Acquired · Nov 26Visa
Founded by Dee Hock as a for-profit, non-stock membership company owned by banks in proportion to volume. It earns about $29 billion at roughly 98% gross margin and 50% net margin, takes about 20 cents on a $100 sale, and has grown volume 17.3% a year for 51 years. Its 2008 IPO raised about $18 billion, all secondary sales by banks.
Tips
- Dee Hock convinced Bank of America to give away its crown jewel by showing the pie would grow▶ 1:07:00Every one of the 200+ franchise banks then signed up to the new organization, and not a single bank jumped ship.
- Dee Hock made Visa a for-profit non-stock membership company owned by the banks that use it▶ 1:18:20A bank contributing 17% of transactions was entitled to 17% of the profits; it was always for-profit, not a nonprofit later converted.
- Dee Hock built a democratic constitution that rival banks could not leave but could change by 80% vote▶ 1:19:40Hock described it as a pure democracy; the regulations worked like the US Constitution, infinitely modifiable by threshold vote.
- Dee Hock got an antitrust letter from the DOJ before asking rival banks to collude▶ 1:24:50He held a letter from the DOJ before touring banks to recruit them.
- Dee Hock won over the holdout international banks with gold cuff links and a farewell speech▶ 1:28:20Visa was global from day one, with Barclays, Sumitomo and other banks across Europe, Canada and Latin America.
- Visa let every bank brand the top of the card while keeping the blue-white-gold mark universal▶ 1:34:00Affinity cards like Southwest and 49ers cards come from this rule.
- The 1977 name change to Visa set off an arms race among banks that pushed it past MasterCard▶ 1:36:30In one year the number of member banks grew 20% and active cardholders grew 45%.
- Visa's open-loop network of banks scaled faster than American Express's closed loop▶ 1:39:00Visa's merchant network was roughly four times the size of American Express's by the mid-1980s.
- Dee Hock hired an engineer, set nine-month deadlines and built Visa's technology in house▶ 1:56:30It worked in nine months; Visa then built clearing and settlement (Base 2), cutting average settlement from about a week to overnight and saving banks about $15 million in year one.
- Visa ran its two data centers in parallel to be reliable instead of keeping a cold backup▶ 2:01:10This is how data centers run today; Visa now runs 99.999% uptime across six data centers.
- Visa standardized on the magnetic stripe and outsourced terminals so merchants moved to digital▶ 2:06:40Pilot banks and merchants cut chargebacks by 82%, and the terminals cost under $500.
- Visa's marketing chief positioned against American Express and bought the Olympics to erase the stigma on credit▶ 2:13:20Visa has been the exclusive payment provider at the Olympics for 37 years and is contracted through 2032.
- Visa isolated antitrust liability in B shares and had a clean 2008 IPO while MasterCard's stumbled▶ 2:27:10It was the largest US IPO in history up to that point, and helped banks through the financial crisis.
- Dee Hock warned that letting banks join both networks would freeze competition between Visa and MasterCard▶ 1:41:00Banks multi-home on both networks and the two share the same features and prices.
