Entrepreneur Stories

December 5, 2023

7 mins

The Evolution of Credit: A Journey Through Time

The concept of credit predates even the creation of money, originating over 5,000 years ago in Mesopotamia. From the Wild West's credit coins to Brooklyn banker John Higgins' "Charge-it-card" in 1946, the evolution of credit cards has been fascinating. The Diner's Club, born in 1949, marked the beginning of the modern credit card era, swiftly followed by American Express's iconic plastic credit card in 1959. The inception of the Diner's Club featured cardboard cards exclusively available to a select group of men, granting them access to 27 local restaurants. Originating as a network of friends with 200 male-only members, it reflects a bygone era when credit products were inaccessible to women. The final leap came with Bank of America's creation of revolving credit in 1966, laying the groundwork for today's Visa.

Source: Dinnersclub.com

The Birth and Expansion of Visa

Visa's journey began on September 18, 1958, when the Bank of America introduced the BankAmericard credit card in Fresno, California, under the leadership of Joseph P. Williams. Williams, head of the Customer Services Research Group at Bank of America, successfully implemented the first all-purpose credit card to address the inefficiencies of the prevailing system in the 1950s.

During that era, middle-class Americans carried multiple credit accounts with various merchants, leading to a cumbersome and inefficient process for both consumers and merchants. The lack of a unified financial instrument prompted the need for consolidation in the industry. While there were attempts to create unified credit cards, such efforts mostly failed, especially among smaller, local banks lacking the necessary resources.

Inspired by the successes of Sears and Mobil Oil in the revolving credit card business and learning from previous failures, Williams and his team decided to conduct a test in Fresno, California. With a population of 250,000, Fresno offered a sufficient size for testing the credit card concept while allowing control over startup costs. Bank of America, with a 45% market share in Fresno at the time, initiated the test by mailing 65,000 unsolicited BankAmericard offers.

Source: Americanhistory

The initial test proved successful, leading to expansions in San Francisco and Sacramento by March 1959 and further into Los Angeles by June of the same year. By October, BankAmericard had mailed 2 million offers and was accepted at 20,000 merchants statewide.

Despite the initial success in generating demand and merchant acceptance, challenges emerged. Over 22% of accounts became delinquent, surpassing the projected 4%, and credit card fraud claims increased. The launch of BankAmericard incurred substantial costs, exceeding $8.8 million, which rose to around $20 million when factoring in advertising and overhead.

To salvage the card's reputation, Bank of America launched a public relations campaign, and by 1961, BankAmericard turned profitable. Early challenges, including fraud and unclear credit card agreements, were addressed, paving the way for future success.

In 1966, Bank of America expanded beyond California, setting its sights on competing with emerging rivals like Master Charge, later known as Mastercard.

The Global Expansion and Vision of Dee Hock

In the late 1960s, Bank of America expanded its BankAmericard program globally by licensing local banks to issue cards under different names. Notable instances include Chargex in Canada (collaboration with banks like Royal Bank of Canada and Toronto-Dominion), Carte Bleue in France, Sumitomo Bank in Japan, Barclaycard in the U.K., and Banco de Bilbao in Spain. A significant development in 1968 was the entry of Dee Hock into the narrative. Serving as the National Bank of Commerce manager, Hock was entrusted with overseeing the introduction of BankAmericard in the Pacific Northwest during that pivotal year.

Dee didn't come up with the idea of credit cards, but he used his big ideas and determination to create a company that changed how the world pays for things over the last 60 years. In 1969, he gathered a group of bankers to fix the struggling BankAmericard program. It was full of problems like fraud and debts. Dee didn't just want to fix it; he wanted to do something bigger.

Source: Visa.com

Dee wanted a world where people could easily trade value anytime, anywhere, without any problems. He thought cash was his biggest competitor.

When Dee heard about another payment system doing something similar, he pushed his team to launch VisaNet in 1973. This made Visa the first to fully digitize card transactions when you buy something. They followed that release with the first electronic clearing and settlement system.

Hock came up with the name "Visa" by bringing together international companies. The name and its logo, featuring blue, white, and gold colors inspired by international flags, were designed to be easily understood worldwide.

Hock thought "Visa" was a simple word that anyone could say in any language. He believed it would be easily recognized and show that it was accepted internationally.

Dee Hock became the CEO of this organization and, in just 25 years, made it way bigger than any other money-related company ever, growing it a thousand times its starting size. In 1974, he made things easier by setting up the Base I and Base II systems, which made credit card transactions computerized.

The Public Face of Visa

In 1975, the First National Bank of Seattle launched the very first debit card, a development that would significantly contribute to Visa's revenues for many years.

The year 1976 witnessed the official birth of Visa in its recognizable form. As the company expanded globally, it became apparent that uniting international and national banks would be mutually beneficial. 

Fast forward to 2007, Visa took a significant step by going public. The company announced its intention to merge various business entities, forming Visa, Inc. On November 9, 2007, Visa filed a $10 billion IPO, and on March 18, 2008, it became a publicly traded company. The initial offering, the largest IPO in U.S. history, sold 406 million shares at $44 per share, raising $17.9 billion. Following the IPO, Visa began trading on the New York Stock Exchange under the ticker symbol "V."

Source: Pexels.com

The increasing use of plastic for transactions is contributing to the continued dominance of Visa in the credit and debit card arena, particularly in the United States.

According to a 2020 report by HSN Consultants, Americans spent $6.7 trillion through credit and debit cards in 2019, marking an 88% increase from 2009. Notably, over 60% of these transactions were conducted using Visa cards. This substantial market presence has propelled Visa into becoming one of the world's most valuable companies, boasting a market valuation exceeding $491 billion as of October 19. Additionally, its shares have seen a remarkable surge, climbing over 170% in the past five years.

Visa's Global Impact and Future Endeavors

In December 2020, Visa revealed the introduction of a new accelerator program in the Asia Pacific region, with the goal of advancing the financial technology ecosystem in that area. This initiative seeks to identify and collaborate with startup companies specializing in financial and payment technologies, with the potential to harness the extensive network of bank and merchant partners within Visa's ecosystem.

​​In the fiscal year 2022, Visa disclosed earnings amounting to US$14.96 billion, accompanied by an annual revenue of US$29.31 billion. This represented a notable surge of 21.6% compared to the preceding fiscal cycle. As of 2022, the company held the 147th position on the Fortune 500 list, showcasing its standing among the largest corporations in the United States based on revenue.


Despite Visa's success, some retailers argue that it has come at the expense of merchants who heavily rely on Visa for payment processing. Criticisms have been voiced regarding the perceived high fees imposed by Visa, with concerns raised that these fees may pose challenges for the sustainability of businesses.

Despite these criticisms, Visa maintains its status as a global payment technology company that has transformed worldwide transactions. Recognized for its widely used credit and debit cards, Visa is a trusted and respected entity in the financial sector.  By prioritizing security, innovation, and effortless payment encounters, Visa has attained notable achievements and remains at the forefront of shaping the future of digital payments


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