Podcast Review | VISA by Acquired Podcast

VISA by Acquired Podcast

Alongside its two peers (certainly Mastercard and to a lesser extent American Express), there is no doubt VISA is ubiquitous with our daily lives. Despite this, how did these companies become such an important global service that we can neither see, touch or feel? We simply expect these payment networks to work, and we would likely only really stop to think about what was happening if it stopped working. How did we end up here?

The story of how VISA become one of the largest companies in the world (and certainly most profitable) is both unlikely, audacious and not something that could most likely be repeated today. Somewhat spun out of the first credit card released by Bank of America in the 1960s, its Founder & CEO Dee Hawk managed firstly to convince Bank of America to let him run his strategy, and secondly managed to convince other US banks to effectively be exclusive (by geography) franchisees of VISA without providing much outside of the marketing function (i.e. not much of the back-end infrastructure). Over time this expanded to an international presence and eventually the geographical exclusivity for certain banks was dropped.

As the decades passed, VISA became more back-end focused and morphed into a payments network, charging interchange fees on every transaction and restructured itself to become a for-profit partnership for its banking members whereby the more volume provided by a bank resulted in a higher % of the profit pool. During this period, the spouses of the banking Board members were present around the boardroom as Dee Hawk made the assumption that individuals would act with more respect not only around their own spouses, but other members spouses. It worked, and VISA managed to not relinquish effective control over everything, despite it being a democratic membership.

The business model of VISA was not without its objectors, as a band of other US banks on the outer got together to form Mastercard. Furthermore, American Express (more of a closed loop system) was around prior to VISA but did not fully capture the opportunity in front of them. An ironic example of this was related to the global sponsorship of the Olympics. American Express turned this down, VISA then snapped up the opportunity and with the slogan ‘accepted everywhere American Express isn’t’, which really propelled VISA on the international scene. What changes the dominance of these payment networks? Regulation has tried and not succeeded so it seems only a drastic shift in technology could see these amazing business models superseded.

‍Link to Podcast

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