No matter which part of the world you belong to, you are bound to have come across the name Visa. Printed on ATM cards, debit cards, and credit cards, Visa is seen, heard, and used everywhere.
Instead of issuing cards, extending credit, or setting rates and fees for customers, Visa allows licensed banks to issue Visa-branded cards under their own names with their own terms of the agreement.
The American company was established in 1958 and is now one of the biggest multinational services corporations. Over the years, Visa has helped connect customers, businesses, banks, and governments to fast, secure, and reliable electronic payments.
Here are some facts and figures to help you get a better understanding of Visa’s position as a leading electronic payment brand in 2021:
- Net Revenues of $24.1 billion
- Transactions worth $164.7 billion processed on Visa’s networks
- $10.4 trillion in payments volume
- Diverse workforce of 21,500 people
- Operations in more than 200 countries
- Investments of $772 Million
Let’s rewind the clock to 1958 when the Bank of America launched a credit card initially named BankAmericard and discover how that ultimately led to the Visa we know today.
With how common and well-known the name ‘Visa’ has become, it is hard to imagine that the multinational financial services corporation was originally known as Americard.
Not only does the Visa of today differ from Americard because of their names, but the Visa of today is much more than what Americard was. But to see how far Visa has come, it is essential to understand where BankAmericard started.
The Idea That Started It All
Headed by Joseph Williams, the BankAmericard came into existence through the think tank, and in-house customer service research group of Bank of America, in 1958. Although Williams did not come up with the idea of the card, it was to his credit that the all-purpose credit card was successfully carried into the implementation phase instead of being canceled outright.
Bank of America launched its very first paper credit card with a limit of $300. The unique feature about this card was that their customers were not required to settle their bills in full each month. Instead, they could make use of the revolving credit method, in which there was no fixed number of payments, and they could spend as much as they wanted without stepping foot in the bank.
In the 1950s, the typical middle-class American carried multiple revolving credit accounts with multiple merchants. However, this was inefficient and cumbersome for both the merchant and especially the consumer as they would need to carry multiple cards and pay separate bills for them every month.
What they needed was an all-purpose credit card, a unified financial service available to the audience. Thus came about the idea of the first credit card available to middle-class consumers and small- to medium-sized merchants in the United States - the BankAmericard.
Cementing Its Place In The Market
On September 18, 1958, Bank of America, on BankAmericard’s official launch, mailed 65,000 unsolicited credit cards to every mailbox in Fresno, California.
The credit cards were distributed to the public through this advertising technique called ‘drop,’ which was essentially mass unsolicited mailing. Though this resulted in some loss, it boosted BankAmericard’s initial launch, which was very crucial at that point. After the successful drop in 1958, Bank of America heard rumors about another bank preparing for their drop in San Francisco - Bank of America’s home market.
Hence, to preserve its market popularity and share, the bank initiated drops in Sacramento, Los Angeles, etc. By October, the entire state of California was saturated with over 2 million cards. At the same time, over 20,000 merchants had accepted BankAmericard.
Initial Hurdles And Potential For A More Promising Future
Though the drop advertisement campaign resulted in almost 2 million credit cards being used by consumers, the bank suffered losses due to the emergence of credit card fraud and around 22% of the accounts being delinquent. As a result, Williams and other close associates had to resign.
Despite this setback, the Bank of America chose to continue the program after realizing its potential. Thus, as part of the bank’s clean-up efforts, it imposed appropriate financial controls and published an open letter to the households within the state of California apologizing for the issue of credit card fraud and other problems associated with its system.
It was able to salvage BankAmericard, and by 1961, the program began yielding profits. However, as part of its efforts to ward off competition, Bank of America deliberately hid the program’s profitability and let the negative impression linger.
Competition Prompts Expansion
By 1966, BankAmericard's profitability had grown so much that it became virtually impossible to hide it anymore. Other banks were eager to enter the market for credit cards, but they could not hope to compete against BankAmericard by themselves.
Thus, the Master Charge (now known as MasterCard) was created due to an alliance between several regional bankcard associations. This new competition posed enough of a threat to BankAmericard that it prompted the latter to seek growth beyond California as well.
Due to federal restrictions, Bank of America could not directly expand into other states; thus, in 1966, it began signing licensing agreements with banks outside of California. Over the following decade, numerous banks licensed Bank of America’s card system and thus, developed a whole network of banks that accepted BankAmericard.
The Bank of America also recognized the advantage in expanding internationally. Thus in the late 1960s, various overseas banks licensed the BankAmericard and began issuing cards with localized brand names such as Chargex in Canada and Carte Bleue in France.
Key Takeaway 1: Take Calculated Risks
The initial phase of the BankAmericard program was riddled with many risks. Still, Bank of America recognized the program’s potential and chose to meet the risks head-on instead of being discouraged.
The biggest risk that the Bank of America took was to let the negative perceptions regarding the credit card system persist, which could have adversely affected the BankAmericard program. Instead, the strategy paid off, and Bank of America established itself in the market unhindered by any competition and reaped the profits.
Dee Hock Spearheads The Program
The new decade kicked off on a rather promising note for BankAmericard with a great outlook on potential growth.
Around this time, Dee Hock, the official founder of Visa Inc., came into the picture. He was an official of a local bank in Washington state, the National Bank of Commerce (later Rainier Bancorp). Hock was in charge of supervising the launch of the bank's own licensed version of BankAmericard.
Following a series of events, Hock helped invent and became chief executive of the credit system that came to be known as VISA International.
Dee Hock Coming Into The Spotlight
Although the Bank of America had portrayed BankAmericard as having overcome all the problems in its path, Hock realized that that was far from the truth. In reality, BankAmericard’s licensee program had developed quite rapidly and in a very disorganized manner.
Dee Hock was the one who identified the problems with the existing system and proposed possible solutions to address them. He specifically pointed out how the problems were arising because of the involvement of other banks in the system.
For example, he identified how "interchange" transaction issues between banks were becoming a severe problem, which had not been a concern when the Bank of America was the only one issuing the credit cards. Hock proposed the formation of a committee that would investigate and analyze the various issues in the existing program. Due to his keen insight and eye for detail, Hock was soon made the committee chair.
The Creation of A Consortium
Hock believed that BankAmericard had a bright future ahead of it and had the potential to stand on its own, separate from the Bank of America. He even successfully convinced the Bank of America to accept his proposition to make BankAmericard an independent entity.
As a result, in June of 1970, Bank of America gave up BankAmericard. The group of member banks that had the license to issue BankAmericard took control over the program and named it National BankAmericard Inc. (NBI).
NBI was now a consortium and not a franchise like before. The independent corporation was responsible for the management, promotion, and development of BankAmericard within the United States. Hock was chosen to be the National BankAmericard’s first president and CEO.
The Formation Of IBANCO
Although National BankAmericard was responsible for handling the issuance and management of BankAmericard in the United States, Bank of America still had the right to grant licenses for BankAmericard to banks outside the U.S. By 1972, the license for BankAmericard had been issued across 15 countries.
Eventually, the international licensees also started having issues with their licensing programs. They were eager to acquire Hock's help with the problems and thus hired him as a consultant. They specifically wanted Hock to help them restructure their relationship with the Bank of America as they knew he had done for licensees within the U.S.
Therefore, in 1974, the International Bankcard Company (IBANCO) was created. IBANCO was a multinational, nonstock corporation formed by bank licensees to develop BankAmericard's international operations. Hock made the domestic BankAmericard system a subsidiary of IBANCO and became the group’s CEO.
Visa Coming To Life
The directors of IBANCO believed that unifying the various international networks of the program into a single network under the same name would prove beneficial for the company. However, some countries were reluctant to issue a card associated with the Bank of America even though its connection with BankAmericard was largely in name only. Hock, therefore, decided to change the name of the card to "Visa" - a name that implied no nationality and which was also easy to pronounce in different languages.
Consequently, in 1976, BankAmericard, Barclaycard, Carte Bleue, Chargex, Sumitomo Card, and all other licensees united under the new name - Visa. Visa USA replaced NBI, and Visa International replaced IBANCO. The company experienced tremendous success under Hock's competent leadership. The Visa card's customer billing rose significantly, and its worldwide recognition grew drastically.
Key Takeaway 2: There Is Always Room For Improvement
Although the BankAmericard was doing well and yielding profits, Hock saw the potential for even greater growth. He was sure that the system could be improved and took the initiative to implement those changes. Hock initiated a timely restructuring of the company so that the issues with the existing system could be countered through a new mechanism. He also changed the company's name when it hindered its growth.
By continuously keeping an eye out for possible improvements, Hock enhanced the company's performance and reputation to an astonishing degree. Due to these improvements, Visa is still a leading financial services corporation.
Visa’s Decade Of Growth
Under the leadership of Hock, Visa continued to expand exponentially and introduced numerous innovative financial solutions to the customers. Even after Hock’s retirement, Visa continued to grow under Charles T. Russel.
The Visa ATM Network
In 1983, Hock introduced a global network of automated teller machines (ATMs) which turned out to be a momentous decision. The Visa ATM services allowed cardholders to obtain cash at places far removed from the banks and credit unions who had issued the cards.
The network of Visa ATMs was an incredible development for travelers in particular as those carrying the Visa card could easily access cash from bank accounts or any other established line of credit.
Initially, Visa wanted to mainly cater to the travelers, which is why most ATMs were placed in airports, gas stations, tourist attractions, etc. However, soon enough, the ATMs were also placed in other locations such as grocery stores and even at banks themselves.
Despite the increased accessibility offered by the Visa ATMs, the banking industry was not too happy about Visa’s ATM network as most banks operated their own ATM networks. One of the competing networks was the Plus System Inc. which was owned by 34 banks (all of them being Visa members) and operated ATMs that only accepted the Plus card. What's more, these banks actively tried to exclude customers who had accounts with competitor banks.
While the other ATM networks were focused on pursuing exclusive privileges for their own customers, Visa was working to implement an inclusive network accessible to all customers of banks that were Visa members.
Changes In Leadership
In 1984, after a successful run as the president of Visa, it was time for Dee W. Hock to retire. Hock’s leadership had helped Visa evolve as more than just a credit card program. After Hock’s retirement, Charles T. Russell took the helm. He was the vice-president previously and had been a part of the company for many years. He was a fitting replacement for Hock and proved his competency as a leader by helping defuse the tensions between Visa and its member banks over the ATM network.
Visa continued to thrive under Russell. In 1986, Visa and MasterCard held a 73% share of the $275 billion global charge card market. The combined transactions of the two amounted to $3.9 billion, which was drastically greater than any other financial services company at the time.
At the beginning of 1987, Visa entered into a contract with Interlink, the largest retailer that accepted debit cards in restaurants and stores in the United States.
Visa had already been handling Interlink’s California-based transaction network since 1984. Coupled with the new contract, Visa was taking a steady lead in the point-of-sale business.
In the same year, Visa also bought a 33% share in the Plus System of ATMs, which at the time was the second-largest ATM network in America. By doing so, Visa granted its cardholders access to almost one-third of all the ATMs in the U.S.
Enhancing The Communication Network
Russell believed that improving Visa's communications network was crucial for maintaining its market share. Visa had already established VisaNet in 1972, an extensive communications and data processing network.
However, VisaNet was designed for credit card transactions only, and Russell envisioned a general-purpose electronic payment system. Thus, he personally oversaw the transformation of VisaNet into a system that could cater to most forms of consumer banking transactions. Moreover, Russell also wanted to connect Visa's electronic mail systems with its data processing networks, so he prompted an extensive redesign of the company's data centers.
Consequently, Visa converted its data centers in Basingstoke, England, and McLean, Virginia into global supercenters, which had the capacity to process worldwide volume from either location. Owing to these strategic upgrades and enhancements, Visa experienced a significant rise in volume while the cost per transaction went down. In 1992, VisaNet recorded 807 transactions per second at incredibly low costs.
Key Takeaway 3: Always Be Open To New Possibilities
One thing that set Visa apart from its competitors was that Visa was open to trying new strategies to achieve growth.
The company did not restrict itself to conventional ideas; instead, it tried to do things its own way, such as Visa's ATM network that was accessible to all customers of member banks instead of being exclusive. Russell was also eager to open a new avenue of growth by initiating improvements to Visa's communications network. The company did not confine itself to conventional norms of the financial services industry; instead, it sought to break the mold and differentiate itself, which lent it an edge in the market.
Visa Takes The Lead
During the 1990s, Visa underwent many developments, some positive, others not so much. But despite the nature of the challenges faced by the company, it ended the decade strongly.
Starting On A Great Note
The new decade opened up on a positive note for the company as in 1992, Visa’s Gold Card emerged as the world’s most commonly used and easily recognizable card.
Similarly, 1993 turned out to be a successful year for Visa. The company issued over three hundred million cards to customers worldwide, and over $500 billion worth of billings were made under Visa's name.
Visa also reported cards and check transactions worth $6 billion, with traveler’s cheques alone generating global sales of over $16 billion. They also expanded their ATM operations by 160,000 across 60 nations.
Visa’s Explores New Payment Options
In 1994, Visa acquired Interlink, thereby obtaining its online banking services. However, the idea of facilitating customers with home banking services through collaborating with Microsoft was unsuccessful in the beginning as it could not perform against competitors such as Intuit.
The debit card was a payment alternative that had exploded in popularity in the 1990s. Thus, following the trend, Visa enhanced the payment convenience for its users by allowing them to use a debit card to make everyday purchases.
Whenever the cardholder would make payment using their debit card, the amount would be deducted from their bank account without any additional charges or interest. Another new payment option was also introduced, i.e., chip-based smart card. It was put on trial for some time, but the results did not meet expectations.
In 1996, a card for electronically storing money that would later be used as cash was offered to the public; it was named Visa Cash. It allowed the customers to load cash by simply transferring money from bank accounts to the card at an ATM.
In 1997, the emergence of new commerce services on the Internet greatly affected Visa. To keep up with market trends, the company signed an agreement with Yahoo to build an internet retail site. However, Yahoo canceled the deal in September 1997, incurring a $20.5 million loss for Visa.
Visa also launched the world's most extensive pilot program for secure electronic commerce by using the Secure Electronic Transaction (SET) protocol which makes electronic financial transactions safe by using encryption, digital certificates, and digital signatures.
By the late 1990s, despite facing many obstacles and hindrances, Visa made improvements in the technological sector and foreign operations and worked on expanding its services, especially debit activity. It was the first to introduce cutting-edge network technology to reduce card fraud. As the 1990s came to a close, Visa was still at the top of the industry, and its consumer payment system was the largest and the strongest in the world.
Key Takeaway 4: Keep Experimenting
The most crucial takeaway from Visa's performance in the 1990s is that some ventures may be unsuccessful but a company should always be keen on experimenting. Visa introduced numerous new services and ideas during the decade, but it was only successful with a few of its ventures. However, that did not discourage Visa from trying out new options and exploring new avenues of growth. Visa had already established itself so well in the industry that it could afford to experiment and have some of them fail without suffering too much and still maintaining its lead.
Important Milestones In The Journey
As the new millennium began, Visa was poised for further growth after spending the previous decades expanding its business and solidifying its place in the market.
Making Visa Safer & Securer
In the year 2000, the number of cards issued by Visa numbered up to 1 billion. In the same year, Visa also launched the Zero Liability policy. The policy was meant to protect cardholders from liability for unauthorized charges made with their account or account information. It was essential for building customer trust and making the credit card system more secure.
In 2004, global trends favored the rise of debit instead of credit, and Visa saw its total debit volume surpass its total global credit volume. In the same year, Visa also introduced Advanced Authorization, which analyzes the risk associated with every Visa transaction and assigns a risk score in real-time.
Visa Undergoes Restructuring
Until now, Visa comprised of four separately incorporated companies:
- The parent company, Visa International Service Association (Visa),
- Visa USA Inc.,
- Visa Canada Association
- Visa Europe Ltd.
In 2007, Visa underwent extensive corporate restructuring. Consequently, Visa USA, Canada, and International became subsidiaries of Visa Inc., while Visa Europe remained a membership association with a license and minority interest in Visa Inc.
According to Joseph W. Saunders, Chairman and CEO of Visa Inc., the restructuring allowed the company to better serve clients in the growing payments industry and advance the global shift towards electronic payments.
In 2008, Visa launched its mobile platform to advance the shift towards mobile commerce. The Visa mobile platform gives member banks and wireless carrier partners the tools and technology to offer innovative mobile financial services.
Within the same year, Visa broke records for its initial public offerings on the N. Y. Stock Exchange, becoming the largest in U.S. history up till that point. Visa Inc. had managed to raise $17.9 billion as investors were confident about its growth potential and welcomed its lack of direct exposure to the global credit crisis.
Visa’s First Global Ad Campaign
In 2009, Visa launched its first global advertising campaign, "More people go with Visa." The campaign's purpose was to reinforce Visa's global marketing under a single theme. The campaign emphasized Visa’s ability to offer security, control, and convenience to customers compared to other modes of payment. It also focused on Visa’s core growth strategy - a global shift with consumers and businesses moving towards electronic payments. The global campaign was also an ingenious tactic to achieve cost efficiency by consolidating its marketing efforts.
Visa Enters The World Of Online Payments
In 2014, the company introduced Visa Checkout, an online service that allows customers to pay from their mobile devices and P.C.s without being redirected from the merchant's site or app. Visa's CEO Charlie Scharf called it the "Visa card for the digital world."
With the world in the midst of an online shift, Visa Checkout was an excellent way to stay relevant and updated with market trends. In 2016, Visa even added the feature of "Swipe," which lets customers complete their online purchase by "swiping" a virtual image of their credit, debit, or prepaid card across the screen of a smartphone, tablet, or laptop.
Visa Inc. Acquires Visa Europe
After the restructuring in 2007, Visa Europe had become an independent company with its own public listing on the New York Stock Exchange. In November 2015, Visa Inc. announced plans to acquire Visa Europe to create a single global corporation. The acquisition of Visa Europe was completed in June 2016.
As a result of the acquisition, customers in Europe would have greater access to Visa Inc.’s scale and resources as well as access to Visa Inc.’s innovative technology and differentiated products and services.
Key Takeaway 5: Adapt According To Market Trends
Visa Inc. managed to stay on top of its game by constantly evolving according to market conditions. It continued to offer services geared towards electronic payments and even ventured into online payments when it sensed the global shift towards the digital realm. It did not hesitate to undertake significant changes and underwent corporate restructuring to better equip itself for catering to a global consumer base.
By staying abreast of changing market dynamics, Visa could stay up to date and develop the most relevant financial services to its customers worldwide.
The emergence of Covid-19 changed the way the world works, and though the changes brought on by the pandemic were drastic, not all of them were bad - especially for a remote payment corporation like Visa.
The pandemic completely changed the entire concept of money in public perception. With consumer preferences changing rapidly, money is no longer just a paper bill but is now digital and borderless.
Through The Thick Of The Pandemic
Visa Inc. remained committed to working with its clients and partners, its primary focus being to transform the movement of money by concentrating on three strategic priorities:
- Consumer payments
- New flows
- Value-added services
The company introduced the Tap to Phone technology, transforming a mobile device into a Visa acceptance terminal for tap to pay transactions in 15 countries.
In 2020, Visa Direct enabled faster payouts to over 2.35 million U.S. small businesses and sellers, with Visa now being accepted at nearly 70 million merchant locations worldwide.
Not only that, but Visa Inc. also made significant progress in corporate social responsibility. The Visa Foundation made a five-year commitment worth $200 million to support SMBs. The company also met its target of using 100% renewable electricity by 2020.
In 2021 the revenue, net income, and earnings per share grew at double-digit rates. At the same time, Visa continued to emphasize its three growth strategies (the same as the ones identified in 2020). Visa is also moving forward with its plans to facilitate the secure and seamless movement of money.
To consolidate its business, Visa deepened current relationships with investors by signing additional contracts with current clients and renewing old contracts. It also laid the foundation for new partnerships by signing key deals with new clients and various fintech corporations.
The company also reported the following statistics, which indicate its steadily growing business:
- Debit payments increased by 23 percent between the years 2020 and 2021
- 70% of all face to face transactions globally are done through Tap to Pay
- Nearly 30% more fintech corporations issued Visa in 2021 than in 2020
- The volume of payments has doubled since 2020
Key Takeaway 6: Craft & Implement A Solid Strategy
Visa Inc. was able to achieve steady growth through the pandemic as it was very clear on what factors were driving its growth. Moreover, it also had a strategy to emphasize the three strategic priorities. Visa was clear about its priorities and simultaneously consolidated its existing operations and clients while also obtaining new clients by making new deals and contracts. Thus, it was able to maintain its growth trajectory even through the pandemic.
Summary & Strategic Takeaways
Visa has grown steadily over the years and is currently offering the broadest range of financial services in the bankcard industry. It has evolved with the changing dynamics of the market, and even today, Visa continues to set the standard in the payments industry.
Growth By Numbers
1. Always Strive To Do Better
The very idea of BankAmericard was born because the customer service research group of Bank of America was not content with the way the credit card system worked and saw room for improvement. Even the subsequent developments such as the enhancement of the licensing programs for issuing the cards; the installation of the security mechanisms for protection against fraudulent transactions; the improvements to the company’s communication network; the introduction of ATMs that were accessible by customers of all member banks; all were possible because the people behind the company refused to settle.
2. Adaptability Is The Key To Survival
Visa was able to retain its relevance in an ever-evolving industry because it was highly responsive to changes in market trends. With the advent of internet-based commerce and the shift to online payments, Visa was prepared to offer consumers online alternatives to its card services. It was also successful in adapting to the changes brought about by the Covid-19 pandemic. By constantly being on the lookout for shifts in the industry, such as the growing popularity of debit cards, the company was not only able to stay afloat but ensure its lead in offering the most relevant and up-to-date financial services to the customers.
3. Keep An Eye On The Competition
Since the beginning, Visa has been highly conscious of competitors, with Bank of America even going as far as to let negative perceptions regarding the new unified credit card system linger to ward off competition. By keeping an eye on its competitors, Visa was able to keep them in check and differentiate its services and thus establish a unique brand identity. For instance, when Visa deliberately went against the banking industry norms and offered ATMs that were accessible by customers of all member banks instead of being exclusive to those of a particular bank.
4. Explore New Avenues Of Growth
Another accomplishment of Visa was that it did not restrict itself when it came to achieving growth and instead pursued various avenues available to it. Be it acquisitions, corporate restructuring, introducing new modes of payment, or even revamping its entire brand identity, Visa did not shy away from anything that could help boost its growth. By doing so, the company covered its bases and was reliant on just one way of expanding its business. Instead, it achieved growth through a diverse strategy.
5. Never Fear Failure
Lastly, Visa did not let the fear of failure hold it back from trying new things. Firstly, it sought to consolidate its business through strategic restructuring and reforms to its licensing program. After having secured its foundations, the company confidently continued to diversify and venture into new lines of businesses while simultaneously reinforcing its existing business. Yes, some plans did not work out as expected and there were failures in the process, but Visa never backed down from taking risks and experimenting. This served the company well and helped it pave its way to success.