Page 22 - GS170201

Views

Interview with industry pioneer Bill Melton

By Brandes Elitch tricky business, because if you guess wrong, you eat the
CrossCheck Inc. check. Bill pioneered the use of computers and database
management, as well as a telecommunications system to
o my knowledge, nobody has written a com- provide quick authorizations.
prehensive history of the credit card acquiring
industry, also called the payments industry, the In 1980, he sold Real-Share to TeleCheck Services, which
T bankcard industry and the merchant processing was later part of First Financial Management Corp. It sold
industry. Material abounds about the issuing side of the for $3 million, big money at the time. He used the money
business: getting plastic cards in the hands of consumers; to start what became Verifone, in Honolulu. At first, he
very little recounts the merchant side of things: getting provided check verification from a bad check database he
merchants to accept credit cards, buy terminals and be maintained. Bill was focused on providing good customer
willing to take a discount on card purchases to cover inter- service, so he decentralized the salespeople and customer
change and other fees. The Green Sheet has been around service groups by co-locating them where the customers
since 1983 and undoubtedly covered a lot of this as events were located. Since the employees were geographically
unfolded. spread out, he was a pioneer in the use of an early form of
e-mail messaging with access to an online database.
I cannot think of anyone who has individually had more Authorization innovations
of an impact on the acquiring industry than Bill Melton. I
met Melton at the Money20/20 show in October 2016, and One of the biggest problems for the credit card industry
it struck me that I'd never seen anything in writing that in the 1970s was developing an effective and cost-efficient
chronicles his contributions to this industry. I asked him if nationwide authorization system. After early unsolicited
he would describe his career, and this article is the result. credit card mailings, the need for almost real-time

Curiosity about the world authorization became painfully obvious. Back then, the
card associations (now card companies) mailed out a
Melton grew up in Nebraska in a community that was telephone book sized "hot list" every week. Fraud was a big
politically and religiously conservative like much of problem: in 1973 alone, credit card losses were estimated
America's heartland. His father was a preacher. In 1964, to be almost $300 million, or 1.15 percent of sales.
after college, Bill went to Vietnam as an American civilian.
He worked for a tug and barge company, and this was The low credit standards used back then for issuing bank
considered sufficiently important to the war effort that his cards required tight monitoring. Another use for the
draft board agreed not to call him. He was there for 5-1/2 authorization system was the transfer of sales information
years during the height of the Vietnam War. I can scarcely to speed the billing process, since most banks at that time
imagine what that was like, and I was in the Army during were still losing money on their credit card operations.
the same period.
Remember, in 1973, all credit card charges were processed
While growing up, Bill had an intense curiosity about by "country club billing," meaning copies of original sales
how the rest of the world lived. After his experience in drafts were issued with monthly statements; "descriptive
Vietnam, he had a strong desire to experience China billing" had not yet been instituted. Yet without descriptive
first hand. He received a U.S. State Department Grant at billing, the entire concept of electronic funds transfer
the East-West Center at the University of Hawaii, and he would fail. At that time, First Data Corp. in Omaha was
was sent to Taiwan to finish his degree, since China was the only processor capable of handling more than 200
blocked at the time. He expected to stay for six months million transactions annually.
but remained for five years, getting his master's degree in
Asian studies and Chinese philosophy. In the process, he During the 1970s there was no widespread agreement in
learned to speak the language and interact with the locals. the banking industry about the use of the magnetic strip
His experiences in China and Vietnam would play a big on the credit card; in fact, there was controversy about
part in what was to unfold shortly thereafter. different possible solutions, including optical character
recognition and smart cards. The controversy was re-
Early business success activated by former Visa Chief Executive Officer Dee
Hock's announcement in the summer of 1979 that all
Bill went to Hawaii after that, where in 1971, he founded Visa cards issued after April 1980 would have to have the
a company called Real-Share. This company did check magstripe on the back.
authorization and guarantee. Payment guarantee is a

22