The Ledger
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Visa's zero-risk information network may be history's best business model
“This information network that doesn't have to take on any of the risk of any of these transactions. It's purely about connecting buyers to sellers and moving information back and forth has proven to be maybe the best business model ever”
Visa's financial profile is superior to any major tech company
“The financial profile of Visa's business is more tech than any of the tech companies. It is what they all wish they could have.”
Software engineers will consume extra time without strict deadlines
“Dee maintained that if you give computer people more time, they will just consume it. So he always insisted. So it's so true. So he always insisted On shorter projects with uncompromising deadlines.”
Card payment networks will persist absent new technology or government intervention
“Without a new paradigm emerging, this is the system.
I'd say a new paradigm or the government intervention, this kind of is the system that we've made our bed and we're stuck with.”
Visa's $18B IPO proceeds provided a secondary selling lifeline to banks
“That eighteen billion dollars was secondary selling to the banks that owned the company, which I think for many of them proved to be a total lifeline through the financial crisis that helped them survive.”
Visa and Mastercard have no sustainable competitive advantage over each other
“At the end of the day, Visa and MasterCard have basically no sustainable competitive advantage over each other.”
E-commerce would not have emerged or succeeded without credit cards
“On the other hand, I don't think e-commerce really would have happened, you know, alone. There's plenty of other value creation out there too. Lots and lots and lots, but let's just take e-commerce. I feel like this is Passover. Like, you know, that would have…”
Costco likely generates net revenue from its Citi and Visa co-branded cards
“I'm pretty sure that this has never been disclosed, and I haven't asked anyone about it, but if you sort of read trade publications, people seem pretty convinced that Costco is making money, which of course they are, on the deal that they cut with Citi and Vis…”
Visa's payments network is a masterclass in massive incentive alignment
“This business is probably the greatest masterclass in the entire world on incentive alignment.”
Gilbert: Thin-margin retailers often pay as much in card fees as EBITDA
“Even large retailers that run at pretty thin margins, it is often the case that their EBITDA is the same size as their card processing fees.”
Visa was always a for-profit corporation, contrary to popular myth
“There's a myth out there that Visa was originally a non-profit and then was converted to a for-profit before the IPO in 2008. That's not true. It was always for-profit. It was just a non-stock membership corporation.”
Apple Pay takes 15 basis points, roughly matching Visa's revenue cut
“So on a Apple Pay transaction, I'm pretty sure Apple makes about as much as Visa does, because they stack an extra 15 basis points on top of the other three fees that we talked about.”
Visa generates a massive 50% net income margin on $30B revenue
“The most shocking thing about the business is they have 50% net income margins. So of the thirty-ish billion that they made in revenue, Their net income was 15.”
Over 50% of global consumer merchant payments now use cards
“Over 50% of consumer payments to merchants go on cards now.”
Visa rented CompuServe's off-peak capacity for early POS digital transactions
“Visa ends up renting CompuServe network capacity to send their digital transactions from merchant point of sale terminals.”
Visa bears no credit risk and operates strictly as an interbank network
“Visa does not extend credit. They do not issue cards. They do not work directly with merchants. They do not work directly with consumers. They are not a bank or a financial institution. They don't ever bear any risk. They are merely a network connecting banks …”
Visa payment network volume compounded at 17.3% annually for 51 years
“The growth in payment volume on the network since then has been 17.3% compounded annually for 51 years.”
Visa's product playbook pairs consumer benefits with margin expansion and lock-in
“That is sort of the playbook that Visa runs, is they figure out what is something that we can sort of advertise as a benefit to you that also helps us either increase number of transactions, margin, or lock-in.”
Distributed open-loop networks trade UX control for superior scalability
“Anytime that you have something that's more distributed, you're going to be compromising a little bit on the user experience because you can't sort of rule by fiat when you want to make a change, but it does potentially come with much better scalability, which…”
Toll booth businesses thrive under duopolies with identical pricing structures
“The first one is, this business is a toll booth, and toll booths make for great businesses, especially when everyone has to drive on your road or the road next to yours, and both of them charge the same toll.”
Gilbert: Visa will not capture high-ticket real estate or auto purchases
“This is a bear case on Visa is, are they ever going to participate in real estate or cars or, no, not at these interchange rates. Why would anyone Ever buckle to pay these sorts of things for things that cost a thousand dollars or more.”
Card transaction authorization flow has remained essentially unchanged since the 1980s
“Almost nothing has changed since the eighties to today on how the transactions work. So the authorization flow is exactly the same as it was, where all the auth flows upstream.”
Rosenthal: Facebook IPO raised $16B at $104B cap, ranking third all-time
“They raise sixteen billion dollars at a one hundred and four billion dollar market cap, making it, I think, the third largest IPO of all time at that point behind Visa and, ironically, General Motors coming out of the bankruptcy during 2008.”
Gilbert: Visa generates net income margins over 50%
“I mean, they have over 50% net income margins.”
Visa and Fed independently built automated clearinghouses concurrently in 1970s SF
“Visa builds an automated clearinghouse for themselves to do settlement electronically over the network. They end up calling this project base two after base one, which was the first thing doing authorizations. This happens at the exact same Time and place as w…”
Amazon and JPMorgan Chase control three of five payment network parties
“JPMorgan Chase is the merchant bank and JPMorgan Chase is one of the largest issuing banks for cards in the world, and so the Amazon Chase credit card that I have and I do all my shopping on Amazon with and all my shopping at Whole Foods with is able to give m…”
Visa's BASE II saved member banks $15 million in its first year
“It ends up saving about fifteen million dollars in labor and postage costs to the banks by automating this. Just in year one.”
Visa holds exclusive Olympic card sponsorship rights through 2032
“It has now been 37 years that Visa is the exclusive payments global sponsor of the Olympics. They're contracted through 2032. So it will be at least 46 years where Visa Is the only card accepted at the Olympics.”
Visa operates as a five-sided network across consumers, merchants, and banks
“This network is actually a five-sided system. There's the consumer, That is buying something. There's the merchant that is selling that something to them. There's the Visa network in the middle, that's the third party, but then there also are the fourth and th…”
Industry average interchange rates have fallen to roughly 2.24%
“There's been downward pressure on interchange for a long time. I think industry average right now is down around 2.24, which is, you know, compelling considering we started at seven percent.”
Visa founder Dee Hock was repeatedly fired for insubordination
“He didn't go to a four-year college. He only has an associate's degree. He bounced around in a bunch of random consumer finance jobs on the West Coast, all of which he got fired from because he's too insubordinate.”
Master Charge was larger than Visa in 1976
“But in 1976, Master Charge was actually bigger. They had 7400 banks. And at this point in history, Visa had about 7000 banks. Master Charge also had more cardholders. Thirty seven million versus Bank AmeriCard's thirty one million before they changed to Visa.”
Singapore and India linked domestic real-time payment rails to bypass Visa
“Singapore and India have already linked theirs up. And so, that is a method of transferring money between countries that has nothing to do with Visa.”
Visa generates $6 billion from new value-added enterprise services
“Probably a good time to introduce that six billion that Visa's doing in value-added services. That is all brand new high margin products that they've sort of invented in the last 10 years or so that they're trying to sell to merchants.”
Visa now has more digital tokens on its network than card credentials
“They now have more digital tokens than card credentials. That's been growing really fast. It doubled last year, their sort of tokens on their network.”
Amex's merchant network was about 25% of Visa's in the mid-1980s
“The American Express merchant network at the time was about 25% the size of Visas.”
Visa is rare essential US financial infrastructure outside New York
“It's like one of the only essential pieces of financial infrastructure in the United States that has not run out of New York.”
Cards capture only $20 trillion of the $200 trillion global payments volume
“Payments, all of payments, is about 200 trillion dollars of volume, and cards are only 20 trillion dollars.”
Visa's BASE II cut transaction settlement time from a week to overnight
“Once base two is done, and again, it also happens in less than a year that it's live and up and running, average settlement time for transactions on the Visa network go from taking a week on average to happening in batch overnight every single night.”
Visa's market cap tops all banks globally, including its creators
“It is the 11th most valuable company in the world. It is worth more than any bank in the world, including every bank involved in creating it.”
Visa spent $40 million on 1988 Olympic sponsorship and media
“After Amex declines, John and the team get in touch with the IOC, the price tag has gone up to seventeen million dollars just for the rights. That's before any media buys. No advertising, there's just for the right to be a global sponsor of the Olympics. They …”