Dunno when it stopped, but for a long time the postcard companies had people hand-color the photos.
Walter Wyckoff, when he walked/worked across America as a social experiment in 1891, ran into a guy who was conned in Chicago (where else?). It seemed to be a variation of the "stuff envelopes at home" scam. For a "fee" the person would buy a group of photos to hand color at home, then sell them back to the company. Unfortunately, they always found "flaws" and wouldn't pay or else gave such complicated photos that it took too much time to be profitable.
When I first looked at the postcard I thought it was a color photograph and wondered how they managed it back then.
I had scanned it at high resolution and decided to enlarge a portion and sure enough, it was clearly hand colored.