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Challenging Conceptual Barriers: EFT and the Debit Card

  • Chapter
Electronic Value Exchange

Part of the book series: History of Computing ((HC))

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Abstract

This chapter chronicles the history of Visa’s signature debit card, placing it in the context of the discussion surrounding electronic funds transfer (EFT) in the 1970s. Visa’s first debit card was introduced in 1975, yet the member banks did not widely issue it until the 1990s. I argue that this had more to do with a technological and cooperative mismatch between Visa’s debit card and the various EFT plans being formulated by the member banks than it did with protecting lucrative credit card profits.

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Notes

  1. 1.

    Mann (2006).

  2. 2.

    For example, see Manning (2000).

  3. 3.

    ‘Total US Visa Debit Volume Surpasses Credit for First Time’, http://corporate.visa.com/media-center/press-releases/press950.jsp (accessed on 22 June 2010).

  4. 4.

    Lee (21 April 2004), p. 11.

  5. 5.

    For early articulations of this see Mitchell (1966) and Carter (1967). Most bankers and serious analysts acknowledged that cash would always remain, but the popular press often predicted the “death of cash.”

  6. 6.

    Like many other cases, these futurists failed to see how these computer systems would also incur significant costs of their own, especially in terms of a new skilled labor force to maintain them. See Noble (1984).

  7. 7.

    Mann (2006), p. 11. Note that with the passage of the “Check 21” act in 2003, checks may now be truncated at the bank of deposit and cleared electronically, which should reduce their costs considerably.

  8. 8.

    For an early review of these sentiments, see Riday (1968).

  9. 9.

    See ‘Federal legislation is introduced to establish electronic fund transfer systems commission and study’, Payment Systems Newsletter (April 1974), p. 1.

  10. 10.

    This concept of “interpretive flexibility” comes form Pinch and Bijker (1984).

  11. 11.

    The following positions were articulated during a 1974 roundtable discussion. See ‘When we achieve a nationwide electronic funds transfer system’, Banking (May 1974).

  12. 12.

    See Reed (October 1972), p. 20+.

  13. 13.

    This decision was challenged in the courts, but was ultimately upheld. See Independent Bankers Association of America v. Smith, Comptroller of the Currency of the United States, No. 75-1786, United States Court of Appeals For the District of Columbia Circuit 175, decided 23 March 1976.

  14. 14.

    ‘When we achieve a nationwide electronic funds transfer system’, Banking (May 1974).

  15. 15.

    ‘Banking at the chain store—closer that you think’, US News and World Report (16 September 1974), p. 77.

  16. 16.

    Hock (1974).

  17. 17.

    Sears owned Sears Bank and Trust Company as well as Allstate Savings and Loan in California, and was investigating a merger with Red Carpet, a real-estate brokerage franchiser; JC Penney had “large insurance and real-estate operations”; and Wards owned Pioneer Trust and Savings Bank. See ‘Banking at the chain store—closer that you think’, US News and World Report (16 September 1974).

  18. 18.

    ‘Banking at the chain store—closer that you think’, US News and World Report (16 September 1974), p. 79.

  19. 19.

    Nocera (1994), pp. 75–88.

  20. 20.

    Information on the asset card concept comes from interviews with Honey, Derman, and Russell, as well published sources cited later.

  21. 21.

    Hock (1973), p. 4.

  22. 22.

    Hock (1973), p. 4.

  23. 23.

    Hock (1973), p. 4.

  24. 24.

    Hock (1973), p. 4.

  25. 25.

    Hock (1973), p. 4.

  26. 26.

    Honey interview.

  27. 27.

    This is not to say that checks are somehow less prone to fraud than credit card transactions. The point was that asset card transactions should be no more dangerous than a check.

  28. 28.

    Kutler (9 June 1977), p. 1.

  29. 29.

    Evans and Schmalensee (2005), pp. 291–294.

  30. 30.

    Honey interview.

  31. 31.

    Nocera (1994), p. 20. For a detailed history of consumer credit in the United States, see Calder (1999).

  32. 32.

    Hock (1976), p. 18. For a classic critical article from the popular press, see O’Neil (1970), pp. 48–50.

  33. 33.

    Stallwitz (1968), p. 56.

  34. 34.

    ‘Card may be solution to unpaid doctor’s bills’, American Banker (26 January 1971), p. 1.

  35. 35.

    Mathews and Slucum (1972), pp. 21–27.

  36. 36.

    This is also similar to Zelizer’s observation that we often treat money earned from different pursuits in different ways. See Zelizer (1994), p. 3.

  37. 37.

    Hartmann et al. (2005).

  38. 38.

    ‘Visa debit card service: a digest of key research findings’ (March 1977).

  39. 39.

    ‘Visa debit card service: a digest of key research findings’ (March 1977); ‘Visa debit card services’ (March 1977).

  40. 40.

    ‘Visa debit card services’ (March 1977).

  41. 41.

    ‘Banking lacks national structures to deal adequately with change’, American Banker (25 September 1974), p. 1.

  42. 42.

    Cleveland (1999), p. 21.

  43. 43.

    Jutilla interview. Jutilla noted that because his bank did embrace consumer lending more than others, he was actually treated better than most.

  44. 44.

    For example, see ‘Nashville Banks Cautious on EFT’, American Banker (11 December 1975), p. 1.

  45. 45.

    ‘Security Pacific, California, contracts for POS system for merchants’, American Banker (7 October 1976), p. 2. Interestingly, the Nashville banks did not offer a guarantee because they were concerned that doing so would turn the merchant into a potentially illegal “branch,” as checks were not guaranteed by law until they were presented to, and accepted by, the issuing bank.

  46. 46.

    For a review of ATM network sharing policies up until 1984, see Felgran (1984), p. 27.

  47. 47.

    Penick (12 September 1975), p. 1. Worthen is the same bank that challenged NBI’s dual membership ban. See the section beginning on p. 113.

  48. 48.

    Ken Larkin quoted in Nocera (1994), p. 308.

  49. 49.

    Brouillette (28 April 1975), p. 1, Brooke (22 August 1975), p. 1.

  50. 50.

    ‘Visa debit card service: a digest of key research findings’ (March 1977), p. 1, ‘NBI announces Entree card’, Payment Systems Newsletter (September 1975), p. 1.

  51. 51.

    See p. 74.

  52. 52.

    American Banker (3 March 1976), p. 6, American Banker (23 April 1976), p. 2.

  53. 53.

    ‘Visa debit card service: a digest of key research findings’ (March 1977), p. 2. Louisiana National charged one dollar a month after the first six months, which was just enough to weed out the inactive cardholders.

  54. 54.

    Honey interview.

  55. 55.

    ‘NCNB to become biggest bank in Visa debit card program’, American Banker (8 March 1979), p. 3. Confusingly, after the card was renamed Visa Debit, the name Entrée was reused for a separate joint venture between Visa/PLUS and MasterCard/Cirrus in the 1980s (Derman and Harrison interviews).

  56. 56.

    Kutler (9 March 1981), p. 1. ‘Debit card volume rises 187% at Visa’, American Banker (14 December 1981), p. 9.

  57. 57.

    As late as 1994, only eleven percent of US ATM/debit cards carried the Visa mark (Evans and Schmalensee 2005, p. 206). Honey believes that Hock mistakenly ignored the growing threat posed by these networks, favoring instead to focus on building his international organization (discussed in Chap. 9).

  58. 58.

    Peirce, Loftesness, and Harrison interviews; see also Modi (October 1987), pp. 68–72.

  59. 59.

    ‘Fee income spurs new debit strategies’, Banking (September 1991), pp. 92–94.

  60. 60.

    Evans and Schmalensee (2005), pp. 206–211.

  61. 61.

    ‘Bank cards are real banking, too’, American Banker (27 September 1974), p. 4.

  62. 62.

    Hock (1984).

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  1. Seattle Pacific University, 3307 Third Avenue West, Seattle, WA, 98119, USA

    Dr. David L. Stearns

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Stearns, D.L. (2011). Challenging Conceptual Barriers: EFT and the Debit Card. In: Electronic Value Exchange. History of Computing. Springer, London. https://doi.org/10.1007/978-1-84996-139-4_8

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  • DOI: https://doi.org/10.1007/978-1-84996-139-4_8

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