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A Brief History of Online Payments - Where Electronic Payments Began

A Brief History of Online Payments - Where Electronic Payments Began

November 29, 2022

From the barter system, to wiring money via telegraph, and now with online payments-- the ways that a customer could complete a purchase have evolved greatly throughout the years.

In particular, online payments are now an irreplaceable part of modern-day lifestyle. It's safe to say that we're seeing more banks, online shops and many other industries offering customers to make purchases online, making mobile and point-of-sale transactions a whole lot simpler.

history of online payments

What Exactly is Online Payment?

Online payment is the transfer of funds through electronic or digital medium via the internet. There are different forms of online payments, including mobile pay, digital wallets, e-banking, bank transfers, and many more.

Why is There a Surge in the Use of Online Payments?

Not only is there a decline in cash payments and increasing demands for more contactless payment options, the widespread use of mobile devices has aided this demand in particular. According to Statista, there's around 6.4 billion smartphone users worldwide in 2021, and that number is expected to still grow.

To understand more about how the payment industry has evolved to how it is today, we must first look at the history of how it all started. Before Apple Pay, Google Pay and other modern payment platforms, when did the digital payments era truly begin to take shape?

Brief History of Digital Payments

  • The roots of electronic payment can be traced back to 1871, when Western Union debuted the electronic fund transfer (EFT) in the U.S.. It was the first time when people could pay for goods and services without having to be present during the transaction process. Forms of payment continue to transform since then, including the launch of the first modern-day credit card by the Bank of America in 1958.
  • However, it was not until the 1960s when the U.S. Advanced Research Projects Agency Network (ARPANET) was launched. The platform laid the foundation for the internet that we’re familiar with today, paving the way for the next evolution of payment methods.

The Early Online Payment System

  • In 1994, the Stanford Federal Credit Union was credited as the first financial institution in North America to launch its online banking services for all of its customers. Presidential Bank soon followed their steps in 1995, being the first bank in the country to offer their clients access to their accounts online.
  • During this time period, the first online purchase was believed to be a pizza from Pizza Hut. It was supposedly a pepperoni and mushroom pizza, one of Pizza Hut's classic menus!
  • Seeing how there's a potential for digital transformation within the banking industry, more financial corporations soon followed suit. Outside of supporting card payments, they began to supply electronic cash alternatives as well, such as digital cash, e-money and tokens.

Paypal - Transforming Digital Payments

  • Digital payments continued to evolve when Paypal first entered the market in the late 90s, and they became one of the first payment service providers to be established globally.
  • A lot of Paypal's innovation was unheard of at the time, being one of the first companies to allow payments via mobile payment apps and using their email addresses.

Asia’s Initial Adoption of Online Payment

Starting from the early 2000s, several companies across Asia were also trying to keep up with the technology changes and provide online alternatives in making payments.


  • China’s digital payment revolution started with two tech juggernauts: Alibaba and Tencent
  • Alibaba was established in 1999 as a B2B ecommerce. It introduced its escrow-based online digital payments solution Alipay in 2003, as there was a growing distrust towards online transactions between strangers. Alibaba would hold onto the buyer’s money until they confirmed the goods have been delivered, aiming to build back the trust towards internet shopping at the time.
  • Later in 2005, Tencent introduced their first online payments brand called Tenpay. This was created to support its successful online gaming business, but later integrated it into its most successful social messaging platform, WeChat. The payment brand then rebranded itself as WeChat Pay, where users can transfer money through the messaging app.



  • The use of physical cash is still common in today's Indonesia, but the utilization of digital payments has started since the 1980s with credit and debit cards.
  • Later in the early 2000s, Bank Central Asia (BCA) introduced e-banking and m-banking, becoming one of the first institutions to introduce an alternative way of executing financial transactions through online means.
  • Online payments would later take off in the mid-2010s. Not only internet shopping and e-commerce were gaining popularity, increased penetration of mobile devices and the rapid growth of fintech companies also contributed to this trend.
  • According to the University of Pennsylvania, smartphone penetration has increased from 90 million in 2015 to 180 million in 2020-- accounting for 67% of the whole population. There were only 20 e-wallets (mostly banks) in 2015, but it has grown to 55 e-money licensed operators in 2020. GoPay and OVO are currently the top mobile wallets with the highest number of monthly active users.


  • One of the first online payment systems in the country dates back to 1996, where the Industrial Credit and Investment Corporation of India (ICICI) began to offer their clients online banking services in their retail branches.
  • History of digital payments in india 2008, the National Payments Corporation of India (NPCI) started to create a more established payment and settlement infrastructure in the country. That has since given birth to various products and services, including India’s unique digital identity system Aadhaar in 2010 and many more.

What is the Future of Online Payments?

The demands for online payment will most likely continue to increase, considering how the real impact of its convenience has become an expected part of our experience online. The methods of how we transact digitally have also evolved recently, including being able to purchase goods and services via cryptocurrency and blockchain.

The continuous growth of smartphone users and mobile wallets is also something that cannot be ignored. According to Statista, there have been approximately 950 million mobile payment transactions worldwide, and that number is expected to skyrocket to a whopping amount of 1.31 billion users by 2023

In the financial sphere, #OpenFinance is considered one of the next things for electronic payments, allowing interconnectivity between financial service providers and other businesses through APIs. Companies implement Open Finance to improve their service quality and provide better products to their customers.

As current or future business owners, it will be of increasing importance to enable customers to transact online with ease. Ayoconnect provides various #OpenFinance online payment solutions to ensure your business runs smoothly. Our trusted team can help you set up direct debit, recurring payments management and many more. 

To learn more about our services, do contact us here and our sales team will be happy to help you with your enquiries!