Consumer credit may seem like a fairly new invention – but it’s actually been around for more than 5,000 years!
In fact, many millennia before the credit score became ubiquitous, there is historical evidence that cultures around the world were borrowing for various reasons. From the writings in Hammurabi’s Code to the exchanges documented by the Ancient Romans, we know that credit was used for purposes such as getting enough silver to buy a property or for agricultural loans made to farmers.
Consumer Credit: 3,500 B.C. to Today
In today’s infographic from Equifax, we look at the long history of consumer credit – everything from the earliest writings of antiquity to the modern credit boom that started in the 20th century.
Consumer credit has evolved considerably from the early days.
Over the course of several millennia, there have been credit booms, game-changing innovations, and even periods such as the Dark Ages when the practice of charging interest (also known as “usury”) was considered immoral by some people.
A Timeline of Consumer Credit
Below is a timeline of the significant events that have helped lead to the modern consumer credit boom, in which Americans now have over $12.4 trillion borrowed through mortgages, credit cards, student loans, auto loans, and other types of credit.
The Ancients and Credit
3,500 BC – Sumer
Sumer was the first urban civilization – with about 89% of its population living in cities. It is thought that here consumer loans, used for agricultural purposes, were first used.
1,800 BC – Babylon
The Code of Hammurabi was written, formalizing the first known laws around credit. Hammurabi established the maximum interest rates that could be used legally: 33.3% per year on loans of grain, and 20% per year on loans of silver. To be valid, loans had to be witnessed by a public official and recorded as a contract.
50 BC – The Roman Republic
Around this time, Cicero noted that his neighbor bought 625 acres of land for 11.5 million sesterces.
Did this person literally carry 11.5 tons of coins through the streets of Rome? No, it was done through credit and paper. Cicero writes “nomina facit, negotium conficit” – or, “he uses credit to complete the purchase”.
Moral Concerns About Lending
800 – The Dark Ages in Europe
After the collapse of the Western Roman Empire, economic activity grinded to a halt. The Church even banned usury, the practice of charging interest on loans, for all laymen under Charlemagne’s rule (768-814 AD).
1500 – The Age of Discovery
As European explorers and merchants begin trade missions to faraway lands, the need for capital and credit increases.
1545 – England
After the Reformation, the first country to establish a legal rate of interest was England in 1545 during the reign of Henry VIII. The rate was set at 10%.
1787 – England
Philosopher Jeremy Bentham writes a treatise called “A Defense of Usury”, arguing that restrictions on interest rates harm the ability to raise capital for innovation. If risky, new ventures cannot be funded, then growth becomes limited.
The Birth of Modern Consumer Credit
1803 – England
Credit reporting itself originated in England in the early 19th century. The earliest available account is that of a group of English tailors that came together to swap information on customers who failed to settle their debts.
1826 – England
The Manchester Guardian Society is formed, and later begins issuing a monthly newsletter with information about people who fail to pay their debts.
1841 – New York
The Mercantile Agency is founded, and starts systemizing rumors about the character and assets held by debtors through a network of correspondents. Massive ledgers in New York City are made, though these reports were heavily subjective and biased.
1864 – New York
The Mercantile Agency is renamed the R. G. Dun and Company on the eve of the Civil War, and finalizes an alphanumeric system for tracking creditworthiness of companies that would remain in use until the twentieth century.
1899 – Atlanta
The Retail Credit Company was founded, and begins compiling an extensive list of creditworthy customers. Later on, the company would change its name to Equifax. Today, it is the oldest of the three major credit agencies today in the United States.
The Consumer Credit Boom
1908 – Detroit
Henry Ford’s Model T makes automobiles accessible to the “great multitude” of people, but they were still too expensive to buy with cash for most families.
1919 – Detroit
GM solves this problem by loaning consumers the money they need to buy a new car. General Motors Acceptance Corporation (GMAC) is founded and popularizes the idea of installment plan financing. Consumers can now get a new car with just a 35% downpayment at time of financing.
1930 – United States
By this time, efficient U.S. factories are pumping out cheaper consumer products and appliances. Following the lead of GM, now washing machines, furniture, refrigerators, phonographs, and radios can be bought on installment plans. It’s also worth noting that in this period, 2/3 of all autos are bought on installment plans.
The First in Big Data
1950 – United States
By 1950, typical middle-class Americans already had revolving credit accounts at different merchants. Maintaining several different cards and monthly payments was inconvenient, and created a new opportunity.
At the same time, Diners Club introduces their charge card, which helps open the floodgates for other consumer credit products.
1955 – United States
Early credit reporters use millions of index cards, sorted in a massive filing system, to keep track of consumers around the country. To get the latest information, agencies would scour local newspapers for notices of arrests, promotions, marriages, and deaths, attaching this information to individual credit files.
1958 – United States
BankAmericard (now Visa) is “dropped” in Fresno, California. American Express and Mastercard soon follow, offering Americans general credit for a wide range of purchases.
1960 – United States
At a time when the technology was limited to filing cabinets, the postage meter, and the telephone, American credit bureaus issued 60 million credit reports in a single year.
1964– United States
The Association of Credit Bureaus in the U.S. conducts the first studies into the application of computer technologies to credit reporting. Accuracy of data is also improved around this time by standardizing credit application forms.
1970 – United States
The first Fair Credit Reporting Act is passed in the United States. It establishes a standard legal framework for credit reporting agencies.
1980s – United States
The three biggest credit bureaus attain universal coverage across the country.
1989 – United States
The FICO score is introduced, and quickly becomes a standard system to measure credit scores based on objective factors and data.
2006 – United States
VantageScore is created through a joint-venture between the top three credit scoring agencies. This new consumer credit-scoring model is used by 10% of the market, and 6 of the 10 largest banks use VantageScore.
The Information Age has enabled a new era in consumer credit and assessing risk – and today, credit reports are used to inform decisions about housing, employment, insurance, and the cost of utilities.
Learn more about how data, the internet, and modern computing is changing credit in Part 2 of this series.
How Big Tech Makes Their Billions
The big five tech companies generate almost $900 billion in revenues combined, more than the GDP of four of the G20 nations. Here’s how they earn it all.
How Big Tech Makes Their Billions
The world’s largest companies are all in technology, and four out of five of those “Big Tech” companies have grown to trillion-dollar market capitalizations.
Despite their similarities, each of the five technology companies (Amazon, Apple, Facebook, Microsoft, and Alphabet) have very different cashflow breakdowns and growth trajectories. Some have a diversified mix of applications and cloud services, products, and data accumulation, while others have a more singular focus.
But through growth in almost all segments, Big Tech has eclipsed Big Oil and other major industry groups to comprise the most valuable publicly-traded companies in the world. By continuing to grow, these companies have strengthened the financial position of their billionaire founders and led the tech-heavy NASDAQ to new record highs.
Unfortunately, with growth comes difficulty. Data-use, diversity, and treatment of workers have all become hot-button issues on a global scale, putting Big Tech on the defensive with advertisers and governments alike.
Still, even this hasn’t stopped the tech giants from (almost) all posting massive revenue growth.
Revenues for Big Tech Keep Increasing
Across the board, greater technological adoption is the biggest driver of increased revenues.
Amazon earned the most in total revenue compared with last year’s figures, with leaps in almost all of the company’s operations. Revenue from online sales and third-party seller services increased by almost $30 billion, while Amazon Web Services and Amazon Prime saw increased revenues of $15 billion combined.
The only chunk of the Amazon pie that didn’t increase were physical store sales, which have stagnated after previously being the fastest growing segment.
Big Tech Revenues (2019 vs. 2018)
|Company||Revenue (2018)||Revenue (2019)||Growth (YoY)|
|Apple||$265.6 billion||$260.2 billion||-2.03%|
|Amazon||$232.9 billion||$280.5 billion||20.44%|
|Alphabet||$136.8 billion||$161.9 billion||18.35%|
|Microsoft||$110.4 billion||$125.8 billion||13.95%|
|$55.8 billion||$70.8 billion||26.88%|
|Combined||$801.5 billion||$899.2 billion||12.19%|
Services and ads drove increased revenues for the rest of Big Tech as well. Alphabet’s ad revenue from Google properties and networks increased by $20 billion. Meanwhile, Google Cloud has seen continued adoption and grown into its own $8.9 billion segment.
For Microsoft, growth in cloud computing and services led to stronger revenue in almost all segments. Most interestingly, growth for Azure services outpaced that of Office and Windows to become the company’s largest share of revenue.
And greater adoption of services and ad integration were a big boost for ad-driven Facebook. Largely due to continued increases in average revenue per user, Facebook generated an additional $20 billion in revenue.
Comparing the Tech Giants
The one company that didn’t post massive revenue increases was Apple, though it did see gains in some revenue segments.
iPhone revenue, still the cornerstone of the business, dropped by almost $25 billion. That offset an almost $10 billion increase in revenue from services and about $3 billion from iPad sales.
However, with net income of $55.2 billion, Apple leads Big Tech in both net income and market capitalization.
Big Tech: The Full Picture
|Company||Revenue (2019)||Net Income (2019)||Market Cap (July 2020)|
|Apple||$260.2 billion||$55.2 billion||$1.58 trillion|
|Amazon||$280.5 billion||$11.6 billion||$1.44 trillion|
|Alphabet||$161.9 billion||$34.3 billion||$1.02 trillion|
|Microsoft||$125.8 billion||$39.2 billion||$1.56 trillion|
|$70.8 billion||$18.5 billion||$665.04 billion|
|Combined||$899.2 billion||$158.8 billion||$6.24 trillion|
Bigger Than Countries
They might have different revenue streams and margins, but together the tech giants have grown from Silicon Valley upstarts to global forces.
The tech giants combined for almost $900 billion in revenues in 2019, greater than the GDP of four of the G20 nations. By comparison, Big Tech’s earnings would make it the #18 largest country by GDP, ahead of Saudi Arabia and just behind the Netherlands.
Big Tech earns billions by capitalizing on their platforms and growing user databases. Through increased growth and adoption of software, cloud computing, and ad proliferation, those billions should continue to increase.
As technology use has increased in 2020, and is only forecast to continue growing, how much more will Big Tech be able to earn in the future?
Visualizing the Size of Amazon, the World’s Most Valuable Retailer
Amazon’s valuation has grown by 2,830% over the last decade, and the tech giant is now worth more than the other 9 largest U.S. retailers, combined.
Visualizing the Size of the World’s Most Valuable Retailer
As brick-and-mortar chains teeter in the face of the pandemic, Amazon continues to gain ground.
The retail juggernaut is valued at no less than $1.4 trillion—roughly four times what it was in late 2016 when its market cap hovered around $350 billion. Last year, the Jeff Bezos-led company shipped 2 billion packages around the world.
Today’s infographic shows how Amazon’s market cap alone is bigger than the nine biggest U.S. retailers put together, highlighting the palpable presence of the once modest online bookstore.
The New Normal
COVID-19’s sudden shift has rendered many retail outfits obsolete.
Neiman Marcus, JCPenney, and J.Crew have all filed for bankruptcy as consumer spending has migrated online. This, coupled with heavy debt loads across many retail chains, is only compounding the demise of brick-and-mortar. In fact, one estimate projects that at least 25,000 U.S. stores will fold over the next year.
Still, as safety and supply chain challenges mount—with COVID-19 related costs in the billions—Amazon remains at the top. It surpasses its next closest competitor, Walmart, by $1 trillion in market valuation.
How does Amazon compare to the largest retailers in the U.S.?
|10 Largest Public US Retailers*||Market Value July 1, 2020||Market Value July 1, 2010||Normalized % Change 2010-2020||Retail Revenue|
|The Kroger Co.||$26B||$13B||107%||$118Be|
|Walgreens Boots Alliance||$36B||$26B||38%||$111B|
|The Home Depot||$267B||$47B||466%||$108B|
|Combined value of retailers (without Amazon)||$1,071B|
Source: Deloitte, YCharts
*Largest public US retailers based on their retail revenue as of fiscal years ending through June 30, 2019, e=estimated
With nearly a 39% share of U.S. e-commerce retail sales, Amazon’s market cap has grown 2,830% over the last decade. Its business model, which aggressively pursues market dominance instead of focusing on short-term profits, is one factor behinds the rise.
By the same token, one recent estimate by The Economist pegged Amazon’s retail operating margins at -1% last year. Another analyst has suggested that the company purposefully sells retail goods at a loss.
How Amazon makes up for this operating shortfall is through its cash-generating cloud service, Amazon Web Services (AWS), and through a collection of diversified enterprise-focused services. AWS, with estimated operating margins of 26%, brought in $9.2 billion in profits in 2019—more than half of Amazon’s total.
Amazon’s Basket of Eggs
Unlike many of its retail competitors, Amazon has rapidly diversified its acquisitions since it originated in 1994.
Take the $1.2 billion acquisition of Zoox. Amazon plans to operate self-driving taxi fleets, all of which are designed without steering wheels. It is the company’s third largest since the $13.7 billion acquisition of organic grocer Whole Foods, followed by Zappos.
Accounting for the lion’s share of Amazon-owned physical stores, Whole Foods has 508 stores across the U.S., UK, and Canada. While Amazon doesn’t outline revenues across its physical retail segments—which include Amazon Books stores, Amazon Go stores, and others—physical store sales tipped over $17 billion in 2019.
Meanwhile, Amazon also owns gaming streaming platform Twitch, which it acquired for $970 million in 2017. Currently, Twitch makes up 73% of the streaming market and brought in an estimated $300 million in ad revenues in 2019.
Despite the flood of online orders due to quarantines and social distancing requirements, Amazon’s bottom line has suffered. In the second quarter of 2020 alone, it is expected to rack up $4 billion in pandemic-related costs.
Yet, at the same time, its customer-obsessed business model appears to thrive under current market conditions. As of July 1, its stock price has spiked over 51% year-to-date. On an annualized basis, that’s roughly 100% in returns.
As margins get squeezed and expenses grow, is Amazon’s growth sustainable in the long-term? Or, are the company’s strategic acquisitions and revenue streams providing the catalysts (and cash) for only more short-term success?
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