1960 to 1969: The Rise of Business Computers and Business Software - The Technical and Social History of Software Engineering - page 115

The Invention of the Credit Card
Several important background inventions occurred in the 1960s. One of these was
the AT&T Datanet, the first commercial modem, in 1960. Another was the devel-
opment of ASCII in 1963; it is the ubiquitous coding system used to allow dis-
parate computers to share common information. The most important perhaps was
a major IBM invention in 1960 that would change the way consumers made pur-
chases.
IBM had developed a technology for a kind of magnetic tape that could be af-
fixed to small plastic cards. In 1960, the American National Standards Institute
(ANSI) made the IBM magnetic tape a U.S. standard. In 1962, the International
Standards Organization (ISO) also issued a global standard.
Once the new IBM magnetic strip was a global standard, credit card companies
and credit card purchases expanded rapidly. The impact of credit cards on comput-
ing and software was enormous. Banks and credit card companies rapidly expan-
ded their data centers and many created large internal software groups.
However, credit cards also created new opportunities for crime. In later dec-
ades, cybertheft of credit card numbers would become one of the most frequent
targets for computer hackers.
Note
The first popular credit card, Diners Club, had been introduced in
1950. But it was a cardboard card without a magnetic stripe. The
original Diners Club card only worked at 27 restaurants in New
York, which explains why “Diners Club” was the chosen name.
Credit card purchases rank as one of the most important retail business changes
in human history. But without fast computers and reliable software, credit card
processing could not have taken off as rapidly as it did.
The first credit cards from Diners Club and American Express were proprietary,
closed systems, which meant that only customers, retailers, and the card compan-
ies were involved in the transactions. Banks were excluded. These cards also re-
quired full 100% payment of balances at the end of every month. Revolving credit
was introduced in 1959, with substantial interest payments and fees for late pay-
ments.