Visa: The Quiet Power Behind Global Commerce

Visa does not extend credit. They do not issue cards. They do not work directly with merchants. They do not work directly with consumers. They are not a bank or a financial institution. They don't ever bear any risk. They are merely a network connecting banks to other banks.

Dee is just gone into B of A with this grand vision of, you should give me this incredible asset, because the value that it will create outside of your hands and your fractional ownership thereof will be so much greater than what it could be on its own.

The innovation baked into the BankAmericard is they say, well, after the 30 days, you can get your statement, you can pay it in full, or you can roll it into a loan. We love loans. We would be happy to extend loans to our customers. We can learn a lot about them, we can make a good amount of money on that interest, so the modern credit card is born.

What they had to do was they created these B shares, and they isolated all the liability from this class action suit to the B shares. While MasterCard had a pretty flubbed IPO, Visa had a great IPO because they said, whatever the courts rule, the banks who own the B shares, the pre-existing shareholders will own all that liability and all the A shares, the new people who are coming in as owners of the company, will be protected.

All it knows is my card number. It has no notion of identity. Isn't that crazy? The banks like that, because then the banks get to say, no, no, this is my customer. Visa, we will use your network, because it is the way that I need to accomplish something for my customer, but I'm not just going to turn my customer into your customer. Why would I do that?

They re-architected BASE I and completed architecting BASE II to run concurrently across multiple datacenters as shared operations running across multiple data centers, which I think may have been either the first or one of the first examples of that ever happening.

He gives this nostalgic speech at the end of dinner saying, 'Here in Sausalito, looking at the bay, this is where me and my colleagues dreamed up the original vision for what this could be. It's sad that this won't be extended to the whole world and a true global payment monetary system, but we're all gathered here. We should celebrate having accomplished so much and had a chance at this dream. Just having the chance is worth it.' He's really good with his debate skills. He's like, 'Before we meet, one more time tomorrow to obviously disband this whole venture and just have the dream be a memory, we have one more thing for you.' He's like Steve Jobs. 'A small gift of appreciation for you giving your valuable time and effort as part of this global undertaking, please take this little box out from under your seats.' Everybody takes a little box out from under their seat, they unwrap it, and inside are a pair of pure gold cufflinks, that on each of the two cufflinks, there is one half of the globe. Under one side, it says in Latin, Studium Ad Prosperadum, which translates as The Will to Succeed, and the other side says, Voluntas In Conveniendum. Apologies to Latin speakers out there that I'm butchering that. It translates as The Grace to Compromise. He explains this all, and somebody from the crowd yells out, do you miserable bastard, because he just pulled out everybody's heartstrings. And he gets the votes. The next morning, all the holdouts reverse course. They all joined.

Dee is obviously 100% against this happening. He doesn't want his banks to be able to join MasterCard too, but he also makes the surprisingly correct argument. He's like, look, this would be a huge mistake, because the US government, if you do this, you are going to freeze the payment networks in the US. Nobody's ever going to develop a new, competing open-loop payment network, because now there's no more competitive vector between Visa and MasterCard. We'll all have the same features, banks will be members of both. They're going to operate in lockstep.

The most negative way someone could paint the ecosystem as it exists today is that the whole credit card system is a wide scale bribe of the American consumer to extort the world's retailers using the retailer's own money, but that is a very cynical way to view it.

John comes in and he's like, no, no, the path to victory here is not positioning against MasterCard. The path to victory is positioning against American Express. Not because we want to kill American Express, we don't actually care. We're way, way, way bigger than American Express. But we need global ubiquity, adoption, and people to get comfortable with using Visa and using credit cards.