The E-Sylum:  Volume 5, Number 36, September 8, 2002, Article 11


An article in the September 16, 2002 issue of Forbes
magazine looks at Visa's hopes to ultimately replace cash
and checks for everyday transactions.  Here are a few

"Swipe your Visa card at a store in Sydney, Australia,
and you trigger a pretty amazing sequence of events.
The 16-digit account number stored in your card's
magnetic stripe zooms across a leased phone line to the
merchant's bank, zips under the Pacific to Visa's data
center outside Tokyo and rides the Visa network to the
data center of your issuing bank in Delaware. It authorizes
the transaction and sends bits whizzing back, a 24,000-mile
roundtrip journey that involves five stops plus a calculation
of how much to charge the merchant in fees and how to
divvy up those fees among the banks. Elapsed time: two

Few systems on Earth can do this. Visa can do it 4,000
times a second and did it 35 billion times last year, riffling
through more transactions in an hour than all of the world's
stock exchanges do in an entire day.  Last year Visa
pumped $2.3 trillion through its 9-million-mile matrix of
fiber lines, and in five years it has suffered only eight minutes
of downtime, better than most any other system on the planet.
So why is Visa overhauling the whole shebang, at a cost of
more than $200 million? Because technology is everything
in the battle for control of consumers' wallets.  Technology
explains how Visa has gained so rapidly on printed paper
money as a medium of exchange, and it will determine whether
Visa can hold its own against newer forms."

"In ten years Visa's dollar volume and transaction volume
has grown fivefold. Pascarella aims to boost Visa's transaction
volume tenfold by 2007.

At that rate, the credit card giant would eclipse the U.S.
Federal Reserve as the world's premier toll-taker in the
currency business.  The Fed turns an annual profit of $28
billion by printing dollars--that sum representing the value
of the interest-free loan the government gets by dint of the
fact that the public keeps cash on hand. There was a time
when commercial banks competed in the business of issuing
paper dollars."

"Visa is hell-bent on rendering paper money a relic. In the
past decade the use of cash and checks has steadily
declined, to 61% of consumer spending from 81% in 1990.
Visa claims to handle 12% of all consumer spending in the
U.S., double the share of its nearest rival, MasterCard, and
aims to accelerate cash's demise. Cash is dead, long live

"The idea is to put Visa not just "everywhere you want to
be," but also in some places where you never dreamed of
paying with plastic. Taxicabs, fast-food drive-up windows,
soda-pop vending machines--Pascarella is putting credit
card readers in all of them. He is persuading phone companies,
utilities, even apartment rental companies to take recurring
payments with Visa. His techies are testing out ways to store
Visa account information on Palm handhelds and cell phones,
so you can use them and not carry a card at all. The goal, says
Pascarella: "total ubiquity, total freedom. Using any device,
anytime, anyplace."  The best growth potential is in the U.S.,
where 83% of remote payments are made with checks. The
corresponding figure in Europe is only 10%, says Celent
Communications, a market researcher.

"Americans have this love affair with cash and checks,"
Pascarella says.  "We're trying to end that."

For years people have been talking about the imminent
demise of paper money. Cybercash, Cybercoin, Flooz, Beenz:
Dozens of dot-coms attempted to reinvent money, and most
died trying. Last year consumer payments in the U.S. totaled
$5.5 trillion, and $3.4 trillion of that was done with cash and
checks, according to the Nilson Report.

Whoever digitizes that $3.4 trillion is going to make a fortune.
Displacing the $1.2 trillion of check transactions made last
year by U.S. consumers could produce $8 billion a year in
fees, according to Celent.

Pascarella figures Visa is in a better position than anyone
else to get at that payday."

"Credit is boring. It's yesterday's news,"  says Carl Pascarella,
chief executive of Visa USA. "Our goal now is to displace
cash and checks. We're not a credit card company, we're an
electronic-payment company."

  Wayne Homren, Editor

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