Background
In 1958, Bank of America launched its pioneering BankAmericard credit card program in Fresno, California. The product idea was that of a bank branch manager, who stopped by a local store and observed clerks in a back room preparing customers' monthly bills. It struck him as inefficient to spend so much time (and money) to prepare and collect bills that were often for paltry amounts, and he wondered if the process could be efficiently centralized, with his bank's computer preparing the bills in off-hours. The original goal of the company was to offer the system across California; however in 1965 the bank began subscribing licensing agreements with a group of banks outside of California. Over the following 11 years, various banks licensed the card system from Bank of America, forming a network of banks backing the BankAmericard system across the United States. [1]
During this same time period, licences for the BankAmericard system also started to be implemented in other countries. For example:
- In Canada, an alliance of banks (including Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Royal Bank of Canada, Banque Canadienne Nationale and Bank of Nova Scotia) issued credit cards under the Chargex name from 1968 to 1977.
- In France, it was known as Carte Bleue (Blue Card). The logo still appears on many French-issued VISA cards today.
- In the UK, the only BankAmericard issuer for some years was Barclaycard.
In 1970, Bank of America gave up control of the BankAmericard program. The various BankAmericard issuer banks took control of the program, creating National BankAmericard Inc. (NBI), an independent non-stock corporation which would be in charge of managing, promoting and developing the BankAmericard system within the United States, although Bank of America continued to issue and support the international licenses themselves. By 1972, licenses had been granted in 15 countries. In 1974, IBANCO, a multinational member corporation, was founded in order to manage the international BankAmericard program.
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| Sample Barclaycard (left), as issued in the UK in the 1960s/70s. Co-branded cards were also issued by affiliates, such as the Co-operative Bank and Yorkshire Bank. The Chargex logo (right) used in Canada, along with the names of the 5 Canadian federal banks that issued Chargex cards. | ||
In 1976, the directors of IBANCO determined that bringing the various international networks together into a single network with a single name internationally would be in the best interests of the corporation; however in many countries, there was still reluctance to issue a card associated with Bank of America, even though the association was entirely nominal in nature. For this reason, in 1977 BankAmericard, Chargex, Barclaycard, Carte Bleue, and all other licensees united under the new name, "Visa", which retained the distinctive blue, white and gold flag. NBI became Visa U.S.A., and IBANCO became Visa International.
The term Visa was conceived by the company's founder, Dee Hock. He believed that the word was instantly recognizable in many languages in many countries, and that it also denoted universal acceptance. Nowadays, the term VISA has become a recursive backronym for Visa International Service Association.
In October 2007, Bank of America announced it was resurrecting the BankAmericard brand name as the "BankAmericard Rewards Visa."[2]
Operations
Visa offers through its issuing members the following types of cards:
- Debit cards (pay from a checking / savings account)
- Credit cards (pay monthly payments with interest)
- Prepaid cards (pay from a cash account that has no checkwriting privileges)
Visa operates the PLUS ATM network and the Interlink EFTPOS network, which facilitate the "debit" protocol used with debit cards and prepaid cards.
Corporate structure
Prior to October 3, 2007, Visa comprised four non-stock, separately incorporated companies that employed 6000 people worldwide: Visa International Service Association ("VISA"), the worldwide parent entity, Visa U.S.A. Inc., Visa Canada Association, and Visa Europe Ltd. The latter three separately incorporated regions had the status of group members of Visa International Service Association. The unincorporated regions (Visa Latin America [LAC], Visa Asia Pacific and Visa Central and Eastern Europe, Middle East and Africa [CEMEA]) were divisions within VISA.
IPO & restructuring
On October 11, 2006, Visa announced that some of its businesses would be merged and become a publicly traded company, Visa Inc.[3][4][5] Under the IPO restructuring, Visa Canada, Visa International, and Visa U.S.A. will be merged into the new public company. Visa's West Europe operation will remain in the hands of its member banks who will have a minority stake in Visa, Inc.[6] In total more than 35 investment banks have joined the deal in several capacities, most notably as underwriters. The law firm Davis Polk & Wardwell has served as counsel to the underwriters, while the law firm White & Case LLP has served as counsel to Visa in the entire global restructuring process.
On October 3, 2007, Visa completed its corporate restructuring with the formation of Visa, Inc. The new company was the first step towards Visa's IPO.[7] The second step came on November 9, 2007 when the new Visa, Inc. submitted its $10 billion IPO filing with the U.S. Securities and Exchange Commission (SEC).[8] On February 25, 2008 Visa announced it would go ahead with an IPO of half its shares.[9] Visa trades under the ticker symbol "V" on the New York Stock Exchange.[10] The IPO took place on March 18, 2008. Visa sold 406 million shares at US$44 per share, raising $17.9 billion USD in the largest initial public offering in U.S. history.[11]
Decentralized association
The decentralized nature of Visa allows it to respond to member needs and adapt the Visa International rules and products to suit the individual needs of their regional members. Regional banks therefore have a strong stake in the governance of their region.
The Visa International Board has the dual responsibilities of:
- Superintendence of the worldwide interests of the Association
- Strategic direction and supervision of the three unincorporated divisions and the central staff of Visa Worldwide services.
Visa issues no cards and makes no loans. Members (about 21,000 worldwide) fund day to day management and make the investments needed to maintain and develop the Visa payment system.
Credit vs. debit
Even though the service is offered by thousands of banks, the end result is standardized for consumers by the Visa International Association. Two protocols are used, depending upon the type of card marketed, often called "credit" and "debit."
The names of the two protocols use the arbitrary "debit" and "credit" from accounting meaning left and right, and they originally had the meanings (and still do to many people) that with credit the cardholder pays later for the purchase, and with debit the cardholder pays immediately. The truth today is that they are merely two different protocols, with which there is still considerable confusion, and even lawsuits over the definitions of products for purposes of antitrust law. Banks can use independent methods to actually recover the money paid for purchases, regardless of which protocol is used. For example, the debit protocol can be used to incur a debt to the bank, and the credit protocol can be used to take money from a checking account.
The debit protocol involves using the card at a point of sale terminal (POS) or automated teller machine where the PLUS or Interlink logo is shown, with a Visa card that has the PLUS or Interlink logo on the back of the card. A PIN (personal identification number, known by its acronym) is used to identify the cardholder. The money is deducted from the attached checking account or prepaid account (which is similar with no paper check-writing capability).
The credit protocol involves using the card at a POS or a banking center where the Visa logo is shown. The cardholder's signature is generally used for identification, often together with the cardholder's civic registration number or ID card/passport. Holders of any Visa card may use the credit protocol even if the card is marketed as a debit card or prepaid card (basically since it has the Visa logo on the front of the card). One source of confusion is the merchant may ask "debit or credit?" even though the words are not defined that way in most dictionaries and even though the card may say "debit card" right on it, and still be available for "credit" transactions. In this way it is a misnomer that the credit cards are only for loans or that the debit protocol is only for checking accounts. Banks actually choose various backend methods of handling the accounts, making "debit" a generic synonym for "Plus/Interlink" (and the equivalent competitive networks), and "credit" a generic synonym for "Visa" (and MasterCard, American Express, Discover Card, which have similar systems).
Association rules
Some outstanding rules of the association include rules about how a cardholder must be identified for security, how transactions may be denied by the bank and how banks may cooperate for fraud prevention, and how to keep that identification and fraud protection standard and non-discriminatory. One notable rule is that no merchant accepting Visa, whether a mom-and-pop store or a government body like a university, may establish any minimum purchase, maximum purchase, or surcharge for any Visa (credit) transaction. They may establish surcharges for debit transactions (although lower fees on debit card transactions means that merchants typically encourage use of debit cards by surcharging more for credit cards, where allowed). However enforcement is by individual banks, who may not know the rules well; so a bank may initially uphold a surcharge or minimum, unless the consumer knows the association rules well. Other rules govern what creates an enforceable proof of authorization by the cardholder (starting from a signature or PIN), and continuing to lower levels of proof such as a shipment accepted or a statement by the consumer. Some countries have banned the no-surcharge rule, most notably the UK[12] and Australia [13] and retailers in those countries may apply surcharges to any credit-card transaction, Visa or otherwise.
New services, security
Recent complications include the addition of exceptions for non-signed purchases by telephone or on the Internet, and an additional security system called "Verified by Visa" for purchases on the Internet.
In September 2007, Visa introduced Visa payWave, a contact-less technology feature that allows cardholders to wave their card in front of contact less payment terminals without the need to physically swipe or insert the card into a point-of-sale device.[14]
In Europe, Visa has introduced the V PAY solution for chip-only, PIN-only cards.[15]
Trade mark and design
Logo design
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| The old Visa and Plus logos. | ||
The blue and gold in Visa's logo were originally chosen to represent the blue sky and golden-colored hills of California, where the legacy Bank of America was founded.
The Visa Flag Symbol is used by merchants to denote the acceptance of Visa credit cards.
As of Mid 2006 Visa removed its trademark "flag" logo from all its cards, websites and retailer's windows. This was the first time that Visa has changed its logo.[16]
For all credit cards, the new logo will be a simple white background with the name VISA in blue with an orange flick on the 'V' (As Above).
For the new Visa Debit and Visa Electron logo, see the relevant pages.
Dove hologram
In 1984, most VISA cards around the world began to feature a hologram of a dove on its face, generally under the last four digits of the VISA number. This was implemented as a security feature - true holograms would appear 3-dimensional and the image would change as the card was turned. At the same time, the VISA logo, which had previously covered the whole card face, was reduced in size to a strip on the card's right incorporating the hologram. This allowed issuing banks to customize the appearance of the card. Similar changes were implemented with MasterCard cards.
On most Visa cards, holding the face of the card under an ultraviolet light will reveal the dove picture, as an additional security test. (On newer Visa cards, the UV dove is replaced by a small V over the Visa logo.)
Beginning in 2005, the VISA standard was changed to allow for the hologram to be placed on the back of the card, or to be replaced with a holographic magnetic stripe ("HoloMag").[17] The HoloMag card was shown to occasionally cause interference with card readers, so Visa eventually withdrew designs of HoloMag cards and reverted back to traditional magnetic strips[18].
[edit] Sponsorships
[edit] Olympics
Since the 1988 Calgary Winter Olympic Games, as a worldwide Olympic partner, Visa is the only form of electronic payment accepted at all venues and Olympic-related transactions. Its current contract with the IOC as the exclusive payment card will continue through 2012. For the 2008 China Olympics Visa is running a Visa Beijing 2008 Olympic Sweepstakes offering a chance to win a trip to Beijing to watch the Olympics live.
Others
VISA is currently the shirt sponsor for the Argentina national rugby union team, nicknamed the Pumas. Also, VISA sponsors the Copa Libertadores and the Copa Sudamericana, the most important football club tournaments in South America.
Until 2005, VISA was the exclusive sponsor of the Triple Crown thoroughbred tournament.
In 2006/7, VISA is the sponsor of the Centennial Park Moonlight Cinema, located in Sydney, Australia
Visa is sponsoring the 2007 Rugby World Cup
It replaces Mastercard as a FIFA sponsor and will be the official card of the 2010 FIFA World Cup in South Africa
Legal proceedings
Visa settled a lawsuit to Wal-Mart for billions of dollars. According to a website associated with the suit,[19] Visa and MasterCard settled their claims for a total of $3.05 billion, and Visa's share of this settlement is reported to have been the larger. As of the spring of 2005, it is expected to have raised its interchange rate from 1.634% to 1.99%, which can be expected to affect the discount rates paid by retail locations to the banks with which they deal.
