Visa’s Place in the Payments Ecosystem

How Visa got started, and where it sits within the payments world.

Visa is one of the dominant players in the global payments ecosystem. It touches the lives of millions of consumers and businesses every day, but few know how Visa got started, and there are many misconceptions about the role Visa plays facilitating payments. Here’s an overview of how Visa got started, and the role it plays in the payments ecosystem.

Visa traces its origins to the first revolving-credit card with universal merchant acceptance – BankAmeriCard.

In the 1950s, consumers had revolving credit accounts with individual merchants, but no one had yet managed to successfully create a revolving credit card that was accepted by multiple merchants. Bank of America’s product development team created BankAmeriCard which was launched in 1958 by mailing 65,000 unsolicited credit cards to consumers in the Fresno, CA area. Subsequently, the program was expanded via mailings of cards to other parts of California. Initially, the program had significant delinquency and fraud issues, but the problems were resolved and by 1961 the program was profitable.

At the time, federal laws prohibited Bank of America from doing business outside of California, so it began to license the BankAmeriCard program to banks in other states and countries, including Canada, France and Japan.

In the late 1960’s, a number of licensees formed a committee to address issues with the licensing program, and in June 1970, Bank of America gave control of the BankAmeriCard program to the issuer banks by creating an entity responsible for managing, promoting and developing the BankAmeriCard system within the United States. In 1974, a similar entity was created to manage the international BankAmeriCard program.

In 1976, the name BankAmeriCard was replaced with a new name – Visa – which was selected because the term was recognizable in many languages, and company leaders felt the name denoted universal acceptance.

On March 18, 2008, Visa became a publicly traded corporation, ending control of Visa by its network banks. The IPO raised US$19.1 billion, in what was the largest IPO at that time. Today Visa’s largest shareholders are institutions. According to CNN money, the top ten owners of Visa are: Vanguard Group (8.39%), Blackrock Fund Advisors (4.94%), SSgA Funds Management (4.61%), T. Rowe Price Associates (2.79%), Fidelity Management and Research Co (2.48%), Geode Capital Management (2.07%), Alliance Bernstein (1.59%), MFS Investment Management (1.38%), Capital Research and Management Co (1.27%) and Wellington Management Co (1.25%).

Business Scope

Today, Visa is one of the dominant players in the global payments ecosystem. A world leader in payments technology, Visa has over 20,000 employees and operates in over 200 countries and territories. Over the years Visa’s product set has expanded to include debit and prepaid cards. Visa has also developed new technologies and capabilities, such as “tap to pay”, tokenization, “click to pay”, and sophisticated fraud prevention technologies, to enable the secure, reliable and efficient movement of funds.

According to Visa its wide range of Visa-branded payment products are used by nearly 15,000 financial institutions to develop and offer credit, debit, prepaid, and cash access programs for consumers, business, and government account holders. In Visa’s 2022 fiscal year, total payments and cash volume was USD$14 trillion, and 4.1 billion credentials were available worldwide to be used at more than 80 million merchant locations, plus an estimated 20 million locations through payment facilitators.

Visa’s Source of Revenue

Visa is compensated for the role it plays facilitating the secure, reliable and efficient movement of funds through the payments ecosystem. This includes (1) data processing revenue: earned for authorization, clearing, settlement, value added services, network access and other maintenance and support services, (2) service revenue: earned for services provided in support of client (issuing bank) usage of Visa payment services, (3) international transaction revenue: earned for cross-border transaction processing and currency conversion, and (3) other revenue: mainly value added services, license fees for the use of the Visa brand or technology, and fees for account holder services, certification and licensing, and . In fiscal 2022, Visa had net revenue of US$29.3 billion. 

Visa is not a financial institution. It does not issue cards, extend credit or set rates and fees for account holders of Visa products. Visa does not receive a portion of the fees account holders pay the issuing banks that establish their accounts.

Visa establishes interchange reimbursement fees that merchants pay the banks which issue the cards their customers use. Visa does not receive a portion of these fees.

If your business is seeking cost-reduction projects, we’re here to help. We fix and monitor your existing merchant account, and we bring that money back to you. No need to change processors or add a project to your team’s already hectic workload. Schedule a consultation today.

Verisave is a third-party cost-reduction firm specializing in merchant accounts and credit card processing fees.

Verisave is not a payment processor, and is not affiliated with any processors, card brands, or banks.

Verisave has more than 20 years of experience optimizing and monitoring the credit card processing industry.

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