Electronic Value Exchange: Origins of the VISA Electronic Payment System (review)

David L. Stearns argues in Electronic Value Exchange: Origins of the Visa Electronic Payment System that the job of a historian of technology is to make invisible technologies visible again. Certainly, he has achieved this goal. His narrative illustrates the history of Visa from 1958 through 1984. Stearns details the company's inception as part of the Bank of America (BofA) through to the resignation of its first CEO in 1984. However, Stearns also illuminates the social and technological negotiations that had to take place to make a plastic card equivalent to a global currency. These dual narratives make Electronic Value Exchange a sweeping contribution to the literature, in both the history of technology and business history.

Visa is a company of contemporary cultural significance. Currently, it is the largest payment card network in the world, processing almost two thousand transactions per second. However, Visa was not the first charge card. Merchants had organized cooperative organizations to provide charge cards as early as the 1930s, and merchant-specific cards date even earlier. Industry charge cards, like gas charge cards, were also available. Even bank issued charge cards were already in existence. However, Stearns illustrates how the strategy behind these bank-issued charge cards was fatally flawed. These banks were offering neither revolving credit nor charging cardholders for fees, making it impossible to collect revenue. More problematic, though, was the scope of these efforts, as banking regulations limited the scale these card issuers could achieve.

Enter the BofA. BofA was the largest bank in the world in the late 1950s when they entered the nascent credit card market. Moreover, BofA, unlike many banks of the time, was culturally disposed to offer consumer credit. However, even with these strengths, by 1968 BofA's licensing agreement to provide the new credit cards was under threat and the system close to dissolution, because of disagreements among the members. Stearns illustrates how, under the leadership of Dee Hock, National Bank Americard Incorporated, later to become Visa, spun off from the BofA to become a vast cooperative membership organization, tasked with making money move.

From this point, Stearns's narrative is driven not by the chronological history of Visa, but instead with the social and technological negotiations Visa spearheaded in order to transform our concept of money into a form of data that could be moved and manipulated by customers and institutions. One of these social negotiations was the distinctive mark borne by Visa credit cards. These marks were negotiated and renegotiated. Stearns argues, convincingly, that one of the reasons for the success of the system was because the mark was large, recognizable, and on every card. This visual clue allowed geographically disparate merchants to be confident in accepting the card.

Negotiation is at the heart of this story. One element of this is the constant negotiation between merchants, issuing organizations, and Visa as the overarching organization. As Stearns rightly points out, Visa Inc. was balancing competition and cooperation. This is particularly well-illustrated in the case of the issuing organizations. These licensees are competitors, offering financial services to the general public—including credit cards. At times, these licensees are not just competitors in the general sense, but are colocated geographically, attempting to capture the same market. However, as members of Visa, these issuing organizations must cooperate to establish and propagate the electronic funds transfer system. One role of Visa was to facilitate this cooperation.

These social and technological negotiations often blur. For example, Stearns illustrates that one of the largest problems faced by the new industry was fraud, which undermined consumer confidence in the idea of credit card as a form of cash. To address fraud, there was a complex authorization system that delayed consumers at the cash register. Stearns illustrates the process of computerizing and centralizing this authorization system. One of the most interesting aspects of this process was the method by which Visa achieved the mass adoption...