Visa, the world’s largest and best-recognized electronic payment system, has its humble beginnings in the early days of charge cards – simple cards issued by individual banks that customers could use to make purchases without cash, and then pay off the balance in full each month. Most charge cards were issued by individual banks, could be used only in the issuing bank’s local area and therefore, did not take off in popularity for the first couple of decades.
In Visa’s case, the story begins in 1958, with BankAmericard, the first credit card issued by Bank of America in the late 1950s. Bank of America began licensing BankAmericard and the use of its system to banks throughout California, and then across the country. BankAmericard offered a revolutionary new option: its credit service. BankAmericard holders could make their purchases and carry a balance from month to month, paying a finance charge until the balance was resolved. Credit cards grew in popularity, increasing numbers of merchants accepted them, and soon, BankAmericard was a national standard.
In 1966, a consortium of east coast banks formed the Interbank Card Association, which issued Master Charge and would eventually become MasterCard. By 1970, more than 1400 banks nationwide offered either BankAmericard or Master Charge credit cards. American Express was a third choice, but its credit card offerings were more expensive and therefore, not as popular with the average bank customer.
In 1970, the member banks that offered BankAmericard got together and created National BankAmericard Inc. (NBI), a member-owned association that took over administration of the program from Bank of America. It wasn’t long before NBI purchased the entire BankAmericard credit card operation from Bank of America. Dee Hock, the executive who had overseen BankAmericard when Bank of America owned it, took over leadership of NBI. At the time, NBI’s system was entirely focused in the United States, but soon, Hock arranged for all of Bank of America’s licenses for BankAmericard to be sold to IBANCO, a member-owned corporation that would operate BankAmericard’s system internationally. BankAmericard’s US credit card business became a subsidiary of IBANCO, and Hock became IBANCO’s Chief Executive Officer.
It was this international growth that led to the rebranding of BankAmericard as Visa. NBI became Visa USA, and IBANCO became Visa International. Without implying any allegiance to a particular nation or any specific bank, and with an easy-to-pronounce name in any language, the popularity of Visa credit cards took off worldwide. The Visa Classic credit card debuted in 1977, and two years later, Visa added to its payment product line by offering Traveler’s Checks. In 1981, Visa introduced its Visa Premiere credit card.
Visa had been building its electronic authorization, clearing and settlement system, VisaNet, for years. As VisaNet became more powerful and more efficient, by 1979, more merchants began using Visa terminals that read the magnetic stripe on the back of the credit card, allowing the entire transaction to take place in seconds, and drastically reducing fraud. Visa credit cards became even more secure in 1983, when Visa added the hologram feature.
Also in 1983, Visa created a revolution: it started its own network of automated teller machines (ATM) that allowed cardholders to obtain cash without going to their own banks. The Visa ATM network grew very quickly, as Hock had required it to be all-inclusive – any Visa member could obtain cash at any Visa ATM, regardless of its location. Some banks, particularly the 34-bank group that operated the Plus system of ATMs, resisted Visa’s approach, as their model had been to make ATMs available only to their own account holders. By 1987, Visa owned a 33-percent share in the Plus network, which brought Plus ATMs under the purview of Visa, and in 1993, Visa acquired Plus entirely.
Also in 1987, Visa took over nationwide operations of Interlink, the largest point-of-sale debit card network in the United States.
VisaNet had been growing since its inception in 1972, but by the early ‘90s it was clear that in order to remain competitive, VisaNet had to be faster, cheaper, more accurate, and more secure – on a global basis. The system’s data processing networks were redesigned and in 1992, Visa designated its Basingstoke, England and McLean, Virginia data centers as hubs that could process Visa’s credit card and debit card transactions from anywhere on the planet. The backbone of Visa’s electronic payment system, VisaNet has been continually upgraded since.
Throughout the ‘90s, Visa focused on adding value for its members and cardholders by offering new and better products, and by continuing to develop its technology. For example, in 1994, Visa had acquired Interlink, which allowed it to offer online banking services to members across the globe. What worked best for Visa during this period was its wildly popular debit card, which allowed cardholders to draw on their checking accounts for purchases. Also along the lines of giving cardholders direct access to cash, Visa debuted its chip-based smart card, Visa Cash, which cardholders could load with cash from their bank accounts at any ATM. Trials in small areas with just a few member banks yielded poor results – most cardholders never went back to reload their Visa Cash cards – but Visa continued to look for ways to use the chip technology.
In 2006, Visa announced that it was combining some of its operations and taking them public, trading under the symbol “V” on the New York Stock Exchange. The initial public offering (IPO) was successful.
In 2007, Visa launched its mobile platform through its VisaNet system, making mobile payments the latest in a long line of value-added services for cardholders.
Visa has taken its electronic payment business far beyond its credit card roots, but Visa continues to improve its credit card offerings. Visa credit cards are available for students, businesspeople, those building credit and regular consumers who want rewards and perks. Consumers can obtain the perfect credit card for their unique needs directly from Visa, or through one of the thousands of member banks that comprise its global network.
