Digital money and the banking system

If you have a bank account, you already use digital money. Your account balance is the electronic representation of fiat money. Cards and phones are ways of accessing that balance — not money itself.

The origin of cards

In February 1950, Diners Club launched in New York the first payment card accepted at multiple establishments, starting with a handful of restaurants in the city [23]. The story that its founder, Frank McNamara, had the idea after forgetting his wallet at a dinner was invented by the company's own publicist, Matty Simmons, who later admitted the invention in a book [23].

Today, cards follow the ID-1 format of the ISO/IEC 7810 standard [24]. And there is an important detail: debit and credit cards are not money — they record a payment order, which moves a balance or creates a debt.

What happens behind the scenes

A card payment involves several participants at once: issuing bank, card network, acquirer, processor and, often, payment intermediaries. Each charges for its part, and security depends on the controls of all of them. Fraud exists and is fought with regulation and technology — the system works because there are rules and oversight, not because it is infallible.