Abstract: Networks, Boundaries, and Gateways: The Visa Payment System as a Source of Industry Change

David Stearns

Abstract

In the second half of the twentieth century, the American banking and payments industries underwent a rather radical transformation. This paper will argue that one significant source of these changes was the very design of our consumer payment systems. Transactional networks, such as payment systems, link various actors together to perform work. When those networks are extended across existing social boundaries, the designers often use a "gateway" node to bridge the previously separate networks. Although the gateway allows each network to remain semi-autonomous, it also enforces rules by which transactions are allowed to cross the boundary. Those wishing actively to defend the boundary will strive to make the gateway noticeable, obvious, and costly to cross (as in the case of "foreign" ATM fees); those wishing to undermine the boundary will attempt to keep the gateway as seamless as possible (as in the case of Visa and the Merrill Lynch Cash Management Account). Seamless gateways often tend to erode existing conceptual boundaries, eventually rendering them simply cosmetic or even meaningless.