Visa (company)
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The Visa and Plus logos.
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The Visa International Service Association of San Francisco, California, USA, commonly called VISA, is an economic joint venture of 21,000 financial institutions that issue and market Visa products including credit and debit cards.
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[edit] Background
In 1958, the 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.
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.
[edit] Corporate structure
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.
Visa's corporate structure is regionally de-centralised, which is unique in the payment scheme industry.
Legally, Visa comprises four non-stock, separately incorporated companies that employ 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 have the status of group members of Visa International Service Association, whereas the unincorporated regions (Visa Latin America [LAC], Visa Asia Pacific and Visa Central and Eastern Europe, Middle East and Africa [CEMEA]) are divisions within VISA.
The decentralised 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.
The Visa Association is not a profit-driven organisation and the four companies that make up Visa issue no cards and make 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. Fees are levied according to the following formula:
- Operating and Marketing costs
- + Investments in new products, platforms and systems
- + Increase in Reserves
- = Members annual fees
On October 11, 2006, VISA announced it will be eliminating its membership structure in most parts of the world, instead becoming a publicly traded company.[2] This is being done in response to a similar move by MasterCard.
[edit] Features of the standard product
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 debit protocol involves using the card at a point-of-sale terminal (POS) or ATM 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) or, more commonly, from a current account.
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).
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.
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 (except for in Australia and the UK, where recent legislation in each has allowed retailers to apply a surcharge on any credit card transaction, VISA or otherwise). They can 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). Enforcement of the rules, however, is by individual banks, and they may or may not know the rules well. So, a restaurant may charge a surcharge or minimum, which may at first be upheld by the bank in many cases, 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.
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.
The VISA system has been known to decline legitimate charges if it believes that the transactions may be fraudulent. In particular, repeated overseas transactions may be denied.
[edit] Logo design
[edit] Old logo design
The blue and gold in Visa's logo were originally chosen to represent the blue sky and golden-colored hills of California, where Bank of America was founded.
The Visa Flag Symbol is used by merchants to denote the acceptance of Visa credit cards. However, the logo is misleading as many merchants, particularly in France, show the logo, but only accept local cards[1].
[edit] New logo design
As of Mid 2006 VISA are now removing their trademark "flag" logo from all their cards, websites and retailer's windows.[citation needed] It will be the first time that VISA have removed this logo since the company was founded.
For all Electron 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.
[edit] 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.
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").[3]
[edit] Issuers
JPMorgan Chase became the world's largest Visa card issuer after acquiring Bank One, which was the largest Visa card issuer.
[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.
[edit] 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
[edit] Legal proceedings
- Visa settled a lawsuit to Wal-Mart for billions of dollars. According to a website associated with the suit [4], 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.
- It has been rumored for years that Visa and MasterCard have been working in tandem for a long time; some believe they are really the same company.[citation needed] In fact, while most card-issuing banks in the United States are members of both Visa and MasterCard, the associations are distinct, and have some key differences. The United States Department of Justice unsuccessfully sued the two associations over allegations that their common ownership was detrimental to competition. The United States Department of Justice was successful with claims brought at the same time against both companies under the Sherman Antitrust Act for preventing banks from issuing American Express cards. In late 2004, the Supreme Court declined to reconsider a lower court's ruling and thereby cleared the way for MasterCard- and Visa-issuing banks to begin issuing American Express and Discover cards. Subsequently, several major issuers like MBNA and Citibank have begun issuing American Express cards, in addition to Visa and MasterCard.
[edit] Initial public offering
On October 11, 2006, Visa announced that some of its businesses would be merged and become a publicly traded company, Visa Inc.[5][6][7]
[edit] Board of directors (Visa USA)
As of August 2005, the following banks are represented on Visa's U.S.A. board of directors:
- JPMorgan Chase (2 seats)
- Bank of America (2 seats)
- Wachovia
- US Bancorp
- Wells Fargo
- Providian Financial Corporation
- First National of Nebraska
- Texas First Bank
- National City Corporation
- SunTrust Bank
[edit] See also
- Visa Debit
- Visa Electron
- MasterCard
- American Express
- Diners Club
- Discover
- China UnionPay
- JCB
- Choice card
- Interchange fee
