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Business History
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Electronic value exchange: origins of

the Visa electronic payments system
a
Bernardo Bátiz-Lazo
a
Bangor University
Published online: 03 May 2012.

To cite this article: Bernardo Bátiz-Lazo (2012) Electronic value exchange: origins of the Visa
electronic payments system, Business History, 54:5, 821-823, DOI: 10.1080/00076791.2012.675033

To link to this article: http://dx.doi.org/10.1080/00076791.2012.675033

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 Business History 821

network provides great insight into mercantile world views, and can reset most of the
terms of the debate about this topic.
Although particularly acute on the role of non-economic criteria and personal
relationships in sustaining cross-cultural trade, this section of the book also leaves
some questions unanswered. It would be of particular interest to business historians
to learn how compliance between network members was enforced in practice, in the
absence of a common legal framework or a more formalised social control
mechanism, such as for instance a traders’ coalition like the one described by Avner
Greif for the Maghribi traders (Institutions and the Path to the Modern Economy:
Lessons from Medieval Trade. Cambridge: Cambridge University Press, 2006).
Although references are made in chapter 3 to the use of rhetoric and the conveyance
of reputational mechanisms in letters as enforcement devices, not much is said of
ostracism from the community that may have helped maintain agents’ honesty. The
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very detailed and intriguing analysis of the relationship between James Dormer and
members of the Ashkenazi diaspora in chapter 4 suggests that threats of exclusion
did occur, but this particularly important problem deserved further attention.
Closely connected to the work by Francesca Trivellato on Sephardic merchants
(The Familiarity of Strangers: The Sephardic Diaspora, Livorno, and Cross-cultural
Trade in the Early Modern Period. New Haven, CT: Yale University Press, 2009), the
second issue at stake in this work concerns the role of mercantile diasporas in the
development of a globalised world, and the nature of the cosmopolitan culture that
historians have ascribed to long-distance traders. In a nuanced analysis, Tijl
Vanneste explores the paradox that cosmopolitan merchants may not have been
sufficiently embedded in their host societies to initiate integration at a global level.
His position is developed in the last two chapters of the book, which survey the
political, social and cultural position of some members of the Jewish diaspora in the
host societies. Tijl Vanneste argues powerfully for seeing these trade networks as
more deeply embedded in the host society than previously thought. The comparison
between the Jewish diaspora, Huguenot refugees and the English in Lisbon suggests
that merchants were able to negotiate different identities according to context. We
can only regret that the reflection on the role of formal institutions in explaining
differences between the diasporas considered here was not pushed further. Yet, given
its scope and its focus on a cross-cultural network, there is no doubt that this
fascinating volume is an invaluable addition to our knowledge of early modern
trading institutions and organisations.

Albane Forestier
Centre Roland Mousnier, Paris
albane.forestier@gmail.com
Ó 2012, Albane Forestier
http://dx.doi.org/10.1080/00076791.2012.675032

Electronic value exchange: origins of the Visa electronic payments system, by David L.
Stearns, London, Springer-Verlag, 2011, xvii þ 240 pp., £45.00 (hardback), ISBN
978-1-84996-138-7

As part of Springer’s History of Computing and the book version of his dissertation,
David Stearns offers a fascinating narrative that navigates somewhere between the
 822 Book reviews

sociology of finance, social studies of technology, retail banking and business

history.
The book has a preface, an introduction, eight chapters and a conclusion. Length
is well balanced, with each representing about 10% of the total. There is an
alphabetic index and most references appear as footnotes. There are four
illustrations and a handful of tables. This was a shame given that the subject matter
called for more of both.
The preface offers a crystal clear map to the book (pp. xiv–xv), which I borrowed as
the backbone of my review. The style is open and quite engaging, the discussion is easy
to follow but based on deep, detailed and authoritative fieldwork. However, at times
one can still come across its roots as a dissertation and some of the end sections of the
early chapters could have been used to explain how developments up to that point
took Visa a step closer (or not) towards their dominant role in facilitating
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electronically-processed transactions and the emergence of a global retail payments

system.
Chapter 1 begins the story with the origins and early forms of travel and
entertainment cards plus the peculiarities of the Federal Reserve’s cheque clearing
system. Stearns argues that these are important to understand the path of
development that credit cards took. The US-centred view that emerges in this first
chapter dominates the discussion.
Chapter 2 analyses the national network built around the BankAmericard, pointing
out its various operational and organisational problems. Here we are introduced to
Dee Ward Hock, Visa’s founder and first chief executive. Throughout the reminder of
the book Stearns describes how Hock’s philosophical ideas and strong personality
shaped the structure and development of the Visa organisation (initially known as
National BankAmericard Incorporated or NBI) from its inception until Hock’s
acrimonious departure in 1984. But although Stearns endeavours to present Hock’s
character and ideas in their context and tries to have different ‘voices’ speak, the
narrative often reads more like a biography of Hock than a business history of Visa.
Stearns takes a bit of a sociological detour in Chapter 3 to discuss the role of the
operating regulations in a cooperative network like NBI/Visa. His point is that these
are a key part of what makes the Visa system ‘work’ at the inter-organisational level.
Stearns also argues that Visa’s role in adjudicating these rules helps establish just
enough ‘trust’ between the competing participants for the system to function and
grow. But he could have used the more ‘sophisticated’ framework of transaction cost
economics rather than ‘trust’ to explain how Hock and the regulations are able to
realign incentives and avoid renegotiating contracts. His argument is nevertheless
clear: Visa’s technical infrastructure was, and still is, very adept at moving
transactional information between participants in the system, but the operating
regulations were and are the one thing which allows participants to coordinate their
work in response to that information.
Chapters 4 to 7 offer some of the most exciting and well-researched aspects of the
book. Here is where Stearns’ background as a computer programmer comes to the
fore, as he is able to explain in simple, layman’s terms the intricacies of building a
major computer system. These chapters make a real contribution to the field as he is
able to grasp the importance of details that would have escaped a researcher with an
economics or history background.
In chapter 4 he begins to deal with the technological aspects of Visa by describing
in detail NBI’s first computerised authorisation and clearing systems (BASE I and
 Business History 823

II), whilst putting Visa’s systems in the context of other similar efforts by individual
banks, independent processors, and bank service organisations. Chapter 5 also
discusses NBI’s first significant technical failure, a program intended to run within
the member banks’ processing centres, known as BASE III.
Chapter 6 charts the various ways in which the system was expanded
throughout the 1970s. On the organisational side, he discusses the formation of
the international version of the organisation and the name change to ‘Visa’. It is a
pity that the story of the judiciary process around the antitrust battles narrated in
this chapter rely mainly on articles published in American Banker and no attempt
was made to look at actual court records. On the technical side, chapter 6 discusses
the shift to IBM hardware, the creation of a second cooperative data centre, the
expansion of the electronic authorisation network internationally, and multi-
currency settlement. By holding organisational and technical aspects together, he
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offers interesting insights into the so-called ‘productivity paradox’; in other words,
he can tell exactly when and how computer systems enabled the organisation to
grow. This is something of a departure from previous studies on the history of
computing in business (and certainly in banking), which have documented the use
of technology to increase efficiency. Stearns’ focus on Visa gives us the first glimpses
of early computer applications that enhance effectiveness in financial service
organisations.
Chapter 7 looks at the technological aspects of authorisation, describing how
Visa helped to develop the concept of fully automated at the point of sale.
Chapters 8 and 9 examine the ways in which the role of the central organisation
had to be worked out through a series of power struggles with the member
banks.
Chapter 10 concludes the book by summarising the narrative and framing the
book’s contribution around the grand themes discussed at the start. There is perhaps
a little bit too much of a summary and I felt the reader could get easily lost in the
attempt to offer two new dynamics that Stearns thinks may apply to the study of
other payment systems or cooperative transactional networks in general. A number
of terms and concepts emerge here that were not introduced before and it is really
rather late in the text to ask the reader to reflect on this rather than flagging them at
the start as is the convention.
You can read Stearns’ witty and insightful ideas regularly on his blog at
http://techsoulculture.org/ (accessed 10 February 2011).

Bernardo Bátiz-Lazo
Bangor University
b.batiz-lazo@bangor.ac.uk
Ó 2012, Bernardo Bátiz-Lazo
http://dx.doi.org/10.1080/00076791.2012.675033