Visa’s mission is to enable consumers, businesses, banks, and governments to use digital currency.
Visa is a global payments technology company. It operates through three business units based on geography: the United States, International, and Visa Europe.
The story of Visa begins with Bank of America (BOA). In 1958 BOA issued BankAmericard, the first credit card with a “revolving credit” feature. Previously, credit cards had been issued by merchants and could only be accepted by a select group of other merchants. BankAmericard represented the first time that a third party (a bank) had offered a card that could be used by a large number of merchants. It also had a new feature – previously, credit cards required their owners to make a lump sum payment with the first statement. BankAmericard allowed them to pay in monthly installments.
At first the card was only operational in California. However, soon BOA began forming licensing agreements with banks outside the state. One of the first of these was National Bank of Commerce in Seattle, whose Assistant Vice President was Dee Ward Hock. Hock became manager of National Bank’s credit card program. In 1968, at a meeting of over 100 licensees from different states, he was elected head of a committee to solve problems the banks were having with BankAmericard. These included delayed payment transfers and a lack of sufficient means to prevent user fraud.
In trying to address these issues, Hock encouraged the bank licensees to take control of the BankAmericard program. In 1970 they formed a consortium called National BankAmericard Inc. (NBI); the independent corporation bought the program from BOA. Hock was recruited once again to lead the new incarnation. In 1974 the group bought BOA’s foreign credit card operations. After this action Hock soon came to learn that many countries without the card were reluctant to issue it because it was associated with an institution with “America” in its name. He had a new problem.
He solved the issue in 1977 when he renamed BankAmericard the “Visa” card. His reasoning was that the name was not associated with a specific location; it did not make a reference to a bank, which might affect perceptions about its possible use; and it was simple to pronounce in any language. At the same time, NBI was rechristened Visa USA and its larger operation was called Visa International. Not long after, Visa launched the first Visa Classic Card and Traveler’s Checks. Following these changes, Visa grew exponentially in terms of customer billings and global name recognition.
The next decade saw a number of new innovations.Visa introduced an electronic transaction-authorizing system that helped reduce retail store fraud by 85%. In 1983 the Visa Classic card was redesigned to feature a hologram for greater security against user fraud. The same year Hock launched one of the card industry’s most impactful services: a global network of automated teller machines (ATMs) that enabled Visa cardholders to obtain cash from anywhere. As a result of these accomplishments, Visa’s market share grew and it overtook MasterCard in billings. By 1992, its Gold Card became the most widely used and best recognized credit card in the world.
Business model of Visa
Visa has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:
Consumers: This segment consists of individuals. They use Visa-branded debit, pre-paid, and/or credit cards given to them by issuer banks to pay for products and services from merchants.
Merchants: This segment consists of businesses. They accept payment from consumers in the form of their various cards and submit them to acquirer banks for processing.
Visa offers three primary value propositions: convenience, accessibility, and brand/status.
The company’s payment cards make life easier. Specifically, they enable consumers to obtain money from their bank accounts without having to actually go in their branches; they can just use ATMs. The cards also allow them to make payments to merchants without having cash on hand.
The company also increases accessibility through its products. It offers a variety of payment card types. Consumers can use debit cards to access bank funds; pre-paid cards if they don’t have a bank account; and credit cards when they need to delay payment.
The company is one of the earliest payment card providers, and thus is one of the most well-known. It connects consumers and merchants in more than 200 countries worldwide and conducts 150 million transactions per day. It has been consistently ranked as the most trusted card firm.
Visa’s main channel is its website, through which it markets its products and services. However, the company also promotes itself through offline advertising on television and through marketing campaigns such as sponsored events. In addition, it offers a mobile app for consumers.
Visa’s customer relationship is primarily of a self-service, automated nature. Consumers use its cards and merchants accept them as payment, all while having limited interaction with employees. Also, its website features a “Resource” section providing detailed answers to frequent questions.
That said, there is a personal assistance component as it maintains customer service staff for providing assistance when needed.
Visa’s key activities focus on platform management. The company’s business model entails maintaining a common platform between three parties: consumers, merchants, and banks.
Visa has two key partners in its business. It works with issuer banks to distribute its payment card products to consumers. It also works with acquirer banks to accept and process payment transaction information submitted by merchants.
Visa’s main resource is its processing infrastructure. It utilizes several synchronized processing centers, including two data centers in the United States. These centers analyze payment transaction information and help ensure uninterrupted connectivity for consumers, merchants, and banks.
The company also relies heavily on its customer service staff to assist all involved parties as needed.
Visa has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is personnel expenses, a fixed cost, as it depends heavily on its human resources. Other major drivers are marketing, administrative, and network/processing expenses, all fixed costs.
Visa has four revenue streams, which are as follows:
Service revenues: These are revenues obtained for providing financial institutions with support services for the delivery of Visa payment products and solutions to consumers.
Data processing revenues: These are revenues obtained for authorization, clearing, settlement, network access, and other maintenance and support services that facilitate transaction and information processing among banks.
International transaction revenues: These are revenues obtained for cross-border transaction processing and currency conversion activities.
Other revenues: These are revenues generated through license fees for usage of the Visa brand; Visa Europe; account holder service fees; licensing and certification; and other activities.
Charles W. Scharf,
Chief Executive Officer
info: Charles earned a B.A. from Johns Hopkins University and an MBA from New York University. His previous positions include Managing Director of One Equity Partners, CFO of Bank One Corporation, and CFO of Salomon Smith Barney, an investment bank.
Chief Marketing and Communications Officer
info: Lynne holds a B.A. in international relations from Stanford University and an MBA from Columbia University. Prior to joining Visa she held senior marketing management positions at Time, Inc. and American Express.
Global Head of Innovation and Strategic Partnerships
info: Jim earned a B.S. degree from the College of William and Mary. He was previously head of Product for Visa. Now, he oversees development of its product and technology roadmap, innovation efforts, and strategic partnerships.
info: Ryan earned a finance degree from the University of Notre Dame. Prior to joining he served as CEO of Consumer Banking for JPMorgan Chase. He leads Visa’s global client organization and is responsible for client support services and global product management.