Visa Inc. is a global payments technology company headquartered in 595 Market Street in San Francisco, California. It facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit card and debit cards. 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. In 2009, Visa’s global network (known as VisaNet) processed 62 billion transactions with a total volume of $4.4 trillion.
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, issuing cards such as Visa Debit.
Visa International has grown from a credit card company into the largest full-service consumer payment system in the world. With around 600 million cards in circulation as of 1998, Visa boasted the most widely recognized general purpose payment card in the world. Worldwide consumer purchases made with Visa reached around $1 trillion in 1997. In the United States, Visa commanded the majority of the market in transactions made with credit cards. The company also offered numerous products and services in the late 1990s, including debit cards, travelers cheques, and a worldwide ATM network.
Visa Inc. (Visa), incorporated in May 2007, is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks. The Company owns, manages and promotes a range of payment brands, including Visa, Visa Electron, PLUS and Interlink, which it licenses to its clients for use in their payment programs. It offers a range of branded payments product platforms, which its clients use to develop and offer credit, debit, prepaid and cash access programs for their customers (individuals, businesses and government entities). It provides transaction processing and value-added services to its clients through VisaNet, Visa Debit Processing Services and Visa Processing Services. In March 2011, the Company acquired PlaySpan Inc.
The Company operates an open-loop payments network, a multi-party system, in which Visa connects financial institutions-issuing financial institutions (issuers) that issue cards to cardholders, and acquiring financial institutions (acquirers) that have the banking relationship with merchants-and manage the exchange of information and value between them. The Company derive revenues from fees paid by its clients based on payments volume, transactions that it processes and other related services that it provides. Its clients deliver Visa products and payment services to consumers and merchants based on product platforms it defines and manages. On July 21, 2010, it completed the acquisition of CyberSource Corporation (CyberSource). CyberSource provides payment and risk solutions to online businesses.
Transaction Processing Services
The Company owns and operates VisaNet, which consists of multiple synchronized processing centers, including a new east coast data center in the United States. In addition, Visa Europe operates one processing center in the United Kingdom. VisaNet is built on a centralized architecture, enabling it to view and analyze each authorization transaction it processes in real time and to provide value-added information, such as risk scoring or loyalty applications, while the transaction data is being routed through its system. CyberSource, a wholly owned subsidiary of Visa Inc., operates multiple data centers in the United States and internationally. These secure data center facilities allow for transaction services and connectivity to the Internet, clients and processing partners. Its core processing services involve the routing of payment information and related data to facilitate the authorization, clearing and settlement of transactions between Visa issuers and acquirers. In addition, it offers a range of value-added processing services to support its clients’ Visa programs and to promote the growth and security of the Visa payments network.
The Company processes Visa transactions occurring in the United States. It also processes Visa transactions where the issuer and the merchant are located in different countries, referred to as cross-border transactions. It performs clearing and settlement through VisaNet for transactions involving an issuer that is located in Visa Europe’s region and an acquirer that is located in the rest of the world, or vice versa. During fiscal year ended September 30, 2010 (fiscal 2010), Visa Europe deployed its own processing system. Visa Europe authorizes transactions for its members through its own processing system.
Other Value-Added Processing Services
The Company offers a range of other value-added services in certain countries, including risk management, debit issuer processing, loyalty services, dispute management and value-added information services. It provides clients in certain countries with a number of value-added risk-management services. These services, including Visa Advanced Authorization, include preventive, monitoring, investigative and predictive tools. Visa Debit Processing Services (DPS) provides issuer processing services for participating in the United States issuers of Visa debit, prepaid and automated teller machine (ATM) payment products. DPS offers card management services, exception processing, PIN and ATM network gateways, call center services, fraud detection services and ATM terminal driving. Visa Processing Service (VPS) provides credit, debit and prepaid issuer processing services, including multicurrency processing functionality, outside the United States. It offers loyalty services, such as the Visa Incentive Network and Visa Extras.
The Company manages Visa Resolve Online, an automated Web-based service that allows its clients’ back-office analysts and client service representatives to manage and resolve Visa transaction disputes more efficiently than with paper-based processes. It provides clients with a range of additional information-based business analytics and applications, as well as the transaction data and associated infrastructure required to support them. Through its CyberSource-branded solutions, it provides technology and services that make e-commerce merchants to accept, process and reconcile payments, manage fraud, and safeguard payment security online. CyberSource brings these payment management solutions to market on two platforms: CyberSource Enterprise services and Authorize.Net.
Product Platforms
The Company offers a range of product platforms that enable its clients to build payment programs for their consumer, business, government and merchant clients. Its payment platforms enable credit, charge, deferred debit, debit and prepaid payments, as well as cash access for consumers, businesses and government entities. Its payment platforms are offered under its Visa, Visa Electron, Interlink and PLUS brands. Its consumer credit product platforms allow its issuers to offer deferred payment and financing products. Its baseline consumer credit platform is marketed to its issuers as Visa Classic. In addition, it offers premium credit platforms. Its premium consumer credit platforms are marketed to issuers, and in some cases, to cardholders, as Visa Gold, Visa Platinum, Visa Signature, Visa Signature Preferred and Visa Infinite.
The Company’s deposit access product platforms enable its issuers to offer consumer payment and cash access products that draw on consumers’ deposit accounts, such as checking, demand deposit, asset or other pre-funded accounts. Its consumer debit platform in the United States and many other countries uses the Visa brand mark. Its clients in Asia Pacific (AP), Latin America and Caribbean (LAC), and Central and Eastern Europe, Middle East and Africa (CEMEX), can use the Visa Electron debit platform, which requires transactions initiated from the card to be authorized electronically. It is used by issuers offering payment programs to risk client segments or in countries where electronic authorization is less prevalent. In the United States, it also provides the Interlink debit product platform, which requires a cardholder to enter a personal identification number (PIN), for authentication. Interlink may be enabled through an acceptance mark on a Visa debit card or issued as a standalone debit card.
The Company’s prepaid product platform enables issuers to offer products that access a pre-funded account, allowing cardholders to enjoy the convenience and security of a payment card in lieu of cash or checks. Its prepaid platform includes gift, travel, youth, payroll, money transfer, corporate incentive, insurance reimbursement and government benefits cards. Its clients can provide global cash access to their cardholders by issuing products accepted at Visa and PLUS branded ATMs. Visa and Visa Electron branded cards offer cash access at ATMs, as well as at branches of its participating financial institution clients. The PLUS brand also be included on issuers’ non-Visa branded cards to offer international cash access as a complement to domestic cash access services.
The Company’s commercial product platforms enable small businesses, medium and large companies, and government organizations to streamline payment processes, manage spend, access information reporting, automate their supply chain and reduce administrative costs. The Visa Business credit and debit platforms provide small businesses with cash flow tools, purchasing savings, rewards and management reporting. Visa Business Electron is an electronic authorization platform used in many countries outside North America. The Visa Corporate platform offers payment options for employee travel and entertainment charges, including cash advances, and provides detailed transaction data, as well as information and expense management tools. The Visa Purchasing platform provides card and non-card electronic payment products that allow companies to procure goods and services, while streamlining resource- and paper-intensive purchase order and invoice processing. Through Synced, its joint venture with US Bank, it markets an integrated invoice processing, payment and financing platform for financial institutions to offer to their corporate and government commercial clients globally. Visa offers government organizations information-and expense-management tools, employee-fraud-and misuse-management tools and strategic sourcing tools for their card programs. In certain countries, Visa offers commercial products for specific government-sponsored programs, targeting agriculture, small-business, freight or construction loan programs.
The Company competes with MasterCard, American Express, Diners Club, JOB, Discover and China Union Pay.
In the mid-1990s Visa developed new products and services that met with varying degrees of consumer enthusiasm. In 1994 the company acquired Interlink, which provided Visa with an online banking service it could offer around the world. A joint venture with Microsoft to offer home banking services and create related software did poorly against Intuit and other competitors in its first few years.
Much more popular was Visa's debit card, a payment option that gained a great deal of momentum in the 1990s. Payments made with the debit cards were withdrawn from the holder's checking account and no interest payments were levied. Visa invested heavily in another new payment option, the chip-based "smart card," with much less satisfying results. Although Visa had endorsed the chip technology in 1992, it did not offer the card until 1996. Named Visa Cash, the card electronically stored money to be used as cash. Consumers could load money onto the card by transferring money from a checking account to the card at an ATM. To encourage member banks to transfer from magnetic stripe cards to the new technology, Visa instituted the Partner Program in 1997. Tests with the card, however, were not encouraging. In a 1998 trial by Citibank and Chase Manhattan on the Upper West Side of Manhattan, consumers rarely loaded their cards a second time. "Smart cards are a technology chasing a business case," Richard Speer, CEO of the financial consulting firm Speer & Associates, told the New York Times in 1998.
Visa encountered a couple of setbacks in 1997 related to new shopping services on the Internet. Visa and Yahoo, the largest Internet search engine, had reached an agreement to jointly develop an Internet shopping site. Yahoo canceled the agreement in September 1997, costing them $20.5 million. The same year Visa postponed the full introduction of a secure Internet purchasing system. The system, dubbed the Secure Electronic Transaction (SET) protocol, would make electronic money transactions safe through the use of encryption, digital certificates, and digital signatures. In August 1997 Visa began the world's largest pilot program for secure electronic commerce using the SET protocol.
In 1998 federal regulators filed an antitrust suit against Visa and MasterCard, charging that their bylaws preventing member banks from issuing competing cards were creating an uncompetitive marketplace. Visa fought the suit, claiming intense market competition existed. "We believe the suit filed today by federal regulators will fail in a court of law," Paul Allen, executive vice-president and general counsel for Visa U.S.A., said in a press release. "Because, when it comes right down to it, consumers have unlimited choices when it comes to credit cards."
In the late 1990s, Visa's focus was on developing its foreign operations, increasing its debit activity, and improving its technological infrastructure. Despite problems with its electronic cash card, the introduction of its SET protocol, and the federal antitrust suit, Visa operated the largest and strongest consumer payment system in the world.
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. 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.
Williams' accomplishment was in the successful implementation of the all-purpose credit card, not in coming up with the idea. 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. 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. 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."However, these prior attempts had been carried out by small banks which lacked the resources to make them work. 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. 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.
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. 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. However, 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. Twenty-two percent 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. 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. 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.
OVERALL
Beta: 0.83
Market Cap (Mil.): $66,331.01
Shares Outstanding (Mil.): 830.07
Annual Dividend: 0.60
Yield (%): 0.75
FINANCIALS
V.N Industry Sector
P/E (TTM): 20.47 23.57 26.13
EPS (TTM): 20.99 -- --
ROI: 10.94 1.47 4.83
ROE: 12.99 13.95 9.92
Statistics:
Private Company
Incorporated: 1970 as National BankAmericard Inc.
Employees: 4,000
Sales: $1.6 billion (1997 est.)
SICs: 6153 Payment Cards, Travelers Cheques, & Travel Vouchers
Name Age Since Current Position
Joseph Saunders 65 2007 Chairman of the Board, Chief Executive Officer
John Partridge 61 2009 President
Byron Pollitt 59 2007 Chief Financial Officer
Antonio Lucio 51 2008 Chief Marketing Officer
Joshua Floum 52 2010 General Counsel
William Sheedy 43 2009 Group Executive – Americas
Ellen Richey 61 2007 Chief Enterprise Risk Officer
Elizabeth Buse 50 2010 Group Executive - International
Oliver Jenkyn 37 2009 Global Head - Strategy and Corporate Development
John Swainson 56 2008 Lead Independent Director
Gary Coughlan 66 2007 Independent Director
Mary Cranston 63 2007 Independent Director
Francisco Fernandez-Carbajal 55 2007 Independent Director
Suzanne Nora Johnson 53 2007 Independent Director
Robert Matschullat 63 2007 Independent Director
Cathy Minehan 63 2007 Independent Director
David Pang 67 2007 Independent Director
William Shanahan 71 2007 Independent Director
Address:
3155 Clearview Way
San Mateo, California 94402-3798
U.S.A.
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, issuing cards such as Visa Debit.
Visa International has grown from a credit card company into the largest full-service consumer payment system in the world. With around 600 million cards in circulation as of 1998, Visa boasted the most widely recognized general purpose payment card in the world. Worldwide consumer purchases made with Visa reached around $1 trillion in 1997. In the United States, Visa commanded the majority of the market in transactions made with credit cards. The company also offered numerous products and services in the late 1990s, including debit cards, travelers cheques, and a worldwide ATM network.
Visa Inc. (Visa), incorporated in May 2007, is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks. The Company owns, manages and promotes a range of payment brands, including Visa, Visa Electron, PLUS and Interlink, which it licenses to its clients for use in their payment programs. It offers a range of branded payments product platforms, which its clients use to develop and offer credit, debit, prepaid and cash access programs for their customers (individuals, businesses and government entities). It provides transaction processing and value-added services to its clients through VisaNet, Visa Debit Processing Services and Visa Processing Services. In March 2011, the Company acquired PlaySpan Inc.
The Company operates an open-loop payments network, a multi-party system, in which Visa connects financial institutions-issuing financial institutions (issuers) that issue cards to cardholders, and acquiring financial institutions (acquirers) that have the banking relationship with merchants-and manage the exchange of information and value between them. The Company derive revenues from fees paid by its clients based on payments volume, transactions that it processes and other related services that it provides. Its clients deliver Visa products and payment services to consumers and merchants based on product platforms it defines and manages. On July 21, 2010, it completed the acquisition of CyberSource Corporation (CyberSource). CyberSource provides payment and risk solutions to online businesses.
Transaction Processing Services
The Company owns and operates VisaNet, which consists of multiple synchronized processing centers, including a new east coast data center in the United States. In addition, Visa Europe operates one processing center in the United Kingdom. VisaNet is built on a centralized architecture, enabling it to view and analyze each authorization transaction it processes in real time and to provide value-added information, such as risk scoring or loyalty applications, while the transaction data is being routed through its system. CyberSource, a wholly owned subsidiary of Visa Inc., operates multiple data centers in the United States and internationally. These secure data center facilities allow for transaction services and connectivity to the Internet, clients and processing partners. Its core processing services involve the routing of payment information and related data to facilitate the authorization, clearing and settlement of transactions between Visa issuers and acquirers. In addition, it offers a range of value-added processing services to support its clients’ Visa programs and to promote the growth and security of the Visa payments network.
The Company processes Visa transactions occurring in the United States. It also processes Visa transactions where the issuer and the merchant are located in different countries, referred to as cross-border transactions. It performs clearing and settlement through VisaNet for transactions involving an issuer that is located in Visa Europe’s region and an acquirer that is located in the rest of the world, or vice versa. During fiscal year ended September 30, 2010 (fiscal 2010), Visa Europe deployed its own processing system. Visa Europe authorizes transactions for its members through its own processing system.
Other Value-Added Processing Services
The Company offers a range of other value-added services in certain countries, including risk management, debit issuer processing, loyalty services, dispute management and value-added information services. It provides clients in certain countries with a number of value-added risk-management services. These services, including Visa Advanced Authorization, include preventive, monitoring, investigative and predictive tools. Visa Debit Processing Services (DPS) provides issuer processing services for participating in the United States issuers of Visa debit, prepaid and automated teller machine (ATM) payment products. DPS offers card management services, exception processing, PIN and ATM network gateways, call center services, fraud detection services and ATM terminal driving. Visa Processing Service (VPS) provides credit, debit and prepaid issuer processing services, including multicurrency processing functionality, outside the United States. It offers loyalty services, such as the Visa Incentive Network and Visa Extras.
The Company manages Visa Resolve Online, an automated Web-based service that allows its clients’ back-office analysts and client service representatives to manage and resolve Visa transaction disputes more efficiently than with paper-based processes. It provides clients with a range of additional information-based business analytics and applications, as well as the transaction data and associated infrastructure required to support them. Through its CyberSource-branded solutions, it provides technology and services that make e-commerce merchants to accept, process and reconcile payments, manage fraud, and safeguard payment security online. CyberSource brings these payment management solutions to market on two platforms: CyberSource Enterprise services and Authorize.Net.
Product Platforms
The Company offers a range of product platforms that enable its clients to build payment programs for their consumer, business, government and merchant clients. Its payment platforms enable credit, charge, deferred debit, debit and prepaid payments, as well as cash access for consumers, businesses and government entities. Its payment platforms are offered under its Visa, Visa Electron, Interlink and PLUS brands. Its consumer credit product platforms allow its issuers to offer deferred payment and financing products. Its baseline consumer credit platform is marketed to its issuers as Visa Classic. In addition, it offers premium credit platforms. Its premium consumer credit platforms are marketed to issuers, and in some cases, to cardholders, as Visa Gold, Visa Platinum, Visa Signature, Visa Signature Preferred and Visa Infinite.
The Company’s deposit access product platforms enable its issuers to offer consumer payment and cash access products that draw on consumers’ deposit accounts, such as checking, demand deposit, asset or other pre-funded accounts. Its consumer debit platform in the United States and many other countries uses the Visa brand mark. Its clients in Asia Pacific (AP), Latin America and Caribbean (LAC), and Central and Eastern Europe, Middle East and Africa (CEMEX), can use the Visa Electron debit platform, which requires transactions initiated from the card to be authorized electronically. It is used by issuers offering payment programs to risk client segments or in countries where electronic authorization is less prevalent. In the United States, it also provides the Interlink debit product platform, which requires a cardholder to enter a personal identification number (PIN), for authentication. Interlink may be enabled through an acceptance mark on a Visa debit card or issued as a standalone debit card.
The Company’s prepaid product platform enables issuers to offer products that access a pre-funded account, allowing cardholders to enjoy the convenience and security of a payment card in lieu of cash or checks. Its prepaid platform includes gift, travel, youth, payroll, money transfer, corporate incentive, insurance reimbursement and government benefits cards. Its clients can provide global cash access to their cardholders by issuing products accepted at Visa and PLUS branded ATMs. Visa and Visa Electron branded cards offer cash access at ATMs, as well as at branches of its participating financial institution clients. The PLUS brand also be included on issuers’ non-Visa branded cards to offer international cash access as a complement to domestic cash access services.
The Company’s commercial product platforms enable small businesses, medium and large companies, and government organizations to streamline payment processes, manage spend, access information reporting, automate their supply chain and reduce administrative costs. The Visa Business credit and debit platforms provide small businesses with cash flow tools, purchasing savings, rewards and management reporting. Visa Business Electron is an electronic authorization platform used in many countries outside North America. The Visa Corporate platform offers payment options for employee travel and entertainment charges, including cash advances, and provides detailed transaction data, as well as information and expense management tools. The Visa Purchasing platform provides card and non-card electronic payment products that allow companies to procure goods and services, while streamlining resource- and paper-intensive purchase order and invoice processing. Through Synced, its joint venture with US Bank, it markets an integrated invoice processing, payment and financing platform for financial institutions to offer to their corporate and government commercial clients globally. Visa offers government organizations information-and expense-management tools, employee-fraud-and misuse-management tools and strategic sourcing tools for their card programs. In certain countries, Visa offers commercial products for specific government-sponsored programs, targeting agriculture, small-business, freight or construction loan programs.
The Company competes with MasterCard, American Express, Diners Club, JOB, Discover and China Union Pay.
In the mid-1990s Visa developed new products and services that met with varying degrees of consumer enthusiasm. In 1994 the company acquired Interlink, which provided Visa with an online banking service it could offer around the world. A joint venture with Microsoft to offer home banking services and create related software did poorly against Intuit and other competitors in its first few years.
Much more popular was Visa's debit card, a payment option that gained a great deal of momentum in the 1990s. Payments made with the debit cards were withdrawn from the holder's checking account and no interest payments were levied. Visa invested heavily in another new payment option, the chip-based "smart card," with much less satisfying results. Although Visa had endorsed the chip technology in 1992, it did not offer the card until 1996. Named Visa Cash, the card electronically stored money to be used as cash. Consumers could load money onto the card by transferring money from a checking account to the card at an ATM. To encourage member banks to transfer from magnetic stripe cards to the new technology, Visa instituted the Partner Program in 1997. Tests with the card, however, were not encouraging. In a 1998 trial by Citibank and Chase Manhattan on the Upper West Side of Manhattan, consumers rarely loaded their cards a second time. "Smart cards are a technology chasing a business case," Richard Speer, CEO of the financial consulting firm Speer & Associates, told the New York Times in 1998.
Visa encountered a couple of setbacks in 1997 related to new shopping services on the Internet. Visa and Yahoo, the largest Internet search engine, had reached an agreement to jointly develop an Internet shopping site. Yahoo canceled the agreement in September 1997, costing them $20.5 million. The same year Visa postponed the full introduction of a secure Internet purchasing system. The system, dubbed the Secure Electronic Transaction (SET) protocol, would make electronic money transactions safe through the use of encryption, digital certificates, and digital signatures. In August 1997 Visa began the world's largest pilot program for secure electronic commerce using the SET protocol.
In 1998 federal regulators filed an antitrust suit against Visa and MasterCard, charging that their bylaws preventing member banks from issuing competing cards were creating an uncompetitive marketplace. Visa fought the suit, claiming intense market competition existed. "We believe the suit filed today by federal regulators will fail in a court of law," Paul Allen, executive vice-president and general counsel for Visa U.S.A., said in a press release. "Because, when it comes right down to it, consumers have unlimited choices when it comes to credit cards."
In the late 1990s, Visa's focus was on developing its foreign operations, increasing its debit activity, and improving its technological infrastructure. Despite problems with its electronic cash card, the introduction of its SET protocol, and the federal antitrust suit, Visa operated the largest and strongest consumer payment system in the world.
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. 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.
Williams' accomplishment was in the successful implementation of the all-purpose credit card, not in coming up with the idea. 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. 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. 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."However, these prior attempts had been carried out by small banks which lacked the resources to make them work. 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. 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.
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. 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. However, 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. Twenty-two percent 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. 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. 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.
OVERALL
Beta: 0.83
Market Cap (Mil.): $66,331.01
Shares Outstanding (Mil.): 830.07
Annual Dividend: 0.60
Yield (%): 0.75
FINANCIALS
V.N Industry Sector
P/E (TTM): 20.47 23.57 26.13
EPS (TTM): 20.99 -- --
ROI: 10.94 1.47 4.83
ROE: 12.99 13.95 9.92
Statistics:
Private Company
Incorporated: 1970 as National BankAmericard Inc.
Employees: 4,000
Sales: $1.6 billion (1997 est.)
SICs: 6153 Payment Cards, Travelers Cheques, & Travel Vouchers
Name Age Since Current Position
Joseph Saunders 65 2007 Chairman of the Board, Chief Executive Officer
John Partridge 61 2009 President
Byron Pollitt 59 2007 Chief Financial Officer
Antonio Lucio 51 2008 Chief Marketing Officer
Joshua Floum 52 2010 General Counsel
William Sheedy 43 2009 Group Executive – Americas
Ellen Richey 61 2007 Chief Enterprise Risk Officer
Elizabeth Buse 50 2010 Group Executive - International
Oliver Jenkyn 37 2009 Global Head - Strategy and Corporate Development
John Swainson 56 2008 Lead Independent Director
Gary Coughlan 66 2007 Independent Director
Mary Cranston 63 2007 Independent Director
Francisco Fernandez-Carbajal 55 2007 Independent Director
Suzanne Nora Johnson 53 2007 Independent Director
Robert Matschullat 63 2007 Independent Director
Cathy Minehan 63 2007 Independent Director
David Pang 67 2007 Independent Director
William Shanahan 71 2007 Independent Director
Address:
3155 Clearview Way
San Mateo, California 94402-3798
U.S.A.