WHAT IS Base I

Base I was the first electronic authorization system for credit card payments. It was developed in 1973 by Bank of America.

BREAKING DOWN Base I

Base I was first developed in 1973 as an electronic real-time authorization system for credit card transactions. It was developed by Bank of America, issuers of the BankAmericard, as part of the VisaNet system. Base is an acronym for Bank America System Engineering. Today, the BankAmericard is marketed as the Visa card, and Base I is the first of two phases of the VisaNet system. The second phase is known as Base II.

Prior to the development of the Base I system, credit card processing evolved alongside the growth of a national credit card system. The first cards were closed-loop systems, native to a particular retailer or a localized group of merchants with a business connection to a particular bank. In the earliest cases, transactions were recorded by a phone call from a merchant to the local bank, who compiled records for a cardholder’s monthly statement.

Card systems steadily grew in the 1950s, with Bank of America's BankAmericard dominating the California market in the early 1960s. Open-loop systems, which allowed transactions among competing banks over a broad geographic area, first appeared with the creation of the Interbank Card Association in 1966. This alliance of banks would soon adopt the MasterCard brand, and inspire Bank of America to form its own rival network, NBI, in 1970. Around this time, third-party firms emerged to support the move toward paper-free processing of transactions. Once such firm was VisaNet. NBI acquired VisaNet in 1973 and marketed the Visa card to compete with MasterCard. Litigation in the early 1970s allowed member banks to join both networks.

How Base I and the VisaNet system process transactions

The development of the Base I system coincided roughly with the launch of the Visa card in the mid-1970s. Base I refers to a real-time authorization system through which merchants would transmit a transaction approval request to a bank. The request would include a card number and dollar amount. In response, the bank would either transmit a simple approval message or a decline message with an explanation attached.

Base II provides a settlement process to handle end-of-day reconciliation for the transactions generated by the Base I system. Base II is a batched system - unlike Base I’s real-time activity, the settlement would take place periodically, and assess a settlement fee to merchants.

As NBI and VisaNet launched and updated it’s system, MasterCard followed suit with a similar two-part processing platform, comprised of a system known as INAS to process transactions and INET to settle and clear balances.