BankAmericard: the card that became Visa

On September 18, 1958, Bank of America, the San Francisco bank with branches all over California, launched the BankAmericard in Fresno, a farm city in California's Central Valley. It did not wait for anyone to apply: in a single mailing, which the industry still calls 'the Drop', it sent about 60,000 plastic cards to the households of Fresno that banked with it. More than 300 local shops had already agreed to take the card. The holder could buy at any of them up to a limit of a few hundred dollars and then choose, each month, to pay the whole bill without interest or to pay part of it and borrow the rest at 18 per cent a year. The shop received its money at once from the bank, less a fee of 6 per cent. The plan came from the bank's small Customer Services Research Group under Joseph P. Williams, who had studied the charge accounts of Sears and the Mobil oil company. Fresno was chosen because 45 per cent of its families already banked with Bank of America, and because a failure there would hurt the bank less than one in San Francisco.

The bank soon threw its caution away. Fearing that a rival was about to launch a card of its own, it mailed cards to its customers all over California, and within thirteen months some two million cards were out and more than 20,000 merchants took them. Then the bills came in. About 22 per cent of the accounts fell behind, against about 4 per cent on ordinary loans; thieves stole cards from the mail, and some merchants made up sales below the limit at which they had to telephone the bank. The bank admitted a loss of $8.8 million in the first fifteen months, and the journalist Joseph Nocera later put the true figure nearer $20 million. Williams resigned in December 1959. The bank tightened its controls, wrote an apology to its customers, and by May 1961 the card was making money, a fact it kept quiet for years so that other banks would stay away.

American law did not let a bank open branches in other states, so in 1966 Bank of America began to license the card to banks elsewhere, which paid a fee and a share of their revenue and issued BankAmericards under the same blue, white and gold bands; Barclays in Britain became the first licensee abroad, as Barclaycard. In the same year rival banks formed the Interbank Card Association, whose cards took the name Master Charge in 1969 and MasterCard in 1979. Banks of every size now mailed cards that nobody had asked for, losses and fraud grew, and Congress held hearings on unsolicited cards in 1967. On October 26, 1970, an amendment to the Truth in Lending Act banned the mailing of credit cards to people who had not asked for them and limited a cardholder's loss on a stolen card to $50.

The licensing system itself almost broke down. Payments between banks were slow and full of disputes, and at a meeting of the licensees in Columbus, Ohio, in October 1968 a manager from a Seattle bank, Dee Hock, was put in charge of a committee to find a remedy. His answer was to take the card away from Bank of America altogether. In 1970 the licensees formed National BankAmericard Inc. (NBI), a company owned by its member banks, with Hock as president; Bank of America became one member among many. NBI built its own computer networks for approving and clearing payments, and in 1974 a sister body, Ibanco, took over the card outside the United States. Because many foreign banks would not issue a card carrying another bank's name, NBI's board chose a new name in May 1976: Visa, a word that reads the same in many languages. NBI became Visa U.S.A. and Ibanco Visa International, and from 1977 the new cards, still with the blue, white and gold bands, replaced the old ones.

The BankAmericard is the ancestor of the credit card most people carry today. The Diners Club had shown in 1950 that one card could be accepted by many businesses, but its bill had to be paid in full; Bank of America joined that idea to revolving credit, the right to pay over time with interest, and offered it to ordinary families rather than travelling businessmen. Its rules, a monthly bill with a grace period, a credit limit, a fee paid by the merchant and a sign in the shop window, became the rules of the industry. And the organization Hock built from its licensees, a network that does not lend money itself but carries payments between thousands of banks that compete with each other, is today's Visa.