Online payments are so commonplace today that it can be hard to imagine that they weren’t used, or even existed, just a few decades ago. It wasn’t until the mid-1990s that online payments became widely available, and it took even more time for them to become the convenient, hassle-free options we’re familiar with now. Below are the pioneers we can thank for paving the way.
The Innovators Who Made Online Payments Possible
While online payments did not exist until the 1990s, a few important milestones occurred before that. Chief among these are the companies that first introduced ways to pay without physical cash or face-to-face interactions, whether it was a payment between two friends or a customer and a business. Then, of course, came the essential development of the internet.
Western Union
Though it may sound surprising, the origins of online payments can be traced to well before the internet: 1871, when long-distance payment methods were introduced through wire transfers using telegraphs. The first company credited with this is Western Union, which allowed people to transfer money to different regions. The process could take weeks to complete, but it laid the groundwork for convenient payment methods.
Diners Club
Another significant component of online payments is credit cards, which were introduced in 1950 by Frank McNamara. One day, while he was out to lunch, McNamara realised he had forgotten his wallet, and the concept of credit cards was born when he “borrowed” money from the restaurant and later paid it in full. He developed the Diners Club card, which was used in the food service industry, though the concept quickly evolved to have broader applications. While credit cards are not the only option for online purchases, they add convenience and security.
World Wide Web
While technically not a company, Tim Berners-Lee’s invention of the World Wide Web in 1990 was a cornerstone in the development of online payments and the internet as a whole. Without Berners-Lee, the internet as we know it wouldn’t have gained popularity or been as easy to use. Berners-Lee’s concept relied on websites and hyperlinks, which we recognise today, whether we’re signing into our online banking accounts or playing the best high-volatility slots on the market.
Online Pioneers of the Payment Industry
As the internet was widely adopted, even more new business ideas surfaced, and the concept of online payments began to be experimented with. These companies were early pioneers of the concept. They overcame the challenges of early online payments to bring us the simplified options we have today.
Stanford Federal Credit Union
Stanford Federal Credit Union (SFCU) is part of Stanford University and leverages Stanford University’s innovative minds to stay at the forefront of technology. This was also the case when the company was founded. SFCU was the first financial institution to offer online banking to its customers, launching the service in 1994.
First Virtual Holdings
1994 saw the launch of the first online payment company, First Virtual Holdings. The company required users to sign up with an email and their credit card assigned them an ID number. When purchasing from participating websites, First Virtual Holdings users would submit their unique ID and email, and the website would verify the purchase through the company. The transaction would then be completed using an Automated Clearing House (ACH) network, which is still used today for some transactions, such as direct deposit payroll payments. First Virtual Holdings was a key player in online payments until 1998, when the company changed its focus.
CyberCash
CyberCash joined the online payment market in 1994 and was a primary rival of First Virtual Holdings. The company focused on a different aspect of online payments, creating one of the first digital wallets. From its inception, one of its key focuses was securing payments and financial information. Its digital wallet service encrypted data, enhancing user confidence in financial security. When First Virtual Holdings shifted its business focus, CyberCash acquired First Virtual Holdings’ clients. CyberCash remained in operation until 2001, when the company declared bankruptcy.
Amazon
Amazon may have begun as an online bookstore, but it’s also shaped online checkout experiences. When Jeff Bezos started the company in 1995, he prioritised the customer experience by offering customers options such as one-click purchases, which streamlined the payment process. Until this point, making payments was cumbersome and often frustrating. Amazon demonstrated how online payments could be simplified and user-friendly, a trend that became more common in the 2000s.
PayPal
In 1998, PayPal, originally Confinity, was introduced. The company offered its users the ability to send or receive money online easily, quickly, and with few fees. It made sending money to friends, peers, and businesses easy and secure. PayPal remains a major player today. It has adapted to changing technology to stay relevant and convenient, allowing for contactless mobile payments, rapid checkouts, and enhanced security.
Alipay
Making payments online was met with scepticism in its early days, leading many online payment companies to prioritise security for their users. In 2004, Alipay entered the market and aimed to gain more trust among online shoppers through its payment options by securing information and offering another security feature: escrow payments. Alipay wouldn’t take the full cost of an order from a customer until the customer received or verified their purchase. The company held the money in escrow and processed the rest of the payment after order verification. This payment style increased confidence for users, making online payments feel more secure and trustworthy. Like PayPal, Alipay remains a major player in the online payment industry. It’s known for its easy-to-navigate mobile app and expanding range of services.
The Current Online Payment Landscape
Since the 1990s and early 2000s, online payments have continued to evolve. While security remains a priority, they now also address user convenience and other concerns, making transactions both safer and easier. People can make payments online using various methods, including credit or debit cards, digital wallets, buy-now-pay-later services, and online transfers.
