Visa Inc.

Visa Inc.

Type	Public (NYSE: V)
Industry	Financial Services
Founded	Delaware (1970)
Headquarters	San Francisco, California, U.S.
Key people	Joseph Saunders (Chairman and CEO) John Partridge (President) Byron Pollitt (CFO)
Products	Payment systems
Revenue	US$6.91 Billion (FY 2009)[1]
Operating income	US$3.54 Billion (FY 2009)[1]
Net income	US$2.35 Billion (FY 2009)[1]
Total assets	US$32.3 Billion (FY 2009)[2]
Total equity	US$23.2 Billion (FY 2009)[2]
Website	Visa.com

Visa Inc. (NYSE: V) is an American global payments technology company headquartered in Foster City, California. Visa connects consumers, businesses, financial institutions and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks.^[3] The company facilitates the processing of transactions on behalf of financial institutions and merchants through VisaNet, one of the world’s most advanced processing networks capable of handling more than 10,000 transactions per second.^[4] In 2009, Visa’s global network processed 62 billion transactions with a total volume of $4.4 trillion.^[5]

Visa does not issue cards, extend credit or set rates and fees for consumers; rather, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers. In 2008, according to The Nilson Report, Visa held a 38.3% market share of the credit card marketplace and 60.7% of the debit card marketplace in the United States.^[6]

Visa has operations across Asia-Pacific, North America, Central and South America, Caribbean, Central and Eastern Europe, Africa and Middle East. Visa Europe is a separate membership entity that is an exclusive licensee of Visa Inc.’s trademarks and technology in the European region.

Background

A 1976 ad promoting the change of name to VISA. Note the early VISA card shown in the ad, as well as the image of the BankAmericard that it replaced.

In mid-September 1958, Bank of America (BofA) launched its pioneering BankAmericard credit card program in Fresno, California with an initial mailing of 60,000 unsolicited credit cards.^[7] The original idea was the brainchild of BofA's in-house product development think tank, the Customer Services Research Group, and its leader, Joseph P. Williams, who convinced senior BofA executives in 1956 to let him pursue what became the world's first successful credit card "drop," or mass mailing of unsolicited credit cards (that is, actual working cards, not mere applications) to a large population.^[8]

Williams' accomplishment was in the successful implementation of the all-purpose credit card, not in coming up with the idea.^[9] By the mid-1950s, the typical middle-class American already maintained revolving credit accounts with several different merchants, which was clearly inefficient and inconvenient due to the need to carry so many cards and pay so many separate bills each month.^[10] The need for a unified financial instrument was already palpably obvious to the American financial services industry, but no one could figure out how to do it. Of course, there were already charge cards like Diners Club (which had to be paid in full at the end of each billing cycle), and "by the mid-1950s, there had been at least a dozen attempts to create an all-purpose credit card."^[10] Unfortunately, these prior attempts had been carried out by small banks which lacked the resources to make them work.^[10] Williams and his team studied these failures carefully and believed they could avoid replicating those banks' mistakes; they also studied existing revolving credit operations at Sears and Mobil Oil to learn why they were successful.^[11] Fresno was selected for its population of 250,000 (big enough to make a credit card work, small enough to control initial startup cost), BofA's market share of that population (45%), and relative isolation, to control public relations damage in case the project failed.^[12]

The 1958 test at first went smoothly, but then BofA panicked when it confirmed rumors that another bank was about to initiate its own drop in San Francisco, BofA's home market.^[13] By March 1959, drops began in San Francisco and Sacramento; by June, BofA was dropping cards in Los Angeles; by October, the entire state had been saturated with over 2 million credit cards, and BankAmericard was being accepted by 20,000 merchants.^[14] Unfortunately, the program was riddled with problems, as Williams (who had never worked in a bank's loan department) had been too earnest and trusting in his belief in the basic goodness of the bank's customers, and he resigned in December 1959.^[15] 22% of accounts were delinquent, not the 4% expected, and police departments around the state were confronted by numerous incidents of the brand new crime of credit card fraud.^[16] Both politicians and journalists joined the general uproar against Bank of America and its newfangled credit card, especially when it was pointed out that the cardholder agreement held customers liable for all charges, even those resulting from fraud.^[17] BofA officially lost over $8.8 million on the launch of BankAmericard, but when the full cost of advertising and overhead was included, the bank's actual loss was probably around $20 million.^[17]

However, after purging Williams and his proteges, BofA management realized that BankAmericard was salvageable.^[18] They conducted a "massive effort" to clean up after Williams, imposed proper financial controls, published an open letter to 3 million households across the state apologizing for the mess they had caused, and eventually were able to make the new financial instrument work.^[19]

The original goal of BofA was to offer the BankAmericard product across California, but in 1965, BofA began to sign 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, thus forming a network of banks backing the BankAmericard system across the United States.^[20] The "drops" of unsolicited credit cards continued unabated, thanks to BofA and its licensees and competitors, until they were outlawed in 1970 due to the serious financial chaos they caused, but not before over 100 million credit cards had been distributed into the American population.^[21]

During the late 1960s, BofA also licensed the BankAmericard program to banks in several other countries, which began issuing cards with localized brand names. 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.

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 1975 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. The term "VISA" may have differing pronunciations around the world. For example, in Canada, advertising, possibly originating in the United States, uses the pronunciation "Veesa", but the common pronunciation among the population is "Veeza"

In October 2007, Bank of America announced it was resurrecting the BankAmericard brand name as the "BankAmericard Rewards Visa."^[22]

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 automated teller machine network and the Interlink EFTPOS point-of-sale network, which facilitate the "debit" protocol used with debit cards and prepaid cards. They also provide commercial payment solutions for small businesses, midsize and large corporations, and governments.^[23]

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 and restructuring

On October 11, 2006, Visa announced that some of its businesses would be merged and become a publicly traded company, Visa Inc.^[24][25][26] Under the IPO restructuring, Visa Canada, Visa International, and Visa U.S.A. were merged into the new public company. Visa's Western Europe operation became a separate company, owned by its member banks who will also have a minority stake in Visa Inc.^[27] In total, more than 35 investment banks participated in the deal in several capacities, most notably as underwriters. The law firm Davis Polk & Wardwell served as counsel to the underwriters, while the law firm White & Case LLP served as counsel to Visa Inc. in the 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.^[28] 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).^[29] On February 25, 2008, Visa announced it would go ahead with an IPO of half its shares.^[30] The IPO took place on March 18, 2008. Visa sold 406 million shares at US$44 per share ($2 above the high end of the expected $37–42 pricing range), raising US$17.9 billion in the largest initial public offering in U.S. history.^[31] On March 20, 2008, the IPO underwriters (including JP Morgan, Goldman Sachs & Co., Banc of America Securities LLC, Citi, HSBC, Merrill Lynch & Co., UBS Investment Bank and Wachovia Securities) exercised their overallotment option, purchasing an additional 40.6 million shares, bringing Visa's total IPO share count to 446.6 million, and bringing the total proceeds to US$19.1 billion.^[32] Visa now trades under the ticker symbol "V" on the New York Stock Exchange.^[33]

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 small business or a government body (like a university), may establish any minimum purchase, maximum purchase, or surcharge for any Visa (credit) transaction.^[34] 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^[35] and Australia^[36] and retailers in those countries may apply surcharges to any credit-card transaction, Visa or otherwise. However, in the UK, this surcharge may not exceed the fee charged by the issuer of the credit card to the merchant, nor are merchants required to charge different prices for credit card transactions.^[35]

In ten US states, surcharges for the use of a credit card are forbidden by law (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas) but a discount for cash is permitted under specific rules.^[37]

Another (and often ignored) rule is that merchants may not require a photo ID in order to process a Visa credit card transaction. Unlike MasterCard, Visa does permit merchants to ask for photo ID, although the merchant rule book states that this practice is "discouraged". As long as the Visa card is signed, a merchant may not deny a transaction because a cardholder refuses to show a photo ID. In some countries (such as Argentina, Spain and Sweden), however, an ID card is de-facto required for all signature-based credit card transactions and routinely requested by all merchants.

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.

Business Overview

Processing

Visa’s information processing network, VisaNet, facilitates the transfer of value and information among its financial institution clients, consumers, merchants, businesses and governments.^[38] Nearly 101 billion authorization, clearing and settlement transactions were processed through VisaNet in calendar year 2009.^[39] Based on testing results, Visa estimates that VisaNet is capable of processing more than 10,000 messages per second.^[40]

VisaNet operates four processing centers on three continents, all synchronized and operating identical authorization platforms. This enables Visa to shift transaction volume from one data center to another if needed.^[40] At the same time, these data centers house multiple authorization engines, essentially “data centers within a data center.”^[41] Combined, these advances help to ensure that the VisaNet system is available and has enough processing power to meet the growing demand for electronic payments.^[40]

Because of VisaNet’s centralized architecture, Visa can also offer enhanced risk management^[42], dispute processing^[43], loyalty programs^[44] and other information-based services.

Innovation

Beyond the payment products listed above, recent innovations from Visa include:

• Money Transfer — Visa Money Transfer is a person-to-person payment platform that enables the transfer of funds from account to account using the Visa network.^[45]
• Chip Technology — In a number of regions, Visa supports the deployment of chip technology, whether EMV contact chip or contactless Visa payWave.^[46]
• Mobile Payments and Services — Visa’s mobile strategy is designed to take advantage of its global network to deliver mobile payments, mobile money transfer, mobile acceptance and value-added services.^[47]
• eCommerce — Visa is one of the most widely accepted payment brands online.^[48] Visa protects online transactions through multiple layers of security, including Verified by Visa, allowing issuers to authenticate cardholders in online transactions.^[49]

Security

Visa’s approach to security focuses on: securing the payments environment to protect card data, monitoring, identifying and preventing fraud through technology and best practices; managing the impact of fraud by helping issuers and acquirers recover from its effects; maintaining trust in Visa payments through merchant and consumer education and creating an environment of partnership by promoting industry engagement and accountability around security.^[50]

PayWave

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.^[51] This is similar to the MasterCard PayPass service, with both using RFID technology.

In Europe, Visa has introduced the V PAY solution for chip-only, PIN-only cards.^[52]

Trade mark and design

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 the legacy Bank of America was founded.

The Visa symbol is used by merchants to denote the acceptance of Visa payment cards.

In 2006, Visa removed its trademark "flag" logo from all its cards, websites and retailer's windows. This was the first time that Visa had changed its logo.^[53]

The new logo has a simple white background with the name VISA in blue with an orange flick on the 'V' (shown in the infobox at the top of this page).

For the new Visa Debit and Visa Electron logo, see the relevant pages.

Dove hologram

The 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").^[54] The HoloMag card was shown to occasionally cause interference with card readers, so Visa eventually withdrew designs of HoloMag cards and reverted to traditional magnetic strips^[55].

Sponsorships

Olympics and Paralympics

Since the 1988 Calgary Winter Olympic Games, as a worldwide Olympic partner, and since the 2004 Athens Summer Paralympic Games as a worldwide Paralympic partner, Visa is the only form of electronic payment accepted at all venues and Olympic- and Paralympic-related transactions.^[56] Its current contract with the IOC and IPC as the exclusive payment card will continue through 2012.^[57] For the 2008 Olympics Visa ran a sweepstakes offering a chance to win a trip to Beijing to watch the Olympics live. On September 29, 2009 it was announced that VISA will be the official sponsor of the Great Britain Olympic and Paralympic team (Team 2012) at the London 2012 Olympics and Paralympics.^[58]

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 was the sponsor of the Centennial Park Moonlight Cinema, located in Sydney, Australia

Visa sponsored the 2007 Rugby World Cup

It replaces MasterCard as a FIFA partner and will be the official card of the 2010 FIFA World Cup in South Africa

Visa sponsored PacWest Racing's IndyCar team in 1995 and 1996, with drivers Danny Sullivan and Mark Blundell respectively.

Visa is also the Official Card of NASCAR

Legal proceedings

Visa Inc.'s former headquarters in Foster City is still home to a significant portion of the company's operations

Visa settled an antitrust lawsuit brought by a class of U.S. merchants, including Wal-Mart, for billions of dollars in 2003. According to a website associated with the suit,^[59] Visa and MasterCard settled the plaintiffs' claims for a total of $3.05 billion, and Visa's share of this settlement is reported to have been the larger.

See also

• Visa Buxx
• Visa Debit
• Visa Electron
• Carte Bleue
• American Express
• Discover
• MasterCard
• China UnionPay
• JCB
• Choice card
• Interchange fee
• Damage waiver
• CIBIL

External links

• Official VISA corporate profile
• Yahoo! — VISA U.S.A. Inc. Company Profile
• Yahoo! — VISA International Company Profile
• Gogopay Online Payment Gateway - VISA International Payments

References