Cloud-Money: A Review-Cash’s Clipping of Capitalism & AI’s Wings

Jeff Yost provides an interesting review, from a historian of technology and computing to Brett Scott´s book above entitled. I don’t always agree with Brett´s interpretation of the history of money and perhaps less with his forecasts. For full disclosure, Brett did send an advance copy of the book, which I am still working on. But find Jeff´s take on the book interesting. See the full review here.

Remittances, Cash and Fintechs in the US-Mexico Corridor (2022)

Some thoughts on: The Journey of a Remittance in the US-Mexico Corridor: From My Salary to My Family

We were invited to take part in a project around the “frictions” to deploy a central bank digital currency. We looked at why cash predominates at the start and end of the transactions in the third largest corridor by volume.

You can find our full report here

Thanks to that, we were interviewed in a couple of outlets:

Interview, “The multi-billion dollar US-Mexico remittances corridor: what you need to know”, BNAmericas (Chile), (July 1, 2022).

Interview by Bradley Cooper, “How ATMs deliver remittances”, ATMmarketplace (USA), (August 2, 2022). Reprinted by Cash Essentials (Switzerland): (English) and (Spanish) (August 17, 2022).

Photo by Igal Ness on Unsplash

How debit cards changed our lives

Debit cards are critical and a momentous innovation for the actual implementation of the cashless economy as they give direct access to liquid balances at the point of sale.

In the latest contribution to ADP ReThink Quarterly (1 February 2022 — Issue 4: Security), I recount the failed emergence of debit cards in the USA during the 1970s and their growth from initiatives in the UK at the end of the 1980s. Read the full article here.

Cash and Covid (La transformación en el uso del efectivo y los pagos digitales durante la pandemia) (An update)

We have published an updated version of our study on the impact of COVID on the use of cash, with Manuel Bautista Gónzalez and Ignacio Gónzalez Correa.

Abstract follows and full article avalaible here but only in Spanish.

No hay evidencia sustancial de que la pandemia de la COVID-19 represente un cambio estructural hacia una economía sin efectivo (cashless) en el sector de pagos minoristas. En el corto plazo, los consumidores aumentaron su volumen de pagos digitales y sin contacto (contactless) como respuesta a los confinamientos y creencias de que el efectivo podría propagar el virus. Sin embargo, lo anterior no ha resultado en una reducción permanente en el uso o eliminación de billetes y monedas. Además, en muchos países se observó la «paradoja del efectivo», es decir, una disminución del efectivo como medio de pago y, simultáneamente, un alza en su demanda precautoria ante la incertidumbre y el deterioro en las expectativas económicas.

Palabras clave: efectivo, economía sin efectivo, sociedad sin efectivo, billetes y mo-
nedas, pagos digitales, COVID-19, sistema de pagos minorista, España, Estados Unidos, Reino Unido, México.

Definitive and uncontroversial evidence is yet to emerge that the COVID-19 pandemic brought about a structural shift to a cashless economy in the retail payments sector. In the short term, consumers increased their volume of digital and contactless payments in response to lockdowns and beliefs that cash could spread the virus. However, this has not resulted in a permanent reduction in the usage or elimination of banknotes and coins. Moreover, there was a «cash paradox» in many countries, i.e., a decrease in the demand of banknotes as means of payment and, simultaneously, a rise in its precautionary demand of cash given consumers’ heightened uncertainty and the deterioration of economic expectations.

Keywords: cash, cashless economy, cashless society, banknotes and coins, digital payments, COVID-19 pandemic, retail payments, Spain, United States, United Kingdom, Mexico.

JEL classification: E42, G20, L81, N20

How the rise of cash machines changed payday

The first Bankomat in Tel Aviv opened to the public in 1970. IPPA Staff, The National Library of Israel, Israel – CC BY. Europeana

After payroll went digital, people still needed cash, mobbing bank branches on paydays. In the 1970s, banks started making big investments in a new innovation: the Automated Teller Machine.

[See full article in ReThink Quarterly (15 October 2021).]

Early cash machine activation token (Bankomat). Courtesy of Lars Ardvisson.

Identification, the fourth function of money

This was an original contribution to The Conversation (France). Posted as per original and creative commons licence.

Translated from the French by the author with Deep L

Patrice Baubeau

Senior Lecturer HDR, History, Economic History, Université Paris Nanterre – Université Paris Lumières

Declaration of interest

Patrice Baubeau has received funding from the Comue UPL for a research project on the social uses of money and the “money of the poor” for the period 2019-2021.

Université Paris Nanterre provides funding as a founding member of The Conversation FR.

A short detour through history allows us to place the question of the three functions of money traditionally identified: standard of value, intermediary of exchanges and reserve of value, in a broader framework. This perspective reveals a fourth fundamental function, identification, which denotes the common, political and social origin of the monetary fact.

Emerging monetary tools, such as bitcoin, state cryptocurrencies, or virtual currencies used in video games, give particular weight to this function of identification and to the political and social consequences that are attached to it.

The question of identification appears alongside Aristotle’s analyses of money, in The Politics and The Nicomachean Ethics, works that focus mainly on the Polis, its limits, its organization, its justice. He thus develops, following Plato, a political and civic reflection that associates the limits of the Polis with the birth of money, whose misuse can conflict with the rules of the ideal State: 1) by making the gain of foreign trade take precedence over the solidarity of internal exchanges; 2) by pricing the exchange value over the use value; 3) by opening the infinite space of desires and speculations over the limited domain of needs.

In short, such a currency, freed from its civic dimensions, tends to become its own end, feeding inequalities and discord within the Polis. This is why money, a political artefact, is also a marker of citizenship: its use inserts the user into a political, social and ethical community and identifies him/her with it.

This function of identification through currency possession or use has not remained the prerogative of the Greek city-states: a constant feature of currencies is the concern of issuers – unless they are counterfeiters – to identify the origin of their currencies, usually territorial or political, by marks indicating the place of production, the issuer or the date.

The multiplication of social and complementary currencies since the 1970s corresponds moreover most often to a “territorial” project consisting in constituting a limited-size monetary space of solidarity. In this way, the use of money can become not only a militant act (sustainable, alternative, ecological economy…) but also support or manifest an identity – this is notably the case with the Basque currency eusko.

Cash is not synonymous with anonymity

This fourth function, this function of identification, is largely neglected in economics – historians and especially numismatists are, on the contrary, very attentive to it. However, taking it into account leads to two important contributions.

First, it reverses the usual perspective on anonymity. Anonymity no longer appears as a property of cash, but becomes one of the modalities of identification by money, which allows a much more graduated approach.

Indeed, as we wrote in a research article in 2016, there is no “one” anonymity: anonymity is always, in fact, an anonymity with respect to a person or an institution. Consequently, it is susceptible to various configurations, which are therefore part of a general function of identification.

Thus, the usual payment in cash to a merchant that one knows does not, of course, entail any anonymity of the payer with respect to the merchant. On the other hand, it does guarantee the anonymity of the merchant’s customers with respect to their banker or tax collector.

Similarly, the use of a contactless payment card results in almost complete anonymity of the customer towards the merchant, as the payment receipt does not include any exploitable element of identity, but precisely identifies the customer to the bank issuing the payment card or to the bank holding the merchant’s accounts.

In general, a process of “nationalization” of money has progressively made the limits of the modern state coincide with those of the monetary spaces of which these states have become the masters.

At the same time, the state assumes another function that is crucial for the proper functioning of civic and social life, beyond payment systems alone: the identification of individuals. This function has grown considerably since the 19th century with the development of various forms of civil status and social security, as well as the rise of enfranchisement and personal ballot.

Consequently, in a State governed by the rule of law, not only do individuals have a right to an identity that the State cannot deny them, but the methods of identification fall within the domain of the law, with the legal guarantees that surround it.

Monetary innovations change the game

Today, new monetary innovations remind us of the importance of this fourth identification function. A first model, already old, consisted in delimiting virtual spaces within which specific monetary forms are employed: massively multiplayer “game” platforms generally provide techniques for accumulating symbols of wealth in order to attach objects, services or skills to avatars.

Already in this case, the watertightness between virtual and real is imperfect, since player “farms” have developed with a view to acquiring objects or abilities in the virtual universe that are then resold in real currency to players who wish to perform. In a way, this amounts to exchanging virtual currency for real currency via virtual goods and services.

In this context, identification takes place within the closed universe of the platform in question, since the “identities” of the avatars are entirely controlled by the provider. The latter also determines the conditions of issue and use of “its” currency. We find again, but limited to a closed and virtual universe, the model of control of money and identities that territorial States carry out.

The second model, which is much more recent, stems from the innovation represented by the blockchain. The blockchain includes an identification device that validates the transaction between a seller and a buyer and makes the record of this validation available to other participants in the payment system.

On the one hand, the identification of transactions makes it essential to identify the users who carry out exchanges. But on the other hand, this identity corresponds to the one declared within the virtual monetary space, and not to an identity as recognized by a State. Moreover, nothing prevents an economic agent from creating a different avatar for each of the existing cryptocurrencies, or even from associating different IP addresses (those that characterize the machines that access the Internet). It is no coincidence that Bitcoin has quickly become the preferred currency of cybercriminals.

This is where Facebook’s diem (ex-libra) virtual currency project makes sense. Users have an identity, guaranteed by the platform and to which, more and more, rights and duties are attached, concerning freedom of expression, the integrity of the “profile”, and even the post-mortem destiny of accounts.

The risk of a lucrative and selective form of identity

Facebook is therefore able to identify its users very precisely. This is the core of its business model: selling the individual characteristics of these profiles. If a currency of its own, or almost, such as the diem, is associated with the Facebook ecosystem, the company or, more likely, the constellation of lucrative interests of which Facebook is the heart, will be able to simultaneously manage its own monetary assets and the proofs of identity related to their use.

However, leaving money in entirely private hands is not always a good idea, even if the management of money by States has also led to disasters, such as the hyperinflationary episodes in Germany in 1923, in Hungary in 1946 or in Zimbabwe since 2000. Leaving the identification of human beings in private hands is even worse: what would happen to a human being whose only proof of existence is a private act, possibly transferable and of which third parties cannot become aware?

Thus, abandoning to the highest bidder these two key elements of the construction of the ancient Polis or of the modern State, which are money and identity, announces the worst of all worlds.

Solutions exist, old and new. Central bank digital currencies (CBDCs), being tested in Asia and Europe, bear witness to this. They limit the risk of substituting a lucrative form of identity for the civic form on which our rights depend, by subjecting payment to identification rather than the reverse.

In a world where the issuance of monetary assets, the creation of identities and the management of the corresponding profiles are no longer the sole responsibility of States, it is indeed becoming urgent to reflect on the articulation of these different dimensions. Only then may we preserve the benefits of the innovations brought about by the rise of the Internet without losing our rights, our goods and our beings. And therefore we must take into account the fourth function of money: identification.

Is there a “concrete wall” for women in Latin American Fintech?

This was an original contriobution to Open Banking Excellence blog. Verbatim copy under creative commons licence.

Bernardo Bátiz-Lazo (Newcastle Business School, Northumbria University, UK), and
Ignacio González-Correa (Department of Economics, Universidad de Santiago, Chile)

We initiated a project to explore the barriers women face to become fintech entrepreneurs in Latin America. Microfinance and then fintech start-ups have focused and helped women “at the base of the pyramid” (by reducing frictions and increasing financial inclusion), but what is the situation of others and particularly towards the “top of the pyramid”? 

We believe this is an important research question because, as a growing sector within the region and other parts of the world, the fintech industry should offer gender-neutral opportunities for development and self-fulfilment. Cristina Junqueira, Co-Founder of Nubank in Brazil in 2013, the most successful fintech start-up in the region to date, suggests these opportunities are real and can be handsomely rewarded. At the same time, however, anecdotal evidence suggests there are important gender disparities in finance and engineering. Does this mean that the case of Junqueira is a fluke?  We therefore asked a group of men and women who were either employed in or had established a fintech start-up across the region to help us identify the barriers women have to wrestle.

An initial challenge was to establish industry boundaries. There is no consistent use of the term fintech. Some root the process to the 19th century while the adoption of electromechanical devices and computer technology came about throughout the 20th century. By the mid-80s, we see the appearance of its acronym (FinTech, Fintech or fintech) encompassing the business and financial impact of technological change internationally. Yet, it was not until 2012 when the concept takes off and is associated with newcomers using applications of information and communication technologies to contest retail financial services.

Since then, the creation of fintech start-ups has been particularly active in Brazil, Mexico, Colombia, Argentina, and Chile. By 2018, there were more than 1,000 fintech companies in Latin America and the Caribbean where Nubank, Mercado Pago (the payments subsidiary of Mercado Libre), Ualá, C6 Bank, and Prisma stand out as the largest and most successful by any measure. Meanwhile, according to, in 2020, $1,977 million dollars of venture capital were invested in Brazil, $567 in Mexico, $210 in Uruguay, and $187 in Colombia.

There is evidence by IDB et al. (2018) and FinteChile& EY (2021) to suggest that in Latin America women represent 30% of the workforce in fintech companies while only 1 in 10 fintech companies have achieved gender parity. Further, 80% of all fintechs have at least one woman on their payroll while in Colombia and Argentina, 16% and 12% of the fintech start-ups, respectively, have at least 50% of women on their payroll. Likewise, 20% of start-ups included women in their founder team in Chile (35% for all the region). Colombia, Mexico, Peru, and Uruguay were the countries with the highest proportion of fintech enterprises with at least one woman on the founding team. Moreover, women founders tend to have more inclusive and diverse teams and seek financial inclusion.

The gender gap, however, widened when considering teams that included women establishing a start-up as these received 15% less funding than men-only teams, while 45% of women-only start-ups did not receive external financing at all. These figures stand out when compared with the performance of fintech start-ups in the rest of the world, where enterprises with at least one woman as founder obtained results that were 63% more positive than those established by male-only teams.

With the previous evidence in mind, we asked a group of men and women who were either employed or had established a fintech start-up across the region to help us identify the barriers women have to contend to become founders. Our initial query evolved around the importance of communities and external networks for the success of start-up founders. On the one hand, male interviewees articulated the importance of having both formal and informal communities prior to and during the early stages of the start-up. They argued that making use of their community was key to sharing resources, information and gaining critical support. On the other hand, female interviewees often saw no value in forming a community prior to start-up. They would engage with other women only after having been active in fintech events. Reasons for this were not altogether clear and something we plan to investigate further. However, some did mention giving priority to family commitments for their use of spare time.

A notable result was that most male respondents in our sample saw no significant barriers or hurdles in the way for women to enter fintech either as founders or employees. To the contrary, female interviewees were quite articulate in their description of a “glass wall”, “maze” or “labyrinth” in the way for them to access and fill spaces which have been typically dominated by men. For instance, even though there are no formal barriers for women to pursue a career in economics, finance, technology or engineering, few actually choose this path. Then recruitment advisors often find it difficult to appoint women to senior positions as they are seldom given opportunities to develop and demonstrate abilities to overcome challenges early on.

It is also the case that throughout the 20th century in Latin America, self-employment has been move comment amongst women in lower income strata than the educated (see the work of Escobar Andrae). This trend seems to remain the case as a 2016 survey in OECD economies, reported that one in ten employed women was self- employed, almost half the rate of self-employed men (18%). In other words, there are simply too few women owned businesses or public companies where women have reach the top positions.

There is thus a vicious cycle. Few women pursue a career in economics, finance, technology or engineering. Few educated women become self-employed. And for those handful that do follow this path,  a lack of opportunities prevents them developing a track record showing an ability to sort out challenges and expertise, thus closing many doors to senior positions or having the skills and track record to become fintech founders. In turn, this results in a very small pool of female directors that can signal positive opportunities for development to or actually mentor young people.

These results led us to believe that our future research should explore in greater depth the importance of “soft skills” such as networking and community building for the establishment of fintech start-ups. This will also entail looking at how training opportunities and women-focused support networks can help towards making fintech entrepreneurship more accessible and equitable. We also are to query the socio-economic norms and barriers which disincentivise middle class educated women to become self-employed.

How the digitalization of payments sets the scene for a cashless society

About 50 years ago, companies started embracing direct deposit for employees’ wages, laying the foundation for today’s digital payments.

[See full article in ADP ReThink Now (June 1, 2021).]

Related publications

Digitalization of payments in Sweden

Digitalization of wages in Germany

Early “Frictions” in the Transition towards Cashless Payments

[Forthcoming in Interfaces Essays and Reviews in Computing and Culture

By Bernardo Bátiz-Lazo (Northumbria) and Tom R. Buckley (Sheffield)

Email – and

Abstract – In this article we describe the trials and tribulations in the early stages to introduce cashless retail payments in the USA. We compare efforts by financial service firms and retailers. We then document the ephemeral life of one of these innovations, colloquially known as “Hinky Dinky”. We conclude with a brief reflection on the lessons these historical developments offer to the future of digital payments.

JEL – E42, L81, N2, N8,

Let’s go back to the last quarter of the 20th century. This was a time when high economic growth in the USA that followed the end of World War II was coming to an end, replaced by economic crisis and high inflation. It was a time where cash was king, and close to 23% of Americans worked in manufacturing. A time when the suburbs – to which Americans had increasingly flocked after 1945 escaping city centres – were starting to change. Opportunities for greater mobility were offered by automobiles, commercial airlines, buses, and the extant railway infrastructure.

This was the period that witnessed the dawn of the digital era in the United States, as information and communication technologies began to emerge and grow. The potential of digitalisation provided the context in which an evocative idea, the idea of a cashless society first began to emerge. This idea was associated primarily with the elimination of paper forms of payment (primarily personal checks) and the adoption of computer technology in banking during the mid-1950s (Bátiz-Lazo et al., 2014). Here it is worth noting that, although there is some disagreement as to the exact figure, the volume of paper checks cleared within the U.S. had at least doubled between 1939 and 1955, and the expectation was, that this would continue to rise. This spectacular rise in check volume, with no corresponding increase in the value of deposits, placed a severe strain on the U.S. banking system and lead to a number of industry-specific innovations emerging from the 1950s such as the so-called ERMA and electronic ink characters (Bátiz-Lazo and Wood, 2002).

The concept of the cashless, checkless society became popularised in the press on both sides of the Atlantic in the late 1960s and early 1970s. Very soon the idea grew to include paper money. At the core of this imagined state was the digitalization of payments at the point of sale, a payment method that involved both competition and co-operation between retailers and banks (Maixé-Altés, 2020 and 2021).

In the banking and financial industry new, transformative technologies thus began to be trialled and developed in order to make this a reality (Maixé-Altés, 2019). Financial institutions accepting retail deposits had been at the forefront of the adoption of commercial applications of computer technology (Bátiz-Lazo et al., 2011). Early forms of such technical devices mainly focused on improving “back office” operations and encompassed punch card electromechanical tabulators in the 1920s and 1930s; later, in the 1950s, analogue devices (such as the NCR Post Tronic of 1962) were introduced, and, in the late 1960s the IBM 360 became widely adopted.  But at the same time, regulation curtailed diversification of products and geography (limiting the service banks could provide their customers). These regulatory restrictions help to explain ongoing experiments with a number of devices which involved a significant degree of consumer interaction including credit cards (Stearns, 2011), the use of pneumatic tubes and CCTV in drive through lanes, home banking, and Automated Teller Machines (ATMs), which despite being first introduced in the late 1960s and early 1970s, would ultimately not gain acceptance until the early 1980s (Bátiz-Lazo, 2018).

Like the banking and financial industry, the retail industry, with its very real interest in point of sale digitalization, was exposed to the rise of digital technology in the last quarter of the 20th Century. The digitalisation of retailing occurred later than in other industries in the American economy (for a European account see Maixé-Altés and Castro Balguer, 2015). Once it arrived, however, the adoption of a range of digital technologies including Point of Sale (POS) related innovations such as optical scanning, and the universal product code (UPC), were extensive and transformed the industry (Cortada, 2003). From the perspective of historical investigation, the chronological place of such innovation, beginning in the mid-1970s, is associated with a remarkable period of rapid technological change in U.S. retailing (Basker, 2012; Bucklin 1980). Along with rapid technological change, shifts in the structure of retail markets, in particular the decline of single “mom and pop stores” and the ascent of retail chains also became more pronounced in the 1970s (Jarmin, Klimek and Miranda, 2009). Two decades later, such large, retail firms would account for more than 50% of the total investment in all information technology by U.S. retailers (Doms, Jarmin and Kilmek, 2004). 

What connects the transformative technological changes that occurred in both the banking industry and the retail industry during this period, is that both sought to utilise Electronic Funds Transfer Systems, or EFTS, a way to reduce frictions for retail payments at the point of sale. During the 1970s and 1980s, the term EFTS was used in a number of ways. Somewhat confusingly, it was applied indistinctively to specific devices or ensembles, value exchange networks, and what today we denominate as infrastructures and platforms.  While referring to it as a systems technology for payments it was defined as one:

“in which the processing and communications necessary to effect economic exchange and the processing and communications necessary for the production and distribution of services incidental to economic exchange are dependent wholly or in large part on the use of electronics” (National Commission on Electronic Funds Transfer, 1977, 1).  

Ultimately EFTS would come to be extended to the point of sale and embodied in terminals which allowed for automatic, digital, seamless transfer of money from the buyer’s current account to the retailer’s, known as the Electronic Funds Transfer at the Point of Sale, or EFTS-POS (Dictionary of Business and Management: 2016). 

One of the factors that initially held back the adoption of early EFTS and the equipment that utilities it, was the lack of infrastructure that would connect the user, the retailer, and the bank (or wherever the user’s funds were stored). As Bátiz-Lazo et al. (2014) note the idea of a cashless economy that would provide this infrastructure was highly appealing… but implementing its actual configuration was highly problematic. Indeed, in contrast to developments in Europe, some lawmakers in Congress considered the idea of sharing infrastructure by banks as a competitive anathema (Sprague, 1977). Large retailers such as Sears had a national presence and were able to consider implementing their own solution to the infrastructure problem. Small banks looked at proposals by the likes of Citibank with scepticism while they feared it may pivot the dominance of large banks.  George W. Mitchell (1904-1997), a member of the Board of the Federal Reserve, and management consultant John Diebold (1926-2005), were outspoken promoters of the adoption of cashless solutions but their lobbying of public and private spheres was not always successful. Perhaps the biggest chasm between banks and retailers though, resulted from the capital-intensive nature of the potential network and infrastructure that any form of EFTS required.

 Amongst the alternative solutions that were trialled by banks and retailers, there were a number of successes, such as ATMs (Bátiz-Lazo, 2018) and credit cards (Ritzer, 2001; Stearns, 2011). Both bankers and retailers were quick to see a potential connection between the machine-readable cards and the rapid spread of new bank-issued credit cards under the new Interbank Association (i.e., the genesis of Mastercard) and the Bankamericard licensing system (i.e., the genesis of Visa), both of which began in 1966, just as the vision of the cashless society was winning acceptance. Surveys from the time indicate that at least 70 percent of bankers believed that credit cards were the first step toward the cashless society and that they were entering that business in order to be prepared for what they saw as an inevitable future (Bátiz-Lazo et al., 2014).

There were also a number of less successful attempts that, far from being relegated to the ignominy of the business archives, offer an important insight into the implementation of a cashless economy which is worth preserving for future generations of managers and scholars. Chief amongst these is a system widely deployed by the alliance of U.S. savings and loans (S&L) with mid-sized retailers under the sobriquet “Hinky Dinky”. Interestingly, Maixé-Altés (2012, 213-214) offers an account of a similar, independent, and contemporary experiment in, a very different context, Spain. The Hinky Dinky moniker was derived from an experiment by the Nebraskan First Federal Savings and Loan Association, which in 1974 located computer terminals into stores of the Hinky Dinky grocery chain – which at its apex operated some 50 stores across Iowa and Nebraska. The Hinky Dinky chain was seen by the First Federal Savings and Loan Association as the perfect retail partner for this experiment owing to the supermarket’s popularity with local customers; an appeal that would be beneficial to this new technology. The popularity of Hinky Dinky was particularly valuable, as the move by First Federal Savings and Loans, to establish an offsite transfer system challenged, but did not break banking law at that time (Ritzer, 1984).

At the heart of the technical EFT system initiated by First Federal, formally known as Transmatic Money Service, was a rudimentary, easy-to-install package featuring a point-of- service machine, with limited accessory equipment in the form of a keypad and magnetic character reader. The terminal housed in a dedicated booth within the store and was operated by store employees (making a further point of the separation between bank and retailer). The terminal enabled the verification and recording of transactions as well as the instant updating of accounts.  The deployment of the terminals in Hinky Dinky stores shocked the financial industry because it made the Nebraska S&L appear to be engaging in banking activities, while the terminals themselves provided banking services to customers in a location that was not a licensed bank branch! 

From its origins in a mid-sized retail chain in the Midwest, some 160 “Hinky Dinky” networks appeared across the USA between 1974 and 1982, before S&Ls abandoned them in favour of ATMs and credit cards. These deployments included a roll out in 1980 by the largest savings banks by assets in the USA at the time, the Philadelphia Savings Fund Society or the PSFS. Rather than commit to the large capital investment that ATMs necessitated, without guarantees of its viability or a secure return on investment, the PSFS pivoted the “Hinky Dinky” terminals as part of the rolled out of its negotiable order of withdrawal (NOW) accounts (commercialised as “Act One”).

The NOW accounts were launched in the early 1970s by the Consumer Savings Bank, based in Worcester, MA (today part of USBank), as way to circumvent the ban on interest payment and current account deposits imposed on S&Ls by Depression era regulation. Between 1974 and 1980, Congress took incremental steps to allow NOW accounts nationwide, something the PSFS wanted to take advantage of. Consequently, in February 1979, the PSFS signed an agreement with the Great Atlantic and Pacific Tea Company (A&P) to install Transmatic Money Service devices in 12 supermarket locations. This was part of the PSFS wider strategy “to provide alternative means for delivering banking services to the public” (Hagley Archives: PSFS Collection).

 These terminals did not, however, allow for the direct transfer of funds from the customer’s accounts to the retailers. Rather the terminals, which were operated by A&P employees, were activated by a PSFS plastic card that the society issued to customers, and enabled PSFS customers with a Payment and Savings account to make withdrawals and deposits.  The terminals also allowed PSFS cardholders and A&P customers to cash cheques.

The equipment used by PSFS, the Hinky Dinky devices, therefore represent an interesting middle ground which improved transaction convenience for consumers, was low risk for the retailer and was relatively less costly for banks and financial institutions than ATMs (Benaroch & Kauffman, 2000). 

One of the most interesting features of the Hinky Dinky terminals as they were deployed by the PSFS and First Federal Savings, was that they represent co-operative initiatives between retail organisations and financial institutions. As mentioned before, this was not necessarily the norm at the time. As the legal counsel to the National Retail Merchants Association (a voluntary non-profit trade association representing department, speciality and variety chain stores) wrote in 1972: “Major retailers… have not been EFTS laggards. However, their efforts have not necessarily or even particularly been channelled toward co-operative ventures with banks,” (Schuman, 1976, 828). These sentiments were echoed by more neutral commentators who similarly highlighted the lack of dialogue between retailers and financial institutions on the topic of EFTS (Sprague, 1974). The extent to which retailers provided financial services to their customers had long been a competitive issue in the retail industry: the ability of chain stores, such as A&P in groceries and F.W. Woolworth in general merchandise, to offer low prices and better value owed much to their elimination of credit and deliveries (Lebhar, 1952). With the advent of EFT retail organisation’s provision of financial services raised the prospect of this becoming a competitive issue between these two industries.

The prospect of a clash between retailers and banks was increased moreover, as there had always been other voices, other retailers, who had been willing to offer credit (Calder, 1999). In the early years of the 20th century, consumer demand for retailers to provide credit grew. This caused tension with the cash only policies of department store such as A.T. Stewart and Macy’s, and the mail order firms Sears Roebuck and Montgomery Ward (Howard, 2015). Nevertheless, it was hard to ignore such demand as evidenced by Sears decision to begin selling goods on instalment around 1911 (Emmet and Jeuck, 1950, 265). Twenty years later, in 1931, the company went a stage further by offering insurance products to consumers through the All State Insurance Company. Other large retail institutions, however, resisted the pressure to offer credit until much later (J.C. Penney for instance would not introduce credit until 1958). Credit activities by large retailers, nonetheless, were determinant for banks to explore their own credit cards as early as the 1940s while leading to the successes of Bankamericacard and the Interbank Association in the 1960s (Bátiz-Lazo and del Angel, 2018; Wolters, 2000).  

The barriers between banks and financial institutions on the one hand, and retailers on the other, continued to remain fairly robust. Signs that this was beginning to change began to emerge in the 1980s, when retailers, such as Sears began to offer more complex financial products (Christiansen, 1987; Ghemawat, 1984; Raff and Temin, 1997). Yet, the more concerted activity by retailers to diversify into financial services, would ultimately be stimulated by food retailers (Martinelli and Sparks, 1999; Colgate and Alexander, 2002). The Hinky Dinky System however shows that a co-operative not just a competitive solution was a very real possibility.   

In 2021 we are witnessing an extreme extension and intensification of these trends. Throughout the ongoing Covid-19 pandemic, the use of cash has greatly declined as more and more people switch to digital payments. In the retail industry, even before the pandemic, POS innovations were becoming increasingly digital (Reinartz and Imschloβ, 2017) as retailers shifted toward a concierge model of helping customers rather than simply focusing on processing transactions and delivering products (Brynjolfsson et al., 2013). Consequently, the retail-customer interface was already starting to shift away from one that prioritised the minimisation of transaction and information costs toward an interface which prioritised customer engagement and experience (Reinartz et al., 2019).

A second feature of the pandemic has been the massive increase in interest in crypto currencies, in its many different forms, around the world. This is most apparent in the volatility and fluctuations in price of Bitcoin, but is also evident in the increased prominence of alternative fiat currencies (such as Ether). Indeed, even central banks in Europe and North America are discussing digital currencies, the government of El Salvador has made Bitcoin legal tender, while the People’s Bank of China have launched their own digital currency in China. A further manifestation of the momentum crypto currencies are gaining include the private initiatives of big tech (such as Facebook’s Diem, formerly Libra). Yet, in spite of all of this latent promise, transactions at point of sale with crypto currencies are still minuscule and time and again, surveys by central banks on payment preferences consistently report people want paper money to continue to play its historic role.

It thus remains too early to forecast with any degree of certainty what the actual long-run effects of the virus, social distancing and lockdowns will have on the use of cash, how consumers acquire products and services, and what these products and services are. It is also uncertain whether and if greater use of crypto currencies will lead to a decentralised management of monetary policy (and if so, the rate at which this will take place). It is though almost certain that consumer’s behaviours, expectations and habits will have been altered by their personal experiences of Covid. In this context the story behind “Hinky Dinky” reminds us to be sober at a time of environmental turbulence and wary of extrapolating trends, to better understand the motivation driving the adoption of new payment technology as some of these trends, like “Hinky Dinky”, might look to have wide acceptance but to result in a short-term phenomenon.      


We appreciate helpful comments from Jeffry Yorst, Amanda Wick and J. Carles Maixé-Altés. As per usual, all shortcomings remain responsibilities of the authors.


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Happy Birthday Credit Cards! Redux

Photo by Paul Felberbauer on Unsplash

For a long time, one of the pillars of the cashless economy has been the advent of bank-sponsored credit cards (at the time called universal payment cards). There are several books about it as well as academic papers, of these my favourite is that by Dave Stearns. You can also see a video by Lana Swartz discussing her book which touches on the genesis of Diner’s Club.

Today (18.Sep.2020), David Birch reminds of the genesis of this payment medium in his column while celebrating the 58th anniversary to what was to become VISA. Throughout his writings, Birch has had a preference for the insight story by Joe Nocera’s “A Piece of the Action “(which, of course, Dave and Lana considered in their work).

However, I had to somewhat disagree with Birch’s version of events. For one I think he is giving too much credit to Diner’s, which was a travel and entertainment card. He is also downplaying the role of large retailers, which offered credit to customers and the main competitors for the banks.

Another point of departure is whether the “combination of regulation and technology” sorted all the problems. In terms of technology, the magnetic stripe was necessary. But at a more fundamental level were the computer systems that enabled to process the large volume of payments within deadlines.

There has been a lot of emphasis on how credit cards were posted indiscriminately for their adoption. We wrote on the UK experience of Barclaycard. However, banks in the USA had been attempting to offer an alternative to store credit since at least the 1940s. Geographic restrictions at the time in the USA led to the development of a business model that enabled users to cross state lines (something difficult to do with personal cheques or the yet to develop ATM network). I think that was part of the key to explaining the success of VISA (and shortly after what was to become Mastercard, launched by Illinois banks which at the time was a single branch state). So a model in which banks were able to network on creating a platform is the argument that Evans and Schmalensee used in their seminal work on two-sided markets. 

However, in a paper with Gustavo del Angel, we argued that American banks made their proposition superior to that of single retailers thanks to their financial muscle and contacts with diverse retailers. It was also the case that the international network built thanks to “monopoly” positions of large incumbent banks in different countries, which eventually became and remain the biggest acquirers in their territory.

Here the non-discrimination clause (where paying by cash was not to be less expensive than paying plastic) was a critical achievement in the marketing of the card by banks amongst retailers. Retailers accepted the cards (and pay banks a commission when customers used the card), based on market studies showing customers with cards would purchase more. The one issue was that these studies prepared by the banks or credit card companies themselves.

It was also the case that many international licences achieved positive cash flows much earlier than expected. Hence the risk of reading too much on developments in the US, where banks were much smaller in terms of branches and customers than in Europe, Japan and large Latin American countries.

In short, I agree with Birtch that:

That the evolutionary trajectory of credit cards was not a simple, straight, onwards-and-upwards hockey-stick to glory and to gross margins that merchants can only dream of.

But the story has perhaps more twists and turns than most people give credit.


RePEc Papers mentioned in this entry:

Bernardo Batiz-Lazo & Gustavo A. Del Angel, 2016. “The Dawn of the Plastic Jungle: The Introduction of the Credit Card in Europe and North America, 1950-1975,” Economics Working Papers, Hoover Institution, Stanford University. Accessed

Bernardo Batiz-Lazo & Nurdilek Hacialioglu, 2004. “Barclaycard: Still the King of Pla$tic?,” General Economics and Teaching, University Library of Munich, Germany. Accessed

See also

Bernardo Batiz-Lazo & Nurdilek Hacialioglu, 2004. “Barclaycard: Still the King of Pla$tic? (Exhibits),” General Economics and Teaching, University Library of Munich, Germany. Accessed