In the beginning...

Short Story on Financial Innovation

"Though the concept of credit has existed longer even than money, charge accounts became popular in the early 20th century. With the invention and growing popularity of automobiles and airplanes, people now had the option to travel to a variety of stores for their shopping needs. In an effort to capture customer loyalty, various department stores and gas stations began to offer charge accounts for their customers, which could be accessed by a card.

Unfortunately, people needed to bring dozens of these cards with them if they were to do a day of shopping. McNamara had the idea of needing only one credit card.

The original form of the Diners Club card was not a "credit card" per se, it was a "charge card," since it did not carry an account of revolving credit, and charged membership fees rather than interest. People using the card paid it off each month. For the first few decades, the revenue came from merchant fees.

Previously, stores would make money with their credit cards by keeping customers loyal to their particular store, thus maintaining a high level of sales. However, the Diners Club needed a different way to make money since they weren't selling anything. To make a profit without charging interest (interest-bearing credit cards came much later), the companies who accepted the Diners Club credit card were charged 7% for each transaction while the subscribers to the credit card were charged a $3 annual fee (begun in 1951).

Initially, McNamara's new company targeted salesmen. Since salesmen often need to dine (hence the new company's name) at multiple restaurants to entertain their clients, the Diners Club needed both to convince a large number of restaurants to accept the new card and to get salesmen to subscribe. After the U.S. tax system started requiring documentation of business expenses, Diners Club offered periodic statements.

In the beginning, progress was difficult. Merchants didn't want to pay the Diners Club's fee and didn't want competition for their store cards; while customers didn't want to sign up unless there were a large number of merchants that accepted the card.

However, the concept of the card grew, and by the end of 1950, 20,000 people were using the Diners Club credit card.

The Diners Club credit card continued to grow more popular, and early developments included monthly installments, revolving credit, rotating charge accounts, and interest-free periods. The card was still primarily for "travel and entertainment," and it continued on that model, as did its closest competitor, American Express, which first appeared in 1958.

By the late 1950s, however, two bank credit cards would begin to display their versatility and dominance: Interbank (later MasterCharge and today MasterCard) and Bank Americard (Visa International).

The concept of a universal credit card had taken root and quickly spread across the world."

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As we all know, hand written checks were first used and then banks issued debit cards so we can access our personal funds. Credit cards are still around for easy access to additional funds.

Now I've never been outside the country, but I do know writing checks was difficult to get a merchant to accept if the bank was out of state. I'm sure there are ways to access personal accounts world wide, but I would imagine it involves visiting a local bank.

These innovations in finance revolutionized how we spend and use money. But what if, you could access your funds anywhere, without the need to change currencies? What if merchants didn't have to pay all those card fees? Would they willingly accept such a payment? And most importantly, with currencies worldwide being stressed beyond reason; due to an unforeseen global crisis, what if this hypothetical currency didn't depend on government or banks? What if there were a decentralized, private, secure, and globally available way to store and spend our wealth? And almost daily new avenues to invest, speculate, and be rewarded were brought to market. What if money itself became capitalised? No need for banks or any other middle man? And what if alternatives were controlled not by one entity, but by the group that held them. Any changes were voted on by the entire group? What if it were private, but transparent; concealing our identity from the public while maintaining an immutable record of deposits and withdrawals? Finally, what if the father of all these assets/payment systems were deflationary in a hyper inflated global economy?


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