Automated Teller Machines
One of the first things that banks and financial institutions did to implement electronic funds transfer (EFT) in the public arena was to cause the proliferation of Automatic Teller Machines, or ATMs. Traditionally, the front-line contact that banks and other savings organizations had with the public was through human tellers. Going to the bank on payday and depositing your check was a tradition for many years. Unfortunately, at least from the bank’s point of view, being able to handle the huge flow of day-to-day transactions created by paper checks also caused the need for an army of people to serve the customers. Someone had to be there to take your check, record the transaction, and give you a receipt or cash—that was the teller. However, many more people were needed behind the scenes to verify the transactions and actually complete the transfer of money between accounts. In 1984, Ian Reinecke estimated, “…between 60 and 70 percent of bank staff were employed in processing checking accounts” (Electronic Illusions, Ian Reinecke, p. 127, 1984, Penguin Books, NY). Most of this work went on after hours, away from the view of the customers, but it consumed incredible resources. And the numbers of transactions were growing tremendously every year as the population and economy grew. Just imagine the potential savings in operational expenses if banks could automate this whole process and eliminate the manual manipulations of paper and currency.
In the same way that all industries had found that computerized electronics was a great asset in reducing labor costs, so too the banking industry began using EFT and ATM’s to shrink their staffing needs. The typical ATM could duplicate most of the services of a live teller; deposits, withdrawals, and money transfers between accounts all could be made with relative ease. More significantly, the terminals could be located outside the bank lobby, allowing 24 hour access and greater customer convenience. For the banks ATM’s became mini-branches that extended their financial territory and customer base far beyond physical buildings. As a result, many ATMs rapidly found homes inside major retail outlets, convenience stores, gas stations, and other highly trafficked locations, a situation welcomed by businesses because it provided instant cash for customers.
However, there was one significant aspect of ATM operations that made them much more than just labor saving devices or simple extensions of the banks’ teller windows. Unlike the neatly defined world of cash- and check-based banking that was prevalent forty years ago, these new electronic devices also began to blur the divisions between banks. Just as the potential of Electronic Funds Transfer resulted in networking the financial institutions into one gigantic system, so banks were becoming linked to people through ATMs. Banks heavily touted this electronic network and its advantages from the very beginning:
“The system is unusual in that a customer of any bank holding membership in the Money Network can use any ATM in the system, no matter what bank actually owns the machine. All transactions are electronically routed to the proper bank through a switching center operated by all of the member banks. Routing is determined by the magnetic coding on the customer’s plastic ATM card” (American Bank newsletter, 1981).
In 1982, Visa International announced plans to create a worldwide network of ATMs and introduced a new electronic card to go along with it. Of all the credit card companies going the electronic route, “Visa’s plans seem the most ambitious”, said the Economist magazine (Sept. 18, 1982, p. 94-96). In fact, these plans were so extensive that Visa readily admitted “…they will take most of the rest of the century to implement”. Visa envisioned itself as being the major “conduit” for the great majority of international electronic banking.
“Visa is spending $15m-20m to upgrade its international data-transmission system to allow banks to connect their ATM networks. A Visa cardholder away from home will be able to draw cash from ATMs anywhere in the world.”
Of course, MasterCard was not going to be left behind in this race. They too quickly issued new cards that would work with ATM terminals. “Both Visa and MasterCard are hoping that the change in card design will…lead to a rapid expansion of electronic shopping”. The two companies were investing heavily and encouraging banks to hook into their systems in order to quickly form a world-encompassing, EFT compatible network.
All around the globe, regional banks formed networks of ATM machines that could make use of these new cards. Independent ATMs also were deployed, which offered compatibility with multiple banks and different bank cards. Within a few short years, a person from one country could use an ATM in another country and instantly have a currency exchange occur, which gave them cash in the local currency while debiting their account in their home country. These powerful networks ultimately brought the age of the cashless buying and selling one gigantic step closer to reality.
It is quite clear that from the earliest beginnings of this technology the major money handling institutions of the world were consolidating their operations and directing them toward the same electronic goal. The initial manifestation of this objective was to have an ATM network that would provide universal banking services. The use of an ATM along with a credit or debit card and a special Personal Identification Number (PIN) would give any person access to their bank account no matter where they were. In the end, when the entire Western Alliance consisting of North America, Europe, and Japan had successfully integrated all their systems into a single network, there would be no more need to carry cash. All you would have to do if you wanted to purchase an item would be to go to the nearest ATM (they would be ubiquitous) and withdrawal some cash.
Point of Sale Terminals
However, ATM’s would not be the final solution to the common electronic goal, because they still involved the use of paper money. Yet, in a second generation machine called a Point of Sale terminal (POS), the prospect of having a truly cashless society suddenly took a giant leap forward. The potential of POS for achieving a totally automated economy was enormous. It was logical to assume that if the capability existed for electronic banking to the extent of obtaining cash out of an account using a networked ATM system, then the technology also must be ripe for eliminating the need for physical money altogether. POS terminals were seen as a key ingredient in the transition to this goal.
Instead of just having an ATM at or near each place of business, the banks and retail outlets started to construct a network of intelligent cash registers with direct EFT links to member banks and also connected to the global network. These POS terminals were different from the normal cash registers that were used in the past. Most of the previous cash registers, no matter how computerized they may have been, only functioned as recorders of each transaction and repositories for the cash and checks a business received. They may have involved computerized inventory control, but they were not connected to a broader network and could not communicate with a customer’s bank. The POS terminal, however, would still be able to handle cash and record each purchase, but it was also designed for cashless buying and selling. In this sense, it was completely tied into the global EFT network so that every transaction could be immediately recorded, validated, and debited to the appropriate customer’s account.
The first POS terminals could handle ATM cards and credit cards as well as the newer debit cards. The terminal also would accommodate payment using cash or checks, but they were ultimately designed to increase the level of cashless buying and selling. If a person used a credit card, the POS network would first validate that the card was still active and then report back through the terminal that the transaction could proceed. If a debit card or ATM card was used, however, the consumer would have to punch in their PIN after swiping the card and the network would then validate the card along with the entered number and subsequently allow the transaction—almost immediately debiting the purchaser’s account. Thus, the POS terminal operated on different levels depending on how a customer wanted to complete the purchase.
The potential benefits of such a system were huge. As these systems began to go online, one official of the northern Illinois ATM network predicted,
“Within the next few years, you probably will be using your Money Network card to pay for a good number of your everyday purchases including groceries, gasoline, prescriptions, clothing and more! The Money Network card is not a charge card. Nonetheless, we predict that Point-of-Sale terminals (POS) will be a very common way to pay for the things you buy. Instead of writing checks or carrying large amounts of cash, you will simply present your Money Network card at the checkout counter. The cashier will place your card in a computer terminal capable of reading and transmitting the encoded data on the card’s magnetic stripe. Next, the cashier will enter through a keyboard the amount of the purchase. Your checking account then will be debited for the amount of the purchase and the merchant’s account will be credited—even if the accounts are at different banks. That, too, is just the beginning of the possibilities being brought about by the advent of electronic funds transfer” (Bank Notes, American Bank, 1981).
Pilot programs to test the functionality of ATM and POS networks have been carried out since the early 1970’s. In the fall of 1971, Hempstead Bank on Long Island set up POS terminals in 35 local area stores (EFTS, Electronic Funds Transfer Systems: Elements and Impact, Mark G. Bender, p. 45, 1975, Kennikat Press). They also issued special cards with computer readable data in the magnetic stripe. Customers who frequented the stores could pay for their purchases without having to bring cash or checks. The cards were just swiped or inserted into the terminals and the amount of the purchase was instantly debited from their accounts at Hempstead Bank. After that trial program, the bank went on to develop a large and completely operational POS system that they actually patented.
City National Bank of Columbus, Ohio, also started a similar program in 1971-’72 (EFTS, Bender, p. 45). Although this experiment was more limited in that the POS terminals were only designed to function as credit authorization devices, it was still a significant and successful test.
One important aspect of credit authorization terminals, even though they were not true POS systems, was that they enticed the major players in the credit card business to enter the EFT arena. The credit card companies rapidly saw the advantages of being fully compatible with the EFT systems as they developed. When the final universal network emerges Visa, MasterCard, American Express, and a host of others wanted to be there ready to provide all the services that POS technology could offer.
Other electronic banking experiments quickly followed these early examples. By the early 1980’s virtually every major urban area either had an ATM system under construction or had one on the drawing boards. Business Week reported on what it called “the most ambitious attempt yet to establish a full-fledged, retail electronic payment system” (Oct. 26, 1981). It began in Des Moines, Iowa and it was conducted along with NCR Corporation.
NCR was the biggest name in cash register technology, and it was only logical to assume that they would not be left out as the new way of electronic buying and selling was being developed. Also involved with this POS test was Dahl’s Foods, Inc., a large Des Moines supermarket chain. The system was novel at the time because it allowed customers to pay for groceries electronically by using a bank card to transfer funds from their account to the supermarket’s account. The experiment was a complete success. William J. Sinkula, a Vice-President at Kroger Company at the time, predicted that similar electronic payment systems would become common in the 1980’s. “The payoff is there. It’s just a question of how fast it develops”, he said (Business Week, 1981).
Throughout the mid-1980s, banks and other financial institutions started to establish POS terminals at gas stations, grocery and department stores, and convenience stores. As the POS network was put in place the same cards previously used in ATM terminals now could be used at retail outlets to pay for items by directly debiting the customer’s account. The effect of this transition was to slowly eliminate the need for people to carry cash or write checks and consumers definitely liked the convenience.
However, the potential of POS technology was not limited to cash registers. The proliferation of other electronic devices designed to accept card purchases of every kind was becoming commonplace. Before the age of cell phones and smart phones, land line-based pay phones were deployed with card reading slots to accept POS payments for calling charges. Virtually any machine that accepted payment for goods or services could be modified to allow POS functions if it could be connected to the EFT network.
Industrial Research & Development magazine featured an article on how the advent of EFT payments was even influencing how people paid for public transportation. They said,
“..efforts to simplify the process of fare collection by transit systems has some officials turning to magnetic information cards.” The San Diego Transit System calls it the Smart Pass. It “registers fares on plastic cards via magnetic transfer” and “deducts a ride each time the card is passed through a reading device. The device also will tell the user the value left on the card” (Industrial Research and Development, Dec., 1982).
By the mid-1990s, every city had duplicated such fare payment systems. Specially coded cards could be used in subways, buses, and trains all across the globe. The cards provided for quick and easy access to mass transit systems without the need for hiring additional tellers to accept cash and make change. Electronic card payments made the whole idea of public transportation much more efficient and economical.
With the proliferation of ATM networks and POS terminals that accepted bank cards, it wasn’t long before all of these card machines were standardized. Compatible systems quickly allowed a person holding only one kind of card to access a bank account, buy groceries, fill up a vehicle at a gas station, purchase retail goods at department stores, make long distance telephone calls, and get from place to place through public transportation systems. Through all the travels and purchases a person might choose to do, there was no more need to carry even so much as one dollar in cash. Even casinos in Las Vegas installed electronic slot machines that would accept coded plastic cards. Fred Collier of Kenilworth Systems, the installer of the slot machines was quoted as saying,
“It’s our contention that the whole gaming industry has to go cashless” (Associated Press, July 6, 1985).
From its beginnings, the transition to the cashless society was proceeding carefully and according to a master plan. The first step was the establishment of the EFT and ATM networks. This acquainted people with the new age of electronic banking where cash and checks could be replaced by cards and electronic communications. Next, was the beginnings of true POS buying and selling where bank cards could be used to purchase any goods or services with direct transfer from personal bank accounts.
In his book, “The Cashless Society: EFTS at the Crossroads”, August Bequai boldly predicted where the world of electronic buying and selling was heading. He said,
“…the 1990s augurs a society where computers will govern every facet of the individual’s daily life. Each home will be equipped with a computer terminal; banking will be conducted from the comfort of one’s home. By simply using a telephone, the average citizen will be able to pay bills. Funds will be transferred internationally via satellite communications, through a global computerized financial network.”
Bequai also openly admitted,
“…we are now on the threshold of the cashless society, a society in which funds and related financial data are transferred, electronically, with the aid of computers” (Cashless Society, Bequai, p. 1).
The Mellon Bank published a two-page advertisement on the advantages of electronic payment systems. In it they addressed some of the major reasons for going to an EFT society, especially in the business world. They said that the most obvious advantage of electronic transfers comes from their inherent speed. In a world where trillions of dollars are transferred every week via EFT this advantage is readily seen.
“An electronic order travels at the speed of light—not at the speed of couriers. Orders and invoices transmitted electronically can never be lost in the mail. Nor are they as vulnerable to human error, since they’re handled by fewer people” (Economist, May 4, 1985).
The Lone Star National Bank in Dallas was one of the first to take a bold step into this new electronic age. By the mid-1980s they transitioned from standard cash-based operations to having absolutely no cash on deposit in the bank’s safe. They were perhaps the first bank to operate completely without cash and it was a radical step. So how were customers supposed to interact with their accounts? Through the local ATM network, of course! They realized that not having cash on hand completely removed the threat of armed robberies. It also got rid of the need for security guards and armored cars to transport cash. At the same time, it enabled them to reduce labor costs, offer higher interest rates on deposits, and eliminate customer lines at teller windows.
Since the early experiment of Lone Star National many other banks and financial institutions have gone cashless. Especially banks that have no physical location for customers to visit but exist solely on the Internet often operate with no cash on hand. Everything is done through electronic transactions using bits of digital currency accessible only through Internet accounts and EFT. Even some retail businesses around the world have eliminated cash transactions, especially in regions where microprocessor equipped cards have replaced traditional credit and debit cards (see Smart Cards). In the near future, it won’t be merely an option to do banking or pay for something electronically it will be absolutely required to access your money and for most routine buying and selling. When that transition is complete, the world will be ripe for the coming of the Antichrist and the Mark of the Beast.
With the establishment of worldwide ATM and POS networks during the 1980s and 1990s, the transition from cash to checks then to credit cards and finally to debit cards proceeded rapidly. Since 1996 the use of debit cards has been increasing at over 20% per year, and in 2006 their use actually exceeded the amount of credit card transactions (Borzekowski, Kiser, and Ahmed; 2006; Consumer’s use of debit cards: Patterns, preferences, and price response; Federal Reserve Board, Washington, D.C.). Over this same period, the annual rate of ATM cash withdrawals and the use of credit cards was basically flat or little changed. Consumers in the U.S. and in other developed nations were definitely moving away from cash and credit and toward debit payments.
In 2012, a survey of financial institutions by PULSE, a Discover Financial Services (NYSE: DFS) company that issues millions of debit cards, said that debit card use was growing at 15%/year for PIN-based transactions and about 8 percent/year for signature-based transactions (https://www.pulsenetwork.com/news/archive/2012/debit-issuer-study.html). With the recent Federal government legislation in the U.S. that limits the fees that financial institutions can impose for PIN-based transactions, the use of debit card purchases has increased dramatically. Today, over 76% of U.S. consumers now have at least one debit card and they use it to purchase on average over $8600 of goods and services each year.
It is now becoming obvious that all the technological developments of the past 30-40 years are merging to create a completely new economic system. The combination of computer technology and an extensive network infrastructure has created the foundation for the system to function. At the same time, the proliferation of credit and debit cards as cash substitutes has moved people away from physical currency or checks and toward the use of EFT networks. Meanwhile, ATMs provided convenient deposit and withdraw points all around the world and the advent of POS provided the means to implement cashless transactions at every retail and commercial business. As we will soon see, the next-generation card and EFT system will be dedicated not merely to credit or debit operations, but for the full implementation of a pre-Mark cashless society with most of the features needed to completely fulfill the prophecies in the book of Revelation.
Next: The Rise of the Internet