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- Have you ever wondered how the Visa card, the small plastic rectangle that you use to pay for almost anything, came to be? How did it revolutionize the way we buy and sell goods and services, and how did it shape the world we live in today? In this article, we will review the book Visa: The Power of an Idea by Paul Chutkow, which tells the amazing story of the Visa card, from its humble beginnings to its global dominance.
- If you want to learn more about the Visa card, its history, its challenges, its innovations, and its impact, you should definitely read this book. You will discover how a simple idea can transform the world, and how you can be part of that transformation.
Visa (2001) chronicles the humble beginnings of the founder of the Bank of America whose vision to financially empower the people gave rise to an idea that today connects over 22,000 banks and financial institutions.
Introduction: A glimpse at the history of the plastic cards in your wallet
Nowadays, most people barely give a thought to swiping a card or depositing a paycheck. So much of how we do personal finance has become an everyday routine. But at the beginning of the twentieth century, banks were really only for big businesses and wealthy people. The rest of the folks had to stash their cash under the mattress. That was until A. P. Giannini decided to change all that.
In this summary, you’ll learn about the simple idea that created a world-changing organization and helped launch the global and digital economy. For better or for worse, one immigrant’s desire to put financial power into the hands of everyday, working people changed the course of the world.
The man behind the card
P. Giannini was seven years old when his father, an immigrant and hardworking farmer, was killed over a one-dollar debt. For a while, his mother struggled on her own before remarrying, selling the farm, and heading to San Francisco.
The family owned and operated a produce business which Giannini worked for from a young age. He saw firsthand how hard the farmers worked and how difficult it was for them to get by financially. He also witnessed the way money functioned as a lubricant in society, making everything go round.
As a young man, Giannini saw the good in money – and the bad. At that time, banks were for big businesses and wealthy people. There was no such thing as a bank for everyday people, let alone loans or credit.
By the age of 30, after working for his stepfather’s business all his life, Giannini was a financially secure man. He got married, and upon the death of one of his in-laws, he inherited stewardship over a small, struggling bank.
Having already developed ideas about the need for a banking system for everyday people, Giannini tried to work with the bank and change the minds of the people running it. When he couldn’t, he decided to start his own. On October 17, 1904, he started the Bank of Italy in San Francisco.
This was all happening during an era when the Wright brothers were toying with human flight and Henry Ford was creating the Model T. Giannini felt that pioneering spirit as he spearheaded efforts to give financial power to the people.
In April 1906, an earthquake and fire struck San Francisco. Giannini, seeing the fire heading toward his bank, packed up all the gold and money in the bank into a delivery truck from his stepfather’s produce company, covered it with oranges, and took it to safety. As people struggled in the aftermath, Giannini saw an opportunity for the bank to be in service to the community. He set up a temporary booth and began offering small loans to workers and families to help them rebuild.
Through that experience, he created the installment loan system. Later other forms of small loans would come.
But this was only the beginning. In 1907, a Wall Street–induced financial panic happened with people doing runs on their banks, pulling their money out, and sending the US into financial chaos. Giannini weathered this storm with a unique confidence-building practice. He stacked bars of gold behind the tellers in his bank to give his customers confidence that all was well. As a result, he didn’t experience the same financial problems as other institutions.
But these circumstances had highlighted the need for banking stability. So when Woodrow Wilson, founder of the Federal Reserve System, began speaking out against modern banking flaws a few years later, Giannini was ready to take action. Wilson advocated for a bank branch system. Giannini started one.
His Bank of Italy became a branch banking system that came to be known as the Bank of America.
In 1949, Giannini died having accomplished many great things, but his legacy continued to grow. In the next decade, the demands of managing installment loan banking became too great. The Bank of America watched as several attempts were made to create a charge card, including the Diner’s Club Card started by Frank McNamara, who created it in response to an embarrassing evening when he didn’t have enough cash on him to cover dinner.
The problem with early attempts at developing credit cards was that they were slow and required the user to have enough cash in their accounts. Merchants would wait sometimes longer than a month to receive funds from a charge card transaction. In 1958, the Bank of America solved this problem with the first revolving credit card called the BankAmericard.
As they say, the rest is history. But we’ll get into that in the next section.
An unexpected new leader
In the fifties and sixties, a young man born to a poor, rural family found his way into the world of banking. Ambitious for his piece of the American Dream, he desired acceptance and financial freedom. Unfortunately, he had a strong aversion to the status quo whenever the status quo wasn’t as good as he thought it should be.
As a result, this young man struggled to succeed at work. There were as many failures as successes, and his employers often urged him to just follow the rules.
In 1968, amidst the chaos of the Tet Offensive in Vietnam, the assassination of Martin Luther King Jr., and the assassination of President Kennedy, a large group of bankers gathered in a hotel conference center to hash out some issues. These bankers were all licensees of the BankAmericard and they weren’t happy.
The card was supposed to have made them a fortune, but instead, it was costing them money. The first day of the meeting was a cacophony of shouting and bickering. The second day wasn’t much better until a smallish, unassuming man was brought to the stage. He was introduced as Dee Hock, a man no one had heard of and whose résumé, had it been on display, would have looked like a patchwork quilt of failures and successes rather than a strong career.
The young dreamer had finally found a place to apply his vision.
The big challenge the bankers were facing – besides the hundreds of millions of dollars they were losing every year in the card program – was the fact that Bank of America owned the BankAmericard license.
Hock gathered three close colleagues, including a man who worked for Ken Larkin, one of the pioneers of BankAmericard. The four men gathered for a few days of brainstorming. On the last day, they started talking about the future of money. They talked about what money even was and how it would look in an increasingly global and digital economy.
At the end of all the thinking, Hock finalized a proposal to create a completely democratic, self-governing body where every bank would be represented equally – even Bank of America. The obstacle was that Bank of America would need to transfer ownership of the BankAmericard system to the self-governing body.
Initially, Larkin outright rejected the idea, demanding that his bank retain control. But Hock was able to go over his head and talk to the head of the bank. It turned out that the card program was costing the bank money as well, and that putting the program into the hands of this new body would actually be beneficial to everyone.
This is how the National BankAmericard Incorporation, or NBI, was created. But Hock didn’t stop there. In brainstorming the values and principles that would guide this body, he and his colleagues planned to create something that could grow and evolve with changes to the economy. He pushed the organization to go international, making partnerships with banks all over the world.
At this point, the two major competitors, MasterCard and American Express, were doing their best to dominate market share. Hock believed himself to be building an international community that would democratize credit, a vision very much in line with Giannini’s mission. He called his partners a visa family. In 1979, he rebranded the card Visa in response to the globalization of credit.
Hock had always been one to see future possibilities. He knew that there was a potential future in which money would become completely digital and globalized. What we don’t know is whether he fully realized that he’d help create that future.
By the seventies, credit cards were in common use and increasingly making their way around the world, but there were a few areas where they could be improved. For one thing, authorization often took far more time than it should, and carrying out transactions was also a lengthy process. For another, credit card fraud was a problem.
To solve the first problem, Hock and his team pioneered something which they called BASE I. BASE stood for BankAmericard Security Exchange and was essentially a computerized network that dramatically sped up the authorization and transaction process. Before the network launched, the authorization process could take up to five minutes. BASE I reduced that to 56 seconds.
The following year, BASE II was launched and was the beginning of the end of paper transactions. It helped globalize financial transactions and increase security, all of which cut costs and losses for thousands of banks. By 1984, BASE II had processed over a billion transactions totaling nearly $53 billion.
Of course, crime is never defeated for long, and Visa’s endless quest for more secure transactions eventually led to the transformation of the card itself. What was once a little plastic card with your name, your bank, and your account number is now a sophisticated passkey with chips and security protocols built in.
Visa’s partnerships around the world and its fraud detection technologies and divisions help the company continue to lead the way in the fight for secure, democratized credit and financial services for everyone.
The final image
Hock rounded out his tenure as the head of Visa by helping craft its image. As with everything, he started first with principles before delving into marketing. He also followed his own path by refusing to hire an outside agency. Instead, he gathered the creative minds inside his organization.
They worked together to come up with the name Visa along with several campaigns to promote the change. Since that time, Visa has used several marketing taglines including:
“Visa makes the world go round.”
“The future takes Visa.”
“Life flows better with Visa.”
“Visa: It’s everywhere you want to be.”
But the name and image of Visa was so much more than a rebranding. It represented Hock’s understanding of what was to come in terms of the globalization of the Visa card.
If he wanted an organization that was truly democratic in which each region was equally represented, it wouldn’t do to have a card name that still contained the word “America.” Just like back when Bank of America had to let go of control, it was now time for America to let go of control.
In 1984, Dee Hock retired from his management role at Visa, but he’d set the ball rolling for continued globalization.
One later CEO of Visa, Malcolm Williamson, described the rise of Visa in phases. Phase one was the inception and innovation built on the principle of democratizing credit and banking led by A. P. Giannini. Phase two was the technology and globalization led by Dee Hock.
Since those two trailblazers, Visa has changed leadership several times and been guided by many great minds. To make sure banks around the world felt equally represented, the company created regional branches representing the US, Europe, the Middle East, Latin America, Canada, and Asia-Pacific. And it’s not hard to picture Visa as a global brand since most people recognize it as a major sponsor of the Olympics.
According to Williamson, phase three of Visa’s life was in refining how it does business, analyzing how it makes money, and focusing more on what the market needs.
Visa is one of those rare organizations that had the benefit of retaining its principles well into its life. A. P. Giannini would have loved the vision and progress created by Dee Hock. The organization continues to retain a decentralized structure, making sure that all partners are equally represented.
The goal of Visa continues to be putting financial power and control into the hands of the people, democratizing finance, and serving people with the freedom and independence they need.
Ultimately, the founding principles of Visa represent the world as we wish it would be. One where everyone has access to the life they want and control over their movements. It’s an egalitarian set of principles rooted in the humble beginnings of an immigrant farmer’s son and his family’s produce business.
Great things can come from simple ideas. A. P. Giannini didn’t have to do anything beyond the age of 30 when he’d already achieved financial security thanks to his family’s produce business. But in the course of his time working among the farmers and sellers, he realized a great need for everyday working people to have access to banking services. Because of this idea, he ended up pioneering installment loans, building one of the first branch banking models, and creating the first system of revolving credit for everyday people.
His greatest successor, Dee Hock, took things to a new level by coaxing BankAmericard out of the hands of Bank of America and transforming it into the international credit card that Visa is today.
A simple idea really can change the world.
About the Author
History, Economics, Biography, Memoir, Business, History, Finance, Technology, Innovation, Non-fiction, Marketing, Leadership
The book tells the story of how the Visa card, one of the most ubiquitous and influential payment tools in the world, came to be. It traces the origins of the Visa card to the vision and philosophy of A.P. Giannini, the founder of the Bank of America, who wanted to give financial power to the common man. It then follows the journey of Dee Hock, the visionary leader who transformed the BankAmericard, the forerunner of the Visa card, into a global partnership of thousands of banks and financial institutions. The book also explores the various challenges and opportunities that Visa faced along the way, such as the Olympic sponsorship, the marketing wars with American Express and MasterCard, the technological innovations that enabled e-commerce, the fight against fraud and counterfeiting, and the social and economic impact of the Visa card in different countries and regions.
The book is a fascinating and engaging account of the history and evolution of the Visa card, as well as the people and ideas behind it. The author, Paul Chutkow, is a journalist and a former Visa executive, who has access to insider information and personal anecdotes that enrich the narrative. The book is well-written, well-researched, and well-illustrated, with colorful photos, diagrams, and charts that complement the text. The book is not only informative, but also inspiring, as it shows how a simple idea can become a powerful force for change and progress in the world. The book is a must-read for anyone interested in the history of finance, technology, business, or innovation.