payment use. Both NFC and MST technologies reduce the amount of time customers spend at checkout by allowing “proximity card” payments; consumers only need to move their smartphones near the POS terminal to communicate payment information within the app.

The migration to EMV chip cards brought a new level of security to payments. EMV, which originally stood for “Europay, Mastercard, and Visa,” the three companies that created the standard, is a global standard for cards equipped with computer chips and the technology used to authenticate chip-card transactions. EMV cards brought enhanced security and reduced credit card fraud compared to magnetic-stripe cards through the unique transaction codes created each time an EMV card is used.

While EMV gained ground in Europe in the early 2010s, retailers in the United States were required to begin accepting EMV cards in October 2015. By September 2019, 3.7 million U.S. merchants were able to process EMV transactions, according to Visa, resulting in significant decreases in counterfeit fraud.

EMV systems are now available in contactless form. These devices allow transactions to be made by waving or tapping on an EMV contactless-enabled terminal. Similar to contact chip cards, they also support cryptographic functions for more secure transactions than with traditional magnetic-stripe cards. Just about all credit and debit cards produced in 2020 have it, and all new POS terminals can receive the signal.

The Next Chapter

Looking deeper into the industry’s bright future, cutting-edge technologies like blockchain and cryptocurrency are likely to gain a greater foothold in the mainstream payments realm. Meanwhile, trends like PIN-on-glass acceptance allow customers to use their personal identification numbers directly on the touchscreens for mPOS transactions, giving merchants and customers an added level of security over current mobile readers.

Biometrics—such as Touch ID, contactless fingerprinting, facial recognition, and iris scanning—already in play on many smartphones and mobile payment apps, are expanding their reach in the payments industry. It is expected that, as more biometric identifiers become available and are used in conjunction with one another, multifactor biometric authentication may become a reality.

New technologies will continue to expand the market, and payments professionals who seek an understanding of the latest advances will be able to educate their customers and appropriately plan for the future of payments. As was the case when ETA first entered the scene in 1990, consumers and merchants still want easy, secure transactions. Technology is enabling capabilities we could only dream of 30 years ago. The next 30 years promise to be just as exciting.