‘Sexual intercourse began in 1963,’ wrote Philip Larkin; consumer debt, with similar connotations of gratification and regret, began in Britain three years later with the launch of Barclaycard, based on the model of the world’s first mass-market credit card, BankAmericard in California, which dated back to 1958. A retired bank manager once told me he swiftly realised the three most useful things about the revolutionary new product: ‘It scraped ice off your windscreen. It picked Yale locks. And it got my customers into debt.’ To that list we can now add a fourth: it fills holes in bank balance-sheets.
In 1977, Bank of America, Barclays and others joined forces to create Visa, which is now owned by more than 13,000 participating banks worldwide and has one-and-a-half billion cards in issue. This distribution of magic plastic to everyone on the planet within reach of a shopping mall has been a fundamental cause of the modern world’s guilt-free, pay-later attitude to debt: America has more than $900 billion of card debts, while Britain has a more modest-sounding £56 billion, which is still well into four figures per cardholder, on top of mortgages, overdrafts and consumer finance.
It was this same easy-money mentality that fuelled America’s subprime mortgage boom, which has now wiped many tens of billions off the reserves of banks around the world. But a nicely circular plan is at hand to restore at least part of the damage: sell off a chunk of the business that started the rot in the first place. Despite current share-market uncertainties, Visa’s owners are pressing ahead with the largest ever initial public offering on the New York Stock Exchange, selling around half of the company to raise up to $18.8 billion, most of which will go back to the banks to help restore their battered balance sheets.