VISA (credit card)

Visa is a brand of credit card and debit card operated by the Visa International Service Association of San Francisco, California, USA, an economic joint venture of 21,000 financial institutions that issue and market Visa products. The Visa card was launched in 1976 and the card was derived from the earlier BankAmericard issued by the Bank of America.

Background

Internationally, BankAmericard was known by other names prior to the introduction of the Visa brand for the network. The blue-white-gold motif used by BankAmericard was also used for these cards. In Canada, an alliance of banks (including Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Royal Bank of Canada, and Bank of Nova Scotia) issued credit cards under the Chargex name. In France, it was known as Carte Bleue (Blue Card). In the UK, the only BankAmericard issuer for some years was Barclaycard.

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.

Corporate structure

Visa offers through its issuing members the following types of cards:

Debit (debit) cards (pay from a checking account)
Credit (credit) cards (pay monthly payments with interest)
prepaid cards (pay from a cash account that has no checkwriting priviledges)

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 Visa Asia Pacific and Visa Central and Eastern Europe, Middle East and Africa [CEMEA) are divisions within VISA.

The de-centralised 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:

Oversight 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

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).

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. 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 competetive networks), and "credit" a generic synonym for "Visa" (and MasterCard, American Express, Discover, 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 estabish any minimum purchase, maximum purchase, or surcharge for any Visa (credit) transaction (they can establish surcharges for debit). 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 enforcable 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.

Controversy

Some merchants, primarily small businesses, still systematically establish minimum purchases or surcharges and get away with it because individual consumers often do not care enough about the small amount or know the rules. In some countries this is backed by legislation, eg. in the UK a retailer is perfectly within his/her rights to impose a surcharge for paying by credit card and the bank/payment system cannot demand that a retailer does not do this. Others deny use of the system to cardholders with foreign banks. If these are non-signed transactions, the discretion may be allowed by the merchant (for example, the merchant may say they only accept phone orders on Visa cards from domestic banks); however, if it is signed or PIN-based transaction, then it is probably against the rules. A large and growing problem exists with account balance ownership--the cardholder's right to be able to keep track of his balance. Automatic charges based on complex if-then statements and contingencies, such as deep contract clauses that say a merchant may collect any due amounts through a Visa transaction without any signature, the association's hertofore refusal to grant future prices on foreign exchange rates (they could be published on the internet from a newspaper standard of the previous business day, or they could be ultimately calculated on the receipt itself) and merchant charges for "any denial" of a transaction contribute to this lack of ownership. Innovations to solve this problem include the dropping of over-the-limit fees (such as with Citibank), and a standard system of requiring check-type information for every transaction: name of payee, amount, date, permission of cardholder. A similar system is needed for automatic charges by merchants.

Logo

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.

Issuers

JPMorgan Chase is the world's largest issuer of the Visa card after acquiring Bank One which was the largest Visa card issuer.

Olympic sponsorship

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.

Other sponsorships

VISA is currently the shirt sponsor for the Argentina national rugby union team.

Legal proceedings

Visa settled a lawsuit to Wal-Mart for billions of dollars. According to a website associated with the suit (link), 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. 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.
In 1999, a Malaysian company called Sheimer tried to register "visa" as a trade mark for condoms (being a pun on "permit to enter"), which, despite being in a different business, was rejected because, among other reasons, Visa had a "strong distinctive character and reputation in the United Kingdom" and "the use of Visa for condoms would be detrimental to the distinctive character of Visa International's earlier trade mark for financial services."^*

Board of directors

As of August 2005, the following banks are represented on Visa's U.S.A. board of directors:

External links

Credit cards | 1976 establishments | Cooperatives

Gourt Home::Gourt :: VISA (credit card)