The day Fresno got
60,000 credit cards
On 18 September 1958, a Californian bank mailed sixty thousand credit cards to people who had asked for nothing. The object that would go on to organise world consumption began with a manoeuvre the law would eventually forbid.
Sixty thousand envelopes in a test town
Fresno, in California's Central Valley, had two virtues in the eyes of Bank of America: the bank held the accounts of a very large share of local households, and the town was remote enough for a failure to go unnoticed. On 18 September 1958, sixty thousand envelopes were delivered there. Each held a BankAmericard already valid, opening a revolving credit line of three to five hundred dollars, with no file, no interview and no application. More than three hundred local merchants had agreed in advance to the 6% commission taken on every sale settled by card.
The method answered a familiar deadlock: no merchant fits out a till for a card nobody holds, and nobody asks for a card no merchant accepts. By posting the cards unbidden, the bank created both sides of the market on the same day. Payments began at once. So did the bill.
Delinquency reached about 22% in the first year, where ordinary instalment credit ran near 4%. Cards lifted from mailboxes, borrowers never screened, merchant fraud: the bank had lent without knowing to whom. Acknowledged losses passed $8.8 million, and more still once advertising and overheads were counted in.
What the bank had really bought
Those lost millions were not buying a loan book; they were buying a network. A means of payment is worth nothing on its own: its use to the holder grows with the number of merchants who take it, and the merchant's interest grows with the number of holders. Economists have since named the arrangement, the two-sided market, and named its opening difficulty, bootstrapping. Fresno was the costly demonstration: the early loss was not an accident, it was the entry price.
What followed bore that out. The bank cleaned up the programme, licensed its system to other institutions from 1966, and in 1976 the whole took the name Visa. The method itself was judged indefensible: in 1970 the United States Congress banned the mailing of unsolicited cards. What remains of Fresno is a lesson every platform has since borrowed, from mobile payment to marketplaces: the loss accepted in the early years funds a position later entrants no longer close.
A network is paid for once; it collects every day thereafter.