Sixty years ago today (Sept. 18), a San Francisco startup launched by sending roughly 60,000 credit cards to consumers living in northern California.
This startup was a bank, and its innovation was a single card that could be used by consumers to purchase things on credit from many different merchants. The card eliminated the need for consumers to establish credit with multiple merchants, then carry multiple cards issued by each of those merchants to pay for purchases over time.
This general-purpose credit card was a hit with consumers and merchants, unleashing massive spending power for middle-class consumers — and merchants also reaped the benefit.
A few years later, this innovator expanded by licensing its tech to other banks across the country and created a business model that provided incentives for merchants, banks and consumers to accept, issue and use this new payment innovation.
About a decade later, the company went global and devised a number of technology innovations to support its growing size and scale, including the first electronic tech that streamlined authorization, clearing and settlement for the banks that were part of its network.
Today, Visa counts 3.3 billion cards, more than 46 million merchants and 16,000 financial institutions (FIs) as part its network, operating across 200 countries and processing transactions in more than 160 currencies to the tune of $10.8 trillion every year.
Visa Executive Vice President Bill Sheedy told Karen Webster that Visa’s last 60 years have been a remarkable journey, one that he’s had a ringside seat to for the last 25 years.
“I joined Visa when I was 26 and just starting out, and I would have told you then that I was working at a mature, growing business,” Sheedy explained. “Now, with the benefit of perspective, I can see how much we have evolved beyond just being in the ‘credit card business.’”
Sheedy explained that in 1993, the year he joined Visa, payments were more or less a secondary business for banks that were more interested in the credit part of the credit card proposition than anything else. For banks, the payments part was an interesting hook, he said.
Now, Sheedy noted, payments are at the forefront of exciting new commerce experiences — what he described as “the next 60 years of Visa’s innovations.”
A Startup All Grown Up
While it’s easy to think of Visa as the largest payments network in the world, that’s really not how Visa thinks of itself, Sheedy said. Visa team members, he said, view themselves as being part of a global tech company that has become extremely good at doing something very difficult: moving money quickly, safely and reliably between parties, no matter where they are or what currency they want to use to make those payments.
“Anyone who has ever tried to get into payments,” Sheedy remarked, “has learned the same lesson. Payments are hard, complicated, heavily regulated and fast-moving.”
That, Sheedy said, makes Visa’s biggest priority to keep the wheels of commerce moving by providing those parties with a reliable, secure, compliant and trusted global payments network.
Yet, Visa’s biggest opportunities, Sheedy said, have come by opening its network for innovators to build on top of it. Some of the most important things the Visa network has done is make it possible for new players with innovative payments and commerce ideas to come into the industry, scale and add value to consumers, merchants, banks and businesses.
On The Road To The Big Six-O
Visa’s journey from a single bank in San Francisco that issues 60,000 BankAmericards to a network of 16,000 FIs all over the world that issues 3.3 billion cards has included many noteworthy milestones. Two in particular stand out, Sheedy told Webster.
The more public facing of the two is Visa’s embrace of, and big push toward, debit. Today, he said, U.S. debit cards are Visa’s largest business. That wasn’t always the case, though.
During the early days of debit in the mid- and late 1980s, Sheedy said, debit was very much a niche product in a world where credit products dominated. What became clear to Visa was the opportunity for the company to use its bank and merchant network to remove another source of friction for the consumer, to turn the their “household account” — their DDA — into a more accessible, easy-to-use payment method.
Sheedy said Visa recognized that consumers liked being able to pay for many things with funds on hand. Before debit, there were only two ways to do that: cash and check, and each came with its own frictions at the point-of-sale in a store.
“We mapped out a better way to tap into that consumer dynamic, and it was the most successful implementation of a long-term plan within a company I’ve ever seen,” Sheedy said. “But it took time, and a lot of evangelizing with the banks [that] were understandably hesitant at first.”
It also took some pretty great ads.
Equally transformational, he said, though less visible, were the innovations in Visa’s electronic authorization, clearing and settlement systems, which gave Visa a lifecycle view of the transactions running over its network.
That change, in 1993, not only gave Visa the ability to understand payments from a lifecycle point of view, but to more precisely manage transaction risk. That lifecycle view and control set the stage for the innovations that would come later, Sheedy said, such as real-time risk scoring and tokenization.
The next evolution of payments, Sheedy told Webster, won’t be defined by “expensive boxes plugged into landlines” that propelled the payments industry for its first six decades. Instead, it will be an array of new devices running new tech, capable of creating new nodes on the network that can accept a payment.
Virtualization and the world of connected devices will continue to change what it means to pay and be paid, he said.
“I view this future as extremely empowering for businesses,” Sheedy said, “since wherever someone is on the planet, as long as they can get a connection, they can process Visa payment credentials. The explosion we are going to see on the acceptance side is going to be huge,” along with the opportunity to digitize the many transactions that remain cash and paper-based on both the retail and business-to-business (B2B) side of payments.
Today, Sheedy noted, Visa is a very different business than it was 60 years ago, but the one thing that hasn’t changed is why it’s in business. That is, to be the trusted and secure global network that serves as a universal currency for consumers or businesses worldwide.
“The first 60 years was about establishing the foundation for connecting consumers and merchants; the next 60 is [about] connecting any two parties that want to transact, anywhere and everywhere they want to be,” Sheedy said.