In 1966 the Bank of America, through BankAmerica Service Corporation, initiated a licensing agreement with out-of-state banks. Currently 25 banks (listed in Table C 1) have signed agreements to issue Boukamericacd under license. There is also the special link with Barclay’s Bank which has agreed to accept BankAmericards in Great Britain. Licensed banks are provided with operating support to get their local plans into operation. They are supplied with manuals describing in some detail the procedures followed by BankAmer- icard in California; key personnel are given a special training course by BankAmerica Service Corporation; and they are provided with computer pro- grams and other support activities. Their cards will be identical in format with that issued by the Bank of America except that the local bank’s name is at the top of the card. Cards issued by one bank will be accepted by all the other banks which will transfer one another’s sales drafts for set oteneae and billing. It is expected that the individual banks will operate their plans in a similar way although they are free to establish their own credit cri- teria and merchant discounts. They are also free to sign agents subject to certain general limitations. BankAmerica Service Corporation is responsible for coordinating individual plans, and helping banks set up their plans. In return for its services and the use of the name, BankAmericard, the license banks pay $25,000 upon signing and royalties of 1/8, 1/4, or 3/8 per cent depending upon sales volume. The licenses are available on a non-exclusive basis open to any bank, the non-exclusive feature being due to anti-trust considerations. In conse- quence, there are several states where two licensees poanete directly with one another.

The interchange system works as follows: Merchants receiving another bank’s cards will handle it using normal methods for local cards, phoning the local service center for authorization of purchases over the floor limit. Approval will be given automatically, unless a cancellation notice has been received, to amounts below the so-called between-bank floor limit, which is $350 for the Bank of America. Above the between-bank floor limit, a collect call must be made to the issuing bank. Settlement will be made daily by sending a draft on the issuing bank through the usual clearing channels. The issuing bank will receive the full discount less a 15 cent handling charge. The sales drafts will then be airmailed to the issuing bank. Licensee banks have been permitted to sign up agent banks and several have been very vigorous in doing so. The Denver licensee has spread not only throughout Colorado but into Wyoming, Montana, and Nebraska. The Mem- phis licensee similarly has signed agents in Tennessee as far east he no ville and in Mississippi, Arkansas and southern Missouri. Under the usual agency arrangement, the agent bank is allowed to sign and service local mer- _ chants in the name of the licensee bank. The licensee supplies all necessary forms. In return the local bank is able to keep merchants who being required to open an account with the credit card bank might shift all their business from the local bank rather than keep multiple accounts. Usually the agent is also paid a fee or a percentage based upon the volume of sales drafts handled. Such fees are determined by the licensee not by the BankAmerica Service Cor- poration. The agent does not carry any revolving credit of cardholders.

There is an interesting alternative to the agent status, what the BankAmerica Service Corporation calls an associate bank. In this case, the licensee delegates varying responsibilities and privileges to the associate. The associate can issue credit card in its own name and can carry all the re- volving credit they generate. It is in turn responsible for losses of these accounts. It, of course, signs and services merchants like an agent bank. The licensee bank, not the BankAmerica Service Corporation, handles the train- ing and supervision of the associate’s plan and, usually, provides the central computer accounting facilities. Fees charged the associate are negotiated by it and the licensee. In effect, the associate bank gets the equivalent of a local BankAmericard franchise. Only its name appears on the cards it issues and on the local advertising. In the eyes of its community, the local bank is running its own BankAmericard plan. The associate therefore gets a credit card system at the cost of whatever additional fees the licensee charges it but without having to set up and operate a full organization. The main purpose of the agent and associate banks is to give the li- ences bank’s plan greater geographic coverage, and in the case of the associate bank, share some of the risks. There are further supplementary benefits for the licensee banks. Agents are required to open accounts with the licensee i and it can use the resultant links to build up its correspondent business as well.