Every second, more than 20,000 credit card purchases occur worldwide. It's remarkable, considering that such a system didn't exist 70 years ago. Even more astonishing is the story of how it all began and how the initial challenge of establishing a two-sided marketplace was overcome. This is the story of how Bank of America created the first credit card.
Prior to this, specialty credit cards, like Diners' Club, catered to specific sectors such as dining. However, in 1958, Bank of America deemed the US ready for more mainstream adoption of credit, leading to the creation of the first universal credit card, the BankAmericard. To tackle the challenge of securing consumers and suppliers simultaneously, they devised a clever strategy known as the "Fresno Drop.”
They selected Fresno as their pilot city and made the bold move to distribute 60,000 credit cards to households within the city. With 60,000 potential customers, it became easier to persuade hundreds of merchants in Fresno to accept the card. Although this approach led to initial losses due to fraudulent activities, it ultimately proved that credit cards could be a massive business.
Eventually, Bank of America would spin off BankAmericard to a newly formed company, which we all recognize as Visa. With a bank-independent company, the stage was set for a universally accepted payment system that anyone in the world could use. However, it took ingenuity and a willingness to risk failure to launch one of the most significant financial revolutions of the 20th century.
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