Chicago can lay claim as a founding city for electronic financial technology, owing to its position as retail leader and commodities trading center, as well as a major player in ecommerce and trading.
As one example, the First National Bank of Chicago served in 1989 as a lead bank in developing an early business-to-business electronic payment network for General Motors. The network combined remittance information to provide payment details, structured according to national standards, with payment transport and settlement through the banking system.
I had the good fortune of working for the consultant who ran First Chicago’s financial electronic data interchange (EDI) business in the late 1980s, Daniel M. Ferguson, as a writer and then managing editor of his EDI Forum journal. My article on the History of EDI at Sears provides a historical touch point for Chicago as an early leader in ecommerce. Other historical articles include one on General Motors’ Financial EDI system, one describing electronic banking strategies, and another covering an early electronic banking system at First Chicago and other banks.
The city famous for its commodities trading pits is also home to major innovations like the invention of financial derivatives in the 1970s and advances in trading technology, including first fully electronic stock exchange. GEO magazine documented the beginning of the transition from open-outcry trading to computer technology in this 1982 photo essay and article.
Archipelago, the first electronic stock exchange, developed in the mid-1990s and opened for stock and option trading in 1997. The electronic exchange won a Chicago Innovation Award in 2003. A number Chicago-based software firms remain on the cutting edge of securities trading, processing.
The Federal Reserve Bank of Chicago has held an annual conference on emerging payments for nearly 15 years. The 2001 proceedings are compiled in “Promoting Electronic Payments: Assessing Future Requirements.” The bank’s handling of payments processing during the 9/11 crisis lead, in part, to Congress’s adoption of the law requiring image-based check processing. The story is detailed in the Chicago Fed’s 2001 annual report: “Inspiring Confidence: The Fed’s Response to 9/11.”
For some more recent Chicago contributions, I have posted a copy of a presentation given on Sept. 13, 2007 by Rob Metzger, Principal, William Blair & Company, to the Illinois Venture Capital Association. “Financial Technology Investing: Chicago’s Hometown Successes” provides a more recent survey of Chicago’s financial technology sector, including payments.
Braintree’ 2013 sale to PayPal ranks high on the “hometown successes” scale, and there are numerous others. I have made no attempt here to catalog the city’s fintech firms, present or past.
This post is merely a sketch of the companies and innovations that have taken place in Chicago, based on pieces I have written or have had on hand. I would like to expand the list, though, and would appreciate any help in the comments section or by email to me.