第 4 章
The Visionary: Dee Hock and the Birth of Visa
By 1968, the BankAmericard licensing program appeared successful on the surface with 254 licensee banks, 6 million cardholders, 155,000 merchants across 17 states, and $458.9 million in sales volume. However, this rapid growth masked serious operational and organizational problems that nearly caused the system to collapse.
A typical BankAmericard transaction in 1968 involved multiple manual steps: merchants checking if purchases exceeded floor limits, calling for verbal authorizations when needed, imprinting cards on multi-layer sales drafts, and awaiting clearing. Banks manually processed these drafts, sorting them between on-us transactions (same bank) and interchange transactions (different banks). The clearing process involved physical mailing of sales drafts between banks while funds moved separately through the check clearing system, creating delays and reconciliation challenges.
The authorization system created significant operational problems. Floor limits (transaction amounts below which no authorization was required) created a security vulnerability that criminals exploited. Merchants often avoided authorization due to lengthy delays, sometimes reusing old authorization codes. Fraud losses on bankcards increased dramatically from $140,000 in 1967 to $2.2 million by 1969.
The clearing and settlement of interchange transactions presented another major operational challenge. When the Federal Reserve refused to process credit card drafts through their clearinghouse system, BASC had to create an alternative that required acquiring banks to mail interchange drafts directly to issuing banks. This separation of clearing drafts from sales drafts created severe timing problems, with issuing banks entering clearing draft amounts into suspense ledgers while waiting for individual sales drafts to arrive for reconciliation-a process that could take weeks.
Beyond operational issues, the BankAmericard licensing system faced fundamental organizational tensions. Bank of America retained ownership of the BankAmericard name and marks along with most power, creating deep distrust among licensees. The most significant tension centered around the interchange reimbursement fee, where the rule was essentially unenforceable.
In October 1968, the BASC called a special meeting of licensees in Columbus, Ohio to address the system's problems. When BASC failed to send senior officers, the licensees became incensed. One committee member had a different vision for solving the system's problems-Dee Ward Hock from Seattle National Bank of Commerce.
Hock possessed a frustratingly complex character that defied simple description. He was simultaneously inspirational yet intimidating, clairvoyant yet aggravating, fair yet brutal. He developed a deep suspicion of "mechanistic, command-and-control organizations" and instead developed the concept of "chaordic" organizations-self-organizing, self-governing systems that harmoniously blend characteristics of chaos and order.
Have you ever considered that your credit card represents one of the most complex organizational innovations in business history? The system works because Hock recognized that money had evolved into nothing more than "guaranteed alphanumeric data" and banks were merely institutions for the custody, loan, and exchange of this data.
第 5 章
Building Trust: The Operating Regulations and Social Architecture
With the independent organization now established as National BankAmericard Inc. (NBI), Hock and his team focused on solving the operational and organizational problems. Their primary task was establishing common rules to govern inter-organizational work, dispute settlement between member banks, and fee assessment. NBI codified these rules into "operating regulations" and required members to contractually agree to follow these regulations "as they now exist or are hereafter modified."
Before tackling the operating regulations, Hock's first challenge was building a staff capable of realizing his vision of worldwide electronic value exchange. Unlike typical banking environments with established routines, NBI resembled a high-pressure tech startup. Hock wisely surrounded himself with people having complementary skills and personalities, particularly Chuck Russell, a bank operations expert with extensive credit card experience who was practical where Hock was visionary.
NBI needed to establish operational rules beyond the organizational bylaws Hock had created. Unlike BofA's licensing system that required separate agreements with each bank, NBI adopted common regulations maintained by member representatives. The regulations primarily governed interactions between member banks and NBI, with banks having more freedom in how they dealt with merchants and cardholders.
Particularly important were rules about fraud liability. Transactions were guaranteed to merchants who followed the regulations, transferring fraud liability from merchants to issuers. The regulations also established the fee structure that determined the system's economic dynamics. NBI inherited the "merchant-pays" model where merchants pay a discount while cardholders pay nothing. The critical interchange reimbursement fee (IRF) determined how much acquirers paid issuers during settlement, effectively setting a minimum for merchant discounts.
The dispute resolution process provided a fair method for resolving disagreements between competing members. When members couldn't resolve disputes themselves, they submitted cases with supporting documentation and a fee to discourage frivolous claims. Though Visa's decisions were typically final, appeals could escalate to the Board of Directors.
In April 1971, NBI launched its iconic "think of it as money" advertising campaign to reshape public perception of the BankAmericard. For Hock, this wasn't just marketing-it was an opportunity to communicate his ideas about the nature of money directly to cardholders. The campaign positioned the BankAmericard as a "modern sensible medium of exchange"-not just a credit card but a new form of money.
Consider how remarkable this achievement was: creating a system where bitter competitors would cooperate, follow common rules, and trust a central organization to fairly resolve disputes. This social architecture was as important as any technological innovation in making the system work.
第 6 章
Technological Revolution: Building the Electronic Backbone
With the organizational structure and operating regulations established, NBI now needed to address the operational problems surrounding authorization, clearing, and settlement of interchange transactions. Authorization had become what Hughes would call a "reverse salient"-an element holding back the development and growth of the overall payment system.
Several organizations pioneered automated local authorization systems in the early 1970s. National Data Corporation (NDC) of Atlanta offered computerized authorization to subscribers starting in 1968. Their system centralized cardholder data on a UNIVAC 494 computer, allowing fully automated authorization decisions without human intervention. In 1971, point-of-sale (POS) terminals began appearing, first in an Omniswitch test using magnetic stripe technology, reducing authorization times to as little as 7 seconds.
After deciding to build their own system, NBI issued an RFP in October 1971 for what they called "BankAmericard Authorization System Experimental (BASE)." When all thirteen vendor proposals failed to meet NBI's requirements, Hock boldly decided NBI would design and build the system themselves. Hock gave them just nine months to establish a nationwide computer network, install terminals in all BankAmericard centers, obtain hardware, build a data center, install regional concentrators, develop 24/7 software, and staff a call center.
BASE centered around a Digital Equipment Corporation PDP-11/45 minicomputer in NBI's new San Mateo data center. This central computer acted as a real-time switch for authorization requests from acquiring centers or large national merchants. The network distributed work efficiently, reflecting Hock's organizational philosophy. Local card centers maintained autonomy, handling their own local authorizations, while NBI provided only interchange services they couldn't accomplish themselves.
Despite a few minor problems, the system was completed within the $3 million budget and on schedule, entering limited production on April 4, 1973, and full 24/7 operation by May 1. BASE immediately reduced interchange authorization time from 4-5 minutes to just 56 seconds, while enabling 24/7 merchant authorizations.
With interchange authorizations automated via BASE, NBI turned to the other half of their operational challenges: clearing and settlement. BASE II would replace the cumbersome mailing of paper drafts between members with a centralized, electronic clearinghouse. By 1972, NBI member banks were exchanging 95 million drafts annually, with projections reaching 225 million by 1975. Hock's solution was to "truncate the paper"-transforming physical sales drafts into electronic records cleared through a centralized computer system.
Imagine the audacity of building a nationwide computer network in the early 1970s when most banks were still using paper ledgers. This technological leap forward was what made global electronic payments possible.
第 7 章
Global Expansion: From BankAmericard to Visa
From 1972 to 1976, NBI underwent three fundamental organizational changes that shaped the payment system's evolution. These expansions were critical to achieving Hock's vision of a worldwide electronic value exchange system that would transcend national boundaries and banking systems.
Though BankAmericard had international licensees since 1966, BofA's subsidiary BASC still controlled these relationships while NBI managed domestic licensees. In 1972, inspired by NBI's success, international licensees asked Hock to help create a global version of the organization. After two years of negotiation, consensus was finally reached, and in June 1974, IBANCO formed as a for-profit Delaware corporation with NBI as a member alongside other national associations and individual licensee banks.
NBI faced a significant legal challenge in the early 1970s regarding whether banks could join multiple bankcard systems. When NBI banned Class A members from joining competing systems like Interbank, Worthen Bank of Arkansas filed an antitrust suit. Eventually in June 1976, NBI removed the ban on dual membership, ushering in "duality" in the US banking system. Hock's predictions proved correct-most banks went dual within six months, no competing system arose, and innovation slowed.
The adoption of the VISA name represented more than a simple rebranding-it was a strategic expansion that tied together Ibanco's international growth and the new dual membership reality. The original BankAmericard name had always been contentious for domestic licensees who resented promoting Bank of America, but it was completely unacceptable for international members who didn't want to evoke a foreign country's name. Tom Honey developed a "tri-level marks" concept for the card redesign, placing the VISA name in the middle white band while allowing issuers to use the top blue band for their own branding.
As the organization expanded, the computer systems needed to grow in parallel to handle the explosive transaction volume. The Visa technical team faced a crucial decision: upgrade to DEC's new PDP-11/70 or switch to IBM's System/370 mainframe. Though Hock had previously vowed never to do business with IBM again after a disagreement, transaction volume eventually forced him to reconsider.
Rather than using IBM's standard operating systems, Visa implemented BASE I on the Airline Control Program (ACP). Originally developed for American Airlines' Sabre reservation system, ACP was perfectly suited for high-volume transaction processing. It was designed to handle unpredictable volumes of simultaneous transactions that each required minimal CPU time.
Have you noticed how we now take for granted that our cards work the same way in Tokyo as they do in Toledo? This global consistency was the result of deliberate standardization efforts that transformed local payment systems into a truly worldwide network.
第 8 章
The Final Piece: Automating the Point of Sale
By the late 1970s, Visa had successfully automated authorization, clearing and settlement, but one critical area remained largely manual: the point of sale (POS). Most merchants still relied on paper-based processes-checking hot card lists, calling for verbal authorizations, and manually completing sales drafts. Floor limits reduced authorization calls but allowed approximately one billion dollars in annual fraud and credit losses.
In 1974, Hock initiated his most ambitious project yet: BASE IV, also known as Electronic Value Exchange (EVE). Hock's vision went far beyond the banking industry's focus on electronic funds transfer (EFT). He imagined a world where all financial transactions would be entirely electronic, originating from any device and accessing any asset the payor owned. Though BASE IV was never implemented, it profoundly influenced the evolution of Visa's payment system by defining an end point and identifying necessary building blocks and standards.
To eliminate paper sales drafts as envisioned in BASE IV, transactions needed to originate electronically at the point of sale, requiring both POS terminals and machine-readable cards. In the early 1970s, two competing approaches emerged: optical (OCR) and magnetic (magstripe) encoding. The American Bankers Association formed a task force to develop standards for card encoding, ultimately recommending the magnetic stripe.
Win Derman established Visa's encoding standard, adding two critical fields to the ABA format: a three-digit service code indicating interchange eligibility and a PIN verification value (PVV) for offline PIN verification. In 1979, Visa mandated that all cards bearing their mark after 1980 must include a magnetic stripe encoded to Visa standards.
With standardized magstripes now required on all Visa cards, the organization turned to creating incentives for mass adoption of affordable POS terminals. In 1979, Visa launched a project to develop affordable terminals that could use merchants' existing voice telephone lines. Frank Fojtik led Visa's technical effort, establishing requirements for vendors to build compliant devices with a price point under $500.
Visa conducted a pilot test from June 1980 to December 1981 with 800 terminals deployed at various merchant types across different regions. The test proved technically successful with terminals exceeding reliability expectations. Authorization time averaged just 20 seconds-twice as fast as verbal authorizations with fewer errors. Most importantly, the pilot demonstrated dramatic fraud reduction benefits-participating merchants authorized every transaction rather than just the 12-15% typically authorized.
To drive merchant adoption, Visa USA created the Terminal Interchange Reimbursement Fee (TIRF)-a special one percent interchange rate for terminal-authorized transactions that was 20% lower than the standard rate. This incentivized acquirers to promote terminals by passing savings to merchants through reduced discount fees.
Think about it: every time you swipe, tap, or insert your card at a store, you're participating in a technological ecosystem that took decades to build. The seemingly simple act of paying electronically required solving complex technical, economic, and social challenges.
第 9 章
Beyond Credit: Debit Cards and the Future of Payments
Though many associate Visa exclusively with credit cards, the organization has offered debit products since the mid-1970s. Hock's vision was never to create a system for entrapping consumers in debt, but rather to build a payment network allowing consumers to access any pool of funds they might possess. By 2002, US debit transactions exceeded credit transactions in volume, and by 2008 in dollar amount as well.
As early as 1973, Hock began promoting what he called the "asset card"-a payment card that could access not just credit lines but also deposits, investments, or any other funds the cardholder might possess. He deliberately avoided the term "credit card," calling it "a misnomer" that represented "a classic example of naming and marketing the product from the perspective of the supplier rather than the user."
Tom Honey was tasked with transforming Hock's asset card concept into an NBI product. The new card would be a companion to the BankAmericard, featuring the same blue, white, and gold bands design. From an operational perspective, it would function almost identically-merchants would process transactions the same way and drafts would clear through BASE II. The key difference came at the issuer level, where instead of adding the draft to a credit account, the issuer would directly debit the cardholder's deposit account like a check.
Honey believed the asset card would appeal to Americans suffering from what he called "credit paranoia"-people not reluctant to use payment cards but reluctant to use revolving credit. NBI's research confirmed that about half of Americans with demand deposit accounts avoided bank credit cards, primarily fearing overspending and unmanageable debt.
Despite consumer interest in the asset card, Honey encountered significant resistance from member banks. Card managers worried the asset card would "cannibalize" their newly profitable BankAmericard programs. More fundamentally, many banks weren't against debit cards per se, but objected to NBI controlling them.
A profound cultural and political divide existed between credit card operations and the "deposit side" of most banks in the 1970s and early 1980s. While card portfolios could deliver 70-80% of a bank's profits during economic downturns, they were treated as "stepchildren" that should "stay quiet and unseen." For traditional bankers, "real banking" meant taking deposits and making commercial loans. Credit cards were viewed as questionable ventures associated with disreputable finance companies and loan sharks-not core banking functions.
NBI announced its asset card, named Entree, in August 1975 for October release. About 15 banks initially committed to issue Entree. Early adopters found the cards didn't cannibalize credit volumes, were used more frequently than credit cards, and experienced less fraud because cardholders were more careful with "their own money."
Have you noticed how debit cards have become the preferred payment method for many people? This shift represents the fulfillment of Hock's original vision-a payment system that could access any type of funds, not just credit lines.
第 10 章
Legacy: The Invisible Revolution That Changed Everything
The author concludes by reflecting on how Visa has become an integral yet largely unexamined part of our daily lives. Despite being one of the world's best-known brands, few understand what Visa is, how it's structured, or how it functions. We've come to take it for granted, like a water faucet or light switch-the systems behind these access devices have faded into the background, becoming invisible.
When we use our Visa cards, we rarely consider the magnetic stripes, terminals, telecommunications, computers, and software that enable electronic value exchange. We don't think about the people who developed machine-readable cards, built point-of-sale terminals, connected merchants and banks worldwide, created systems to authorize thousands of transactions per second, and settled millions of dollars nightly across multiple currencies. We don't think about this because "it simply works."
Forty years ago, Californians would gather to watch someone pay with a BankAmericard. Today, we're annoyed when someone writes a paper check. What once seemed magical-using a card at a foreign ATM to get local currency-is now routine.
Visa's story reveals how payment systems aren't neutral conduits for value transfer-they operate according to marks representing rules that determine who pays for services, who bears fraud costs, how disputes resolve, and who controls the rules. These systems inherently favor certain groups and can restrict access, creating profound effects on value exchange patterns.
The 1960-70s payment revolution wasn't about digitizing accounts but digitizing standardized messages, allowing instant worldwide transmission. This enabled Visa to clear transactions overnight, dramatically accelerating value flow while reducing handling costs and float time. This technological shift created a profound possibility: any organization maintaining accounts could potentially join the network regardless of geography or industry.
The next time you effortlessly pay for coffee in a foreign country or make an online purchase from halfway around the world, remember that you're participating in one of humanity's most complex and successful technological systems-one that fundamentally changed how money moves and how we think about value itself. The revolution in your wallet may be invisible, but its impact on our world has been nothing short of transformative.
