THE REAL GAME-CHANGERS: HOW DID VISA AND MASTERCARD RESHAPED THE WORLD

As even more revolutionary solutions emerge to improve our lives, we often take certain advancements for granted. It is no longer surprising to find someone with a credit or debit card, as they have become integral components of our financial lives, facilitating seamless transactions and money transfers. However, this convenience was not always the norm. Pioneers such as Visa and Mastercard set the train of financial progress in motion. In this article, we will explore the success stories of Visa and Mastercard, uncovering the factors behind their renowned fame.

TO THE VERY ROOTS—GRANDFATHER OF ALL CREDIT CARDS

What is truly fascinating is the fact that the first form of credit cards already existed as early as 1949. Frank McNamara and his partner Ralph Schneider created the restaurant Diners Club based on countless experiences Frank had encountered. He often found himself in situations where he had to negotiate with restaurant managers to pay for his meals the following day, as he had forgotten his wallet. The "Diners Club" credit card started with a small group of friends and colleagues, eventually expanding to the entire local area.

From that moment, in 1958, American Express introduced plastic credit cards, which have since evolved into the familiar cards we know today. As time passed, two prominent pioneers emerged.

FROM BANKAMERICARD TO VISA—HISTORY OF SUCCESS

Visa credit cards are one of the most popular worldwide. Their history is a journey through challenging tests and experiments, aimed at determining whether placing trust in clients would yield positive results. Another crucial issue was the need for consolidation, as the typical American middle-class held multiple revolving credit accounts with various merchants. This clumsy and insufficient system required unity between those endless numbers of merchants and consumers.

In 1958, as a solution to these problems, the Banks of America launched its first credit card, initially known as BankAmericard. It rapidly gained popularity domestically and aspired to achieve international status. However, obtaining a specific license was essential for successful expansion into foreign financial markets. Bank of America, lacking confidence in the card’s prospects outside the country, relinquished support for BankAmericard. As a result, in 1970, various issuer banks assumed control and propelled the program to an international level. Just five years later, the first debit card was introduced,  and within one more year, the globally recognized Visa finally came into play. 

How Visa revolutionized the financial field? Visa’s impact on the financial industry extends beyond providing seamless payment options for consumers. Security has been a top priority for cardholders. You might be surprised but there are three distinct stages involved in ensuring proper payment or exchange: authorization, clearing and settlement. Remarkably, Visa payment rails can complete this process in just seconds, traveling from a specific store to the issuer, then to Visa, and back to the store. While Visa takes a small fee of 0.13% per card transaction, the sheer volume of transactions, with over 24,000 processed per second, translates into billions in revenue.

GOING HAND IN HAND—HISTORY OF MASTERCARD SUCCESS

Just as BankAmericard was establishing its presence in the financial landscape, another competitor was on the horizon. In 1966, Interbank emerged as a coalition of local banks with its own credit card program. Unlike BankAmericard, Interbank had the advantage of having supporting banks from the start. Their journey to expand globally was not without challenges, requiring specific licenses to operate in different countries. Interbank started in Mexico and later expanded to Europe, Japan, Australia, and Africa, eventually rebranding as “Master Charge” and merging with First International Bank. In 1974, the introduction of the magnetic stripe paved the way for a seamless transaction experience, and Master Charge transformed into MasterCard.

How MasterCard revolutionized the financial field? As the second-largest player in the duopoly, Mastercard enables us to use debit cards, credit cards, and prepaid cards in over 210 countries, supporting more than 150 currencies. In 2020, Mastercard processed over 90 billion transactions, with a gross volume of $6.3 trillion. With the introduction of magnetic stripes, both Visa and MasterCard enhanced the ease and security of making payments and transactions for cardholders. The MasterCard system implemented three stages to ensure transaction safety.

WRAPPING UP

We have come a long way from cash transactions to the convenience of managing finances within a single bank. Visa and MasterCard Visa and MasterCard were pioneers in financial innovation, revolutionizing the way we handle our money. As the Fintech revolution continues to unfold with neo-banking and a diverse range of solutions, join us to stay ahead of the curve and unlock the full potential of this transformative landscape. Stay tuned for more exciting content!