The drop, the cuff links, and the five-sided network that became the most profitable large business in the world. How a small-bank program manager from Seattle convinced Bank of America to give away its most valuable asset.
"Any organization that could guarantee transport and settle transactions in the form of arranged electronic particles 24 hours a day, 7 days a week around the globe would have a market every exchange of value in the world that beggared the imagination." — Dee Hock
Ben Gilbert & David Rosenthal, on the episode
Ben Gilbert and David Rosenthal spend this episode of Acquired on Visa, the 11th most valuable company in the world and a business most people cannot accurately describe. The popular assumption is that Visa is a financial institution that extends credit, issues cards, and works directly with consumers. The actual operating system is sharper: Visa is a network connecting banks to other banks, bearing no financial risk, touching no money, moving only information. The episode traces how this came to be, starting with Bank of America's 1958 credit card drop in Fresno and ending at 50% net income margins on $30 billion in revenue. It is above all the story of Dee Hock, a self-taught debate champion from rural Utah who convinced the most conservative financial institutions in the world to forfeit a franchise and hand him control of what would become global payments infrastructure.
Tactic 01
Ben Gilbert & David Rosenthal, Acquired
Design The Envelope, Not The Price
The play
Map every party in the chain and design fees so the paying party still benefits the system's champions.
Ben Gilbert & David Rosenthal says
Interchange is intentionally flexible, part of a five sided network of consumer, merchant, Visa, issuing bank and acquiring bank who split the value differently depending on who is doing what work. On a $100 sale a merchant might be charged a 2% discount, bringing it down to $98. Visa created higher interchange tiers like Visa Signature so issuing banks get more money to offer better rewards, which brings higher value customers to merchants. The merchant is really the only party in the arrangement that is not thrilled with it.
Try this
Map every party in your transaction chain and design your fee or reward structure so the party bearing the cost benefits the parties who will champion your system.
