Abstract
This chapter recounts how NBI fully automated the point of sale. I introduce Hock’s broader vision for electronic value exchange, discuss the debates surrounding how to make the cards machine-readable, and Visa’s role in encouraging the development and widespread adoption of low-cost, dialup, point-of-sale terminals.
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- 1.
‘Visa dial terminal pilot project final report’ (April 1982), p. 1.
- 2.
Hock (1974), p. 8.
- 3.
In the 1970s, the word “terminal” was often used for any kind of origination device. In order to avoid confusion, I will use the more distinctive terms employed today. By “POS terminal,” I mean a device used to authorize (and possibly capture) transactions at the point of sale, and by “ATM” or “cash dispenser,” I mean a device used primarily to obtain currency.
- 4.
Peirce interview. Peirce stressed that as an IBM salesperson, he had every incentive to encourage NBI to pursue the plan, but he knew that it would end in disaster, and thus was unwilling to risk the long-term relationship between the two organizations.
- 5.
Peirce correspondence.
- 6.
According to Derman, this chaining of bitmaps and fields was added during the ANSI standards process and was not part of the original IBM design.
- 7.
For a description of single-message debit transactions, see Chap. 8.
- 8.
Schantz (1982), p. 11.
- 9.
Schantz (1982), p. 13.
- 10.
Schantz (1982), pp. 15–16.
- 11.
Campbell-Kelly and Aspray (1996), pp. 176–180. In the early 1980s, Visa considered requiring a barcode on their debit card, which they were trying to sell to the supermarkets, but decided against it because it lacked the necessary capacity.
- 12.
‘NDC credit authorization pilot underway’, Payment Systems Newsletter (July 1971), p. 7, ‘Operations and systems notes’ American Banker (16 February 1972), p. 6.
- 13.
It may be surprising that MICR was never considered, but Perry Hudson, who served as chairman of the ABA card standardization task force, remarked that it was simply never suggested (Hudson interview).
- 14.
Hudson noted that OCR was the only serious competitor to the stripe, but at the time of their investigation (1970), OCR POS terminals were not yet available. Additionally, Magtek was already selling a magstripe POS reader that was being used by the airlines.
- 15.
MacKenzie argues that we construct knowledge about the properties of artifacts according to four methods: testimony of authority; induction through testing; induction through use; and deduction. Each of these methods involves a social dynamic, even deduction, which is typically thought to be asocial. See MacKenzie (1996).
- 16.
‘Magnetic stripe for credit cards urged by ABA unit’, American Banker (16 February 1971), p. 1.
- 17.
For example, see Brooke (3 November 1971), p. 6.
- 18.
Quoted in ‘Magnetic stripe for credit cards urged by ABA unit’ American Banker (16 February 1971).
- 19.
At this time, the account number was actually variable in length, but tended to be around 13 digits. Sixteen-digit numbers were not used until later.
- 20.
The encoding scheme used four data bits plus one parity bit per character, allowing for 16 distinct values. This was enough for the digits 0 through 9, plus a few special values used as field separators and begin/end markers.
- 21.
This point was made by Bertram Tobin of Chase Manhattan Bank, quoted in ‘Standards are the glue’, Payment Systems Newsletter (July 1972), p. 1.
- 22.
The airline encoding scheme used 6 data bits plus one parity bit per character, providing a maximum of 79 alpha-numeric characters on the stripe.
- 23.
Derman interview.
- 24.
Brooke (14 September 1973), p. 6.
- 25.
Brooke (3 November 1971), p. 1. This article is an edited version of Warfel’s speech to the Data Processing Supplies Association.
- 26.
Recall that these early POS terminals performed authorization only. Merchants still completed a paper sales draft for each transaction, and it was these paper drafts that would be cleared and settled.
- 27.
Warfel quoted in Brooke (3 November 1971), p. 1.
- 28.
Brooke (3 November 1971), p. 1.
- 29.
‘Beating the new credit cards’, Business Week (11 August 1973), pp. 120–122.
- 30.
Brooke (9 April 1973), p. 1.
- 31.
Brooke (13 April 1973), p. 1.
- 32.
For the basic concept, see United States Patent number 3819910. For details of the actual encoding method, see numbers 3775755 and 3858032.
- 33.
Tyson (25 October 1973), p. 1.
- 34.
Brooke (8 May 1975), p. 1.
- 35.
Mark Ponton, VP of Marketing, Personal Banking Group, quoted in Tyson (25 October 1973), p. 1.
- 36.
Brooke (11 September 1974), p. 1.
- 37.
American Banker (14 November 1973), p. 1.
- 38.
Nilson (March 1978), Report No 182, p. 1.
- 39.
For example, see Brooke (18 October 1972), p. 1.
- 40.
Information on the Visa magstripe standard comes from interviews with Derman.
- 41.
Kutler (6 February 1979), p. 1. See also Kutler (12 June 1979), p. 3.
- 42.
Information on the Dial Terminal Project comes from interviews with Fojtik, Harrison, Derman, Powar, Peirce, and Pittenger, as well as the ‘Visa dial terminal pilot project final report’ produced by Visa USA (April 1982).
- 43.
‘Visa dial terminal pilot project final report’ (April 1982), p. 3.
- 44.
Although the final report mentions local calls to acquirers as one of the telecommunication paths, Powar recalled that all calls during the test actually came to San Mateo.
- 45.
The MIPs were later renamed “Visa Access Points” (VAPs). Powar noted that they used the limited number of MIPs available that year as an incentive for terminal adoption; to get a MIP, the member had to purchase 200 terminals.
- 46.
Pittenger and Powar interviews.
- 47.
‘Visa dial terminal pilot project final report’ (April 1982), p. 3.
- 48.
‘Visa dial terminal pilot project final report’ (April 1982), p. 37.
- 49.
The importance of this fee is discussed in Chap. 3.
- 50.
The TIRF was not the first time Visa USA had offered a special incentive rate. In 1979, they offered an Electronic Interchange Reimbursement Fee (EIRF) to merchants who used their electronic cash register systems to authorize all transactions and submit them electronically to their processor within three days. This rate was originally developed to entice JC Penney, one of the three largest retail chains in America, to accept Visa cards. The details of this deal, which became highly controversial, will be discussed in Chap. 9.
- 51.
Cleveland (1999), p. 20.
- 52.
Cleveland (1999), p. 22.
- 53.
Cleveland (1999), p. 20.
- 54.
Cleveland (1999), pp. 22–23.
- 55.
Powar interview.
- 56.
Powar, Derman, and Fojtik interviews.
- 57.
Powar interview.
- 58.
Derman interview.
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Stearns, D.L. (2011). Automating the Point of Sale: Encoding Standards and Merchant Dial Terminals. In: Electronic Value Exchange. History of Computing. Springer, London. https://doi.org/10.1007/978-1-84996-139-4_7
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