The Insider Look of Visa Card

VISA is the world's leading brand of electronic-payment card. There are more than one billion Visa cards in circulation.

The two main forms of electronic-payment card are credit cards and debit cards. A credit card enables its holder to make purchases on a line of credit (a kind of loan) issued by a financial institution, usually a bank. A debit card (also known as a check card) simply allows its holder to access existing cash funds in his or her checking account. Whereas a credit card allows the cardholder to repay the amount of the purchase to the bank in monthly installments, debit cards require that the purchase be paid for in full at the time of the sale.

Visa is the brand name of Visa International Service Association, a company owned by some 20,000 member banks that are licensed to issue Visa cards under their own names (for example, Bank of America Visa or Wells Fargo Visa). Visa International itself does not issue cards or provide credit to cardholders. Rather, each member bank issues the cards, setting its own terms of agreement (such as the annual fee for using the card, the interest rate that will be charged on outstanding credit balances, and late-payment penalties) with cardholders. Member banks are also responsible for contacting merchants with requests that they accept Visa cards and for providing the necessary technical support for these merchants to handle Visa purchase transactions. The banks that issue Visa cards compete with one another for cardholders, yet they are all bound together by the need to cooperate so that participating merchants can take a Visa card issued by any bank.

Visa International's central role is to serve as a hub between cardholders and merchants. It does this by maintaining the massive, around-the-clock electronic-payment network through which purchases are processed. Visa International is also responsible for enhancing its brand name through marketing, sponsorship agreements, and other activities. In turn, Visa makes most of its money by charging its member banks fees.

The Visa brand traces its origins to 1958, when California-based Bank of America began issuing BankAmericard, the first electronic-payment card of its kind. In 1966 Bank of America began licensing other U.S. banks to issue the BankAmericard. In 1970 the bank agreed to sell the BankAmericard credit card program to NBI (National BankAmericard, Inc.), a newly formed corporation in which all of the banks that issued BankAmericard had equal ownership. The creation of NBI was spearheaded by Dee W. Hock (b. 1929), a banker at National Bank in Seattle, one of the licensee banks.

In the early 1970s BankAmericard began a process of international expansion. Through agreements with foreign banks, the card was issued under many different names, including Barclaycard in the United Kingdom, Chargex in Canada, Sumitomo Card in Japan, and Bancomer in Mexico. Finally, in 1976 BankAmericard and affiliated cards were rebranded as "Visa," a name that could be instantly recognized (and pronounced the same way) all over the world.

Since the name Visa was introduced to the world more than three decades ago, the company has achieved phenomenal growth and capitalized on emerging technologies to increase the efficiency, convenience, and reliability of its services. Throughout most its history, Visa surpassed its main competitors, including MasterCard, American Express, and Discover, in terms of brand recognition and worldwide billings.

One of Visa's greatest successes in promoting its brand name came in 1986, when the company became the official credit card sponsor of the Olympic Games. According to the agreement, Visa would pay a significant sponsorship fee in exchange for being the only credit or debit card accepted for purchases of tickets, souvenir merchandise, and all other items sold at Olympic events. Visa would also be the only card accepted by automated teller machines (ATMs) in the Olympic complex and other official Olympic venues. Further, Visa would be the only credit card company entitled to advertise or display its logo at the games. This exclusive agreement, which was planned to continue through the 2012 Olympics, proved enormously successful in raising international public awareness of the Visa brand.

Also during the 1980s Visa greatly expanded its services by providing cardholders with immediate access to cash through a partnership with Plus System, Inc., one of the largest ATM networks in the United States. In the late 1980s, through an agreement with Interlink, the largest network in the United States for accepting debit cards in restaurants and retail stores, Visa became the leading brand for debit cards nationwide. By enabling its cardholders to use a debit card to pay for everyday purchases such as groceries and gas, Visa opened up a vast new frontier of payment convenience for its cardholders. In the 1990s, with the advent of Internet commerce and the rapid increase in demand for debit card use, Visa was focused on implementing new technologies to improve the speed, capacity, and security of its payment-processing network.