David L. Stearns

Electronic Value Exchange

Setting the Stage: Money, Credit, and Payments in America Associating: Dee Hock and the Creation of the Organization Crafting the Social Dynamics: Staffing, Operating Regulations, and Advertising Automating Authorization: BASE Automating Clearing and Settlement: BASE II and III Expanding the System: Organizational and Technical Growth Automating the Point of Sale: Encoding Standards and Merchant Dial Terminals Challenging Conceptual Barriers: EFT and The Debit Card Negotiating Roles: Controversies and the End of an Era Conclusions: Towards a General Socio-technical History of Payment Systems

Automating the Point of Sale: Encoding Standards and Merchant Dial Terminals

This chapter recounts how NBI fully automated the point of sale. I introduce Hock’s broader vision for electronic value exchange, discuss the debates surrounding how to make the cards machine-readable, and Visa’s role in encouraging the development and widespread adoption of low-cost, dialup, point-of-sale terminals.

Expanding the System: Organizational and Technical Growth

This chapter examines the various ways in which the system was expanded throughout the rest of the 1970s. The expansions were both organizational and technological, and I argue that the two must be kept in a dynamic tension in order to understand this period fully. Organizational topics include the formation of the international organization; anti-trust battles and the institution of “duality”; and the adoption of the name “Visa.” Technological topics include the expansion of BASE I’s capacity by switching to the Airline Control Program (ACP) on IBM hardware and creating a second cooperative data center; the expansion of the authorization network internationally; and multi-currency clearing and settlement.

Setting the Stage: Money, Credit, and Payments in America

This chapter establishes a context for the history presented throughout the rest of the book. It describes the formation of the Federal Reserve’s check clearing system in the United States; the early charge card programs operated by Western Union, the oil industry, the airlines and the department stores; the various travel and entertainment cards of the 1950s; and the early bank-issued credit cards, especially the BankAmericard from Bank of America. It ends with the creation of the first national interchange networks: the Interbank system; and the BankAmericard licensing system.

Associating: Dee Hock and the Creation of the Organization

This chapter describes the formation of the cooperative member association that would eventually be known as Visa. I first analyze the BankAmericard licensing system of the late 1960s, arguing that its problems could not have been solved solely by the application of new technology, as it was also suffering from serious organizational issues. I then introduce Visa’s founder, Dee Ward Hock, and describe how his own personal philosophy shaped the design of the new organization. Finally, I recount the formation of the new organization, which was initially known as National BankAmericard Incorporated (NBI).

Automating Authorization: BASE

This chapter describes the creation of NBI’s first electronic authorization system, known as BASE. It recounts the various ways that banks sought to automate local authorizations, how Omniswitch demonstrated that interchange authorizations could be switched between local centers, and the efforts to create a single shared national authorization system for all the different charge and credit cards. This effort was ultimately abandoned and I end by describing the design and construction of NBI’s own system, which went into production in April of 1973.

Negotiating Roles: Controversies and the End of an Era

This chapter describes other conflicts between Hock and the member banks over what role the central organization should play. I argue that this role had to be “worked out” as the system grew and evolved. Most of the members assumed that the central organization existed solely to coordinate their credit card programs, but several events caused them to question whether Visa was now acting more like their competitor than their coordinator. Topics covered include the Visa travelers cheque program, the direct signing of the national retailer JC Penny by Visa USA, and other signs that the membership interpreted as empire building. As Hock and the members continued to struggle over their respective roles, tensions increased, Hock’s power of persuasion began to fade, and he was ultimately forced out of the organization in 1984.

Automating Clearing and Settlement: BASE II and III

This chapter describes how NBI solved the other half of their operational problems: clearing and settlement. It describes the creation of BASE II in 1974, the first electronic clearinghouse for bank-issued payment cards. It also covers the failed attempt to create a software package for the member banks, known as BASE III.

Crafting the Social Dynamics: Staffing, Operating Regulations, and Advertising

This chapter describes how Hock and his staff crafted a few key social dynamics at three levels of the system: the central organization’s staff; the overall NBI association; and the cardholding public. I introduce a number of key employees who appear throughout the narrative, analyze the role of the operating regulations, and discuss NBI’s early national advertising campaigns.

Challenging Conceptual Barriers: EFT and the Debit Card

This chapter chronicles the history of Visa’s signature debit card, placing it in the context of the discussion surrounding electronic funds transfer (EFT) in the 1970s. Visa’s first debit card was introduced in 1975, yet the member banks did not widely issue it until the 1990s. I argue that this had more to do with a technological and cooperative mismatch between Visa’s debit card and the various EFT plans being formulated by the member banks than it did with protecting lucrative credit card profits.