The Evolution of Merchant Processing: Past, Present, and Future

Merchant processing

This article will satisfy your curiosity about how merchant processing first began. Not only that, but you will gain key insights into future merchant processing trends for small businesses. With payments being so crucial to every business, it can only benefit you to understand the past, present, and future of this crucial component, right?


So, let’s get going with the history of payments. As you will find out, we have come a long way from the humble beginnings of the first credit card transaction ever.


Ancient Merchant Processing

Western Union is such a staple of American business that the company made its way into a blockbuster film (Back to The Future) due to its telegram service. However, their merchant processing sprouted roots way back in 1871 by allowing customers to wire funds. Though it was limited to a handful of major cities, this led to more payment options.


“Metal Money” was introduced by Western Union in 1914, making it one of the first credit cards. The company kept innovating, and by 1989, customers could pay bills ranging from car loans to house payments. That may seem like a given in modern times, but keep in mind the internet was not widely available and wouldn’t be for six more years. So, this was genuine payment progress.


1950s: Other Brands Inch Merchant Processing Forward

Western Union was not the only early adopter. The 1950s saw three more players enter the fray. Diners Club, American Express, and BankAmericard released their initial credit cards.


No doubt you’ve heard of the first two companies, but BankAmericard? It got rebranded into a “little” enterprise now known as Visa, one of the most prominent names in payment processing.


But how did these companies handle credit card transactions before everything was linked by electronic networks? Well, if you have ever visited an old gas station when their internet was down, you may have seen this analog technology. The machine was called an imprinter and its basic function was making a carbon copy receipt by sliding a lever over the credit card. Thank goodness that era is behind us!


Entering Electronic Payment Processing: 1979

Those bulky, manually operated imprinters started to vanish as soon as Visa developed the first electronic merchant processing alongside their first point-of-sale terminal. This 1979 evolution made transactions incredibly fast and convenient. Of course, that made the trend explode since paying with plastic became as easy as paying with cash.


By the way, we’ve got a surprising stat at the end of this post on how many Americans still use cash.


Not everything was quick and easy, though. Not yet, because… what about large transactions? Banks were not ready to send thousands of dollars over electric lines. This technology was still new, and risks were not fully known. That’s the reason time-consuming authorizations over the phone were needed to avoid fraud. We are talking about a literal phone call, not a phone app, just to be clear!


Point-of-Sale Innovation

Three corporations that helped propel payment processing:


  • Hypercom
  • Ingenico
  • Verifone

These hardware manufacturers helped make credit and debit card use as normal as old-school cash registers. Yet, unless you owned a business, those behind-the-scenes companies may be unfamiliar.


Sure, today’s point-of-sale terminals (as seen here) would blow away early merchant processing hardware. But without those initial machines, a crucial payment foundation would never have been cemented.


ATMs Pop Up To Cash In

How normalized are ATMs today? Most folks can’t recall what the acronym means. It’s just an ATM! But Automated Teller Machines were quite the invention back in the day. 


Getting cash out of a machine 24 hours a day, 365 days per year? It squashed the problem of bankers’ hours limiting consumer access to cash, thanks to inventor John Shepherd-Barron.


One ATM can produce a 40%–70% annual return on investment with 80–100 monthly transactions. ~Fortune


Web Stretches The Future Of Merchant Processing

Who could have predicted the impact the internet had on businesses once the web became mainstream around 1995? It took merchant processing and the payment industry to new frontiers most business owners never envisioned. While the mid-1990s saw most consumers hesitant to pay for items online, a 180-degree change was brewing.


One reason? Better technology, which created super secure payments. Making online payments as safe as paying with a credit card in person meant more people would embrace shopping online. The days of Amazon offering only one product, books (true story), were not going to last because improved payment methods were about to erupt e-commerce popularity.


Global e-commerce is expected to reach $8.1 trillion in 2026!


History And Future Of Merchant Processing— The Last Decade


So much happening currently with payment processing connects to the history and future of merchant processing.


  • Seamless online and offline payments
  • Contactless payments
  • Mobile pay with smartphones
  • Faster connections / back-up connections
  • Machine learning for enhanced fraud detection
  • Personalizing customer experience

Let’s dig into those:


Seamless payments, online and offline, mean less work with actionable reports in one place.


Contactless payments and mobile payments give consumers more options to pay in speedier fashion than in the past. Also… not every young person carries a wallet, but nearly all carry a phone.


Modern people have limited time and patience. This trend will likely worsen, making faster payments an absolute must at every checkout.


Lastly, machine learning is touching every industry, so it’s wise to follow its specific uses for merchant services. This technology not only shields you from fraud but also helps shape customer experiences that create repeat business booms!


There’s no question that great strides have been made from 2014 to the present day. And some of these strides came on rapidly due to the 2020 pandemic. Smart business owners adapted quickly and are now constantly monitoring merchant processing trends for small businesses that could impact their livelihood.


Top Payment Trends Business Owners Are Following?


Think speed and efficiency of transactions. Also, solid merchant support from their payment processing provider. Reasonable transaction fees, along with fee-structure transparency, should also be top-of-mind for business owners.


The problem? A multitude of companies sell payment processing services. Each has tempting offers that can lock merchants into a contract that is not all it appears. Sadly, hidden fees are a major problem in the merchant processing industry.


That’s why National Processing makes it simple. We guarantee the lowest rates and back it up with $500 if you find a lower rate. Contact one of our friendly team members now so you can start saving on processing fees from day one.


The Future Is Bright For Merchant Services


Payment options are only going to get enhanced as we move toward the 2030s. Time flies! So does technology, making it vital to watch these future payment trends:


Contactless payments will improve. It must be done in a way the customer enjoys. A recent story in the Wall Street Journal highlighted a fresh in-store self-checkout system that shoppers loved, even those opposed to typical self-checkouts. Contactless payments will gain further traction the more customer-focused they become.


We can’t ignore cryptocurrencies, either. Despite tons of hype around some digital currencies, bitcoin has shown staying power. This means business owners and merchant service providers can’t ignore the trend. But we must stay on top of news concerning downsides of this complex payment technology.


One trend that isn’t complex?


Ringing up more sales and driving higher profits. This will come with the evolution of merchant processing services that include data-driven insights and decision-making. Example: Understanding customer habits through purchase histories. Plus, customer segmentation for personalized marketing campaigns.


3 More Opportunities For The Future Of Merchant Processing


  • Subscription payment plans are terrific for driving consistent revenue. Think your business isn’t right for subscriptions? Businesses ranging from meal-prep to fitness to monthly fashion shipments are using subscriptions to ramp up revenue.
  • Cyber threats will never cease. Good thing that defenses against those threats won’t rest either. Stay in the loop about enhanced POS security and ensure your staff understands protocols for managing payment data. Test employees with regular “phishing” emails or texts to see if they bite on messages like criminals could send.
  • Biometric payment authentication, which includes fingerprint and facial recognition. It is hard to imagine anything more authentic than a fingerprint, right? Merchants and customers alike want to be sure they are never hit by payment fraud, so this type of payment security has major upside.

National Processing has your future in mind with top-notch merchant services. No hidden fees. No hassles.


Start saving money and time with National Processing today.


Wrapping Up With Merchant Processing FAQ


How many Americans still use cash instead of merchant services for store purchases? 


2022 Pew Research survey showed cash use is declining each year: 41% of respondents said they used no cash in a typical week.


Are kids able to make purchases using merchant processing?


Over the years, some financial institutions have tested debit cards for “child accounts” linked to their parents’ cards. One innovative approach recently is the GoHenry debit card and app, designed to help kids learn about money, budgeting, and investing.


What are 3 ways businesses can save money on merchant processing?


1) Never rush into signing a contract until the processor representative has taken time to clearly explain fee structures. 2) Review your merchant processing statement regularly to catch mistakes and understand where the highest fees originate. 3) Ask your provider if they offer volume discount rates.

Picture of Shane McLendon

Shane McLendon

Job Title, Author

Customer focused

If we can't beat your current rates, we'll give you $500!*

We happily accept merchants processing any amount. Price guarantee for merchants processing $10,000 or more per month. Free terminals and other promotions depend on processing volume, credit and qualifications.

Customer focused

If we can't beat your current rates, we'll give you $500!*

We happily accept merchants processing any amount. Price guarantee for merchants processing $10,000 or more per month. Free terminals and other promotions depend on processing volume, credit and qualifications.