Haordic Organization Visa (Part 4)

At that time, I was never able to make the retail and service businesses, as well as cardholders, members of the NBI. Any step in this direction caused a storm of protest from the banks. Probably, if I had shown firmness, I would have been able to incline them to my side, but now it is too late to talk about it.

Di Hoke

Dear readers, we continue the series of articles on the history of the birth of the world's largest financial institution, Visa. As in the previous section, the quotes from the book “One from Many: VISA and the Rise of Chaordic Organization” are shown in italics. Important quotes are highlighted in bold. We will discuss these points in the fourth and final part.
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While NBI dealt with dual membership and dealt with issues related to communication systems, marketing and protection of plastic cards, that is, the most important problems, without solving which, BankAmericard could not be launched throughout the US, Bank of America Service Corporation continued to license banks throughout the world. Each license had its own specifics, required a special approach to marketing, computer and operating systems. In addition, all the cards were called differently. If in the USA a credit card with a blue-white-gold logo was called BankAmericard, in Japan it was already Sumitomo Card, in Great Britain - Barclaycard, in Canada - Chargex, in Mexico - Vancomer, etc. Due to language, currency, cultural and legal differences in other countries were much more troubles than in the United States.



Following the example of the NBI, foreign licensees created their own committee and even tried to put together an international organization. However, their attempt failed. At the end of 1972, an international committee of licensees approached the NBI leadership with a proposal to create a world organization. We were not against it, but there was a difficult problem. If NBI takes on the development of this project, it means that we will impose our world perception and culture on other countries, and they will just hate us. Yes, and how to combine obligations to NBI members with obligations to banks located outside the United States? How to escape from their own difficulties? At the same time, our success was directly related to the success of the program abroad. Is it possible to fulfill the dream of the most perfect global system of exchange of value without an effective worldwide organization?

This task was more difficult than creating NBI. The world organization had to overcome language, cultural, monetary, technological, legal and political differences. It was necessary to use thousands of banks around the world, as well as national consortia in France, Canada, Scandinavia and the USA. One would expect that tens of thousands of different financial institutions from more than 200 countries and regions would also want to join such an organization. It will take several years - without any guarantee of success. And yet, if such an organization appeared, it would be a huge plus for both the US market and the market of other countries. At the same time, the experience gained and the consolidated authority of the NBI would undoubtedly provide us with an invaluable service. For NBI, it's time to become a "citizen of the world."

I turned to the NBI board of directors with the same request that had once been addressed to Maxwell Carlson. I explained that the leadership of the NBI will be able to move in the right direction only if it is free from obligations to this organization.

At the same time, it was necessary for us to develop NBI in order to preserve its authority and make a profit. Many of the managers, including our chairman Sam Stewart, once worked on the organizing committee and saw that the National Bank of Commerce gave me complete freedom of action. They remembered how zealously I defended my own independence and the right of the committees to act openly, in the general interest.

The Council authorized the NBI management to carry out organizational functions, taking into account the needs of foreign participants. For the implementation of this international program, we were freed from the obligation to observe only the interests of the NBI. In the event of a conflict, the executive committee of the council was to defend the NBI. On the part of the council, this was a very noble gesture.

For two years I was simultaneously the president and chief executive officer of the NBI, and also an independent agent acting on behalf of international licensees. It was an amazing time: I met a lot of friends, survived the betrayal. There were plenty of surprises.

For two years we fought and removed a huge amount of contradictions. The management of each licensee bank decided on the conditions for participation in the new organization. Only disagreements remained on three points. The committee decided to hold the last meeting. If the banks had not revised their position, the project would have to be abandoned. During the preliminary negotiations, it became obvious that the contradictions only exacerbated. We, the organizers, desperately sought a way out. It seemed that none of the compromises we proposed could be accepted.

The situation ceased to be transparent, one of the licensee banks sabotaged the creation of a new organization. Dee Hoke delivered a speech in which he disclaimed the leadership commitment. But it was decided before the annual meeting of the licensee banks to do nothing. The meeting was to be held in Spain in a few weeks.

I used to cope with difficulties with ease, so I stopped looking for compromises and thought about what we have achieved during these two years. How did such a large group of various people manage to overcome so many obstacles? Finding the answer to this question was not easy, but it turned out to be very simple. Every time during the crisis, all project participants were focused on success and ready to make concessions. They were not worried about the victory and not the defeat - they were embraced by a sense of unity, illuminated by a common goal.

A few more people joined me, and an hour later we had an idea that could be expressed like this: the will to win and the willingness to compromise. If we wrote this phrase, for example, only in English, it could offend the speakers of other languages. So it should have sounded in a dead language. We turned to linguists and received a translation into Latin: stadium ad prosperandum - voluntas in conveniendum. I still do not know how accurate this translation is, but it doesn’t matter, because the essence is important.

We asked a good local jeweler to mold clichés for us, then to make cufflinks. One cufflink should have depicted the earth’s hemisphere with the contours of the continents framed with the inscription stadium ad prosperandum, and the second with the other hemisphere also with the contours of the continents framed with the inscription voluntas in conveniendum. We wanted to give such cufflinks to each member of the organizing committee. But it was our secret.

In San Francisco, then turned out to be a wonderful warm day. At the meeting, people faced their foreheads, showered each other with recriminations. Four large Canadian banks issuing Chargex credit cards behaved very aggressively. They said that if other banks did not accept their demands, they would leave the project. In complete confusion, I stood in front of the crowd and said:

- Well, it seems that Canada does not want to accept the views of the others. What will others say? Will we continue without our Canadian friends?

All nodded in response.

- Good. So, Chargex representatives fall out of the process. Do you think they can remain in the meeting in the role of observers without the right to participate in further discussions?

And again, everyone agrees nod. Canadians are surprised, but do not leave.

However, the voltage did not subside. Other issues also showed serious disagreements. It was nearing evening, the clouds were gathering. I proposed to suspend the meeting and, if we are abandoning the project, document our decision to document tomorrow, and now make an excellent walk around the bay. At Fisherman's Wharf, we rented a pleasure boat. We invited the audience to go on it in the direction of Sausalito, where dinner awaited us at the French restaurant Le Vivoire - not far from the place where four years ago Sam, Jack, Fred and I, sitting on the open terrace of the hotel restaurant, asked a magic question: “ If we assume that the unbelievable is possible and that there are no obstacles, how do we ideally imagine a global system of value exchange? ”

Mother Nature was kind to us. We set sail from Fisherman's Wharf. Beyond the Golden Gate Bridge, the sun was setting, painting clouds in pink and purple tones. And the bridge, indeed, confirming its name, became dazzlingly golden, which was especially noticeable against the pastel colors of the city. A golden path stretched across the blue water to the horizon. The evening was warm, everyone took off their jackets, the yacht slowly walked past the buildings of Alcatraz Island, similar to the fortress (there used to be a federal prison there). We sailed on, past the green island of Angel Idend, until we finally landed between the floating houses in Sosalito.
We walked to a restaurant where we drank several bottles of fine wine and had a great dinner. People thawed out. I asked for a minute of attention and said a few words about the difficulties we went through, about the work done. Before each of the participants put a case with cufflinks. I explained:

- Our dream has not come true, but let's not consider it a failure. From the very beginning it was clear that it was impossible to create a world organization. However, for two years we have worked tirelessly. We did not know how the meeting would end, but in any case we decided to give you a present. Open the cases.

All opened elegant boxes. And I continued: - We decided to give you a souvenir for the memory of today. On one cufflink is a hemisphere with a Latin inscription stadium ad prosperandum, which means “the will to win”. On the other - the second hemisphere, bordered by the second part of the maxim: Voluntas in conveniendum, or "willingness to compromise." Today, after two years of hard work, we have gathered to bury our project. We could not come to an agreement. We, the organizers, have one request for you. Please wear these cufflinks tomorrow. You will go home and take away the gift as a reminder that we could not unite the world, because we did not have the will to win and readiness for compromise. If a miracle happens and tomorrow all our differences melt away like fog, these cufflinks will remind us until the very death hour that we were able to unite the world, because we had the will to win and readiness for compromise.

In complete silence, everyone looked at the cufflinks. And then one Canadian, my friend, a very cheerful man, got up and, smiling with a big mouth, exclaimed:

- Oh you, damn!

Under the friendly laughter, we continued to have dinner.

The next morning, everyone put on these cufflinks. On the eve, many members of the committee called their superiors before the night, demanding authority for a positive decision. In complete silence, the chairman opened the meeting. He asked:

- Does anyone want to speak on the way out of the project? Canadians have refused the statements made the day before, and have expressed desire to enter the new organization. People listened and quietly touched their cufflinks.

An hour later, we agreed on all issues.

A few months later, the Ibanco international organization was created, now called Visa International. Her motto was the phrase "The will to win, willingness to compromise." As far as I know, to this day each new director of the bank is given gold cufflinks and a certificate describing this story. For me, this is the highest award.

In 1973, it became obvious that the use of different card names hindered the development of the system. Then all the cards united only the blue-white-gold logo. In each country, the credit card was called differently, and in some countries there were even several names. In the USA - BankAmericard, in Canada - Chargex, sometimes the card was named after the issuing bank, such as Sumitomo in Japan or Barclays in the UK. And each time the card was given the name of one bank, other banks refused to connect to the project. Trading enterprises were confused all the time, and this seriously interfered with work. Thus, the possibilities of international marketing were severely limited: the cards lost their attractiveness.

At the cash registers the names of the cards were posted, which were accepted for payment: “Barclaycard is accepted here”, “Sumitomo cards are accepted”. Merchants did not like the fact that banks were advertising on their premises. Cardholders thought that only cards of the bank specified in the ad were accepted for payment, and this did not suit other banks. The system grew, and the problem of the name complicated everything. In the US, the name BankAmericard also limited other banks - it turned out that they were promoting Bank of America.

Savings and credit companies, which also received the legal right to engage in the business of credit cards, did not really like the fact that the card was called a bank. In other countries, were dissatisfied with the word American. The very concept of "card" was not suitable for such new products as traveler's checks and money orders. Every year it is becoming more and more difficult to solve these problems. When the international corporation Ibanco was created in 1974, a mechanism emerged that made it possible to get out of a difficult situation.

After the creation of Ibano, another important event occurred. The international committee, which was at the origin of the new corporation, no longer wanted to surrender its powers. But could the two organizations have a common leadership? At first it seemed not. There were two separate legal entities: the National BankAmericard, which included US banks, and Ibanco, which included several national consortia like NBI, Chargex, Carte Bleue, and a hundred more individual banks around the world.

On many issues, the interests of NBI now did not coincide with the interests of other Ibanco members - this concerned marketing, service fees, new products, operational issues and much more. The conflict of interests seemed inevitable, but the same thing happened for two years while we were creating Ibanco. Therefore, we decided to deal with this issue.

We came up with a very original way out. Ibanco and the NBA will sign a joint management agreement - the same staff will serve both organizations. The boards of directors of both organizations will be able to independently remove managers from their posts, but for the appointment of new ones, the consent of the NBI board of directors and the Ibanco board of directors will be required. Thus, managers will be appointed and rewarded bilaterally, and removed or punished - unilaterally. In the event of a conflict of interest, managers will have to declare this, determining for themselves which of the parties they represent. The other side will be represented by its board of directors.

Soon after the formation of Ibanco, we asked the board of directors to allow us to develop a single international card name. Under the conditions of the new organization, this was a most difficult task. It was necessary to replace all the cards in the hands of customers. It was necessary to re-stick all the stickers on cash registers at retail outlets. All electronic signs had to be dismantled and replaced with new ones, and only in Japan there were about 200 thousand. It was necessary to issue forms and stationery with new logos. The same was true of advertising. The changes should have affected dozens of countries with different languages, cultures and laws. Joint management was unable to solve such a number of complex tasks.

Reforms could not be managed from a single center. Rather, this task will have to be entrusted to thousands of various independent organizations, giving them the right to act autonomously. We'll have to explain to people why the name of the card changes, and promote it on the market. And this should be done quickly and in a coordinated manner, in the conditions of honesty and openness, so that cooperation goes hand in hand with competition.

The situation was complicated. Although Ibanco had an exclusive license of Bank of America, the blue-white-gold logo and the name of the card were fully owned by the bank. Fortunately, by the time Ibanco was established, an agreement was reached on signing the agreement, which provided for compensation to the bank in case of transfer of ownership rights to the international component of the system. Under the terms of the contract, if the new name of the card turns out to be acceptable for 80% of the participants in the system, the right to design the cards should be transferred to Ibanco without any additional compensation. This meant that all banks had to give up the name BankAmericard and it became the exclusive property of Vapk of America.

We again turned to the goals and principles of the project. Everything was simple with the goals: it was necessary to invent the name of the world organization and its product, retaining the blue-white-gold logo. The name and logo will be jointly owned. To come up with the name of the card, it was necessary to approve the basic requirements for it. And we started thinking.

The new name had to be short, expressive, easily recognizable and easy to pronounce. It was supposed to sound so as not to cause unhealthy associations in any language. It was supposed to protect the world trademark, under which the exchange of value and other operations will take place. It should not contain hints of geographical location, organization name or type of service, for example, Ameri, Euro, bank, charge, credit and card. The name of the card was supposed to reflect the mobility, the profitability of the credit card and the ability to use it while traveling. As a result, we sketched 15 requirements. But in this situation it was possible to choose the name forever. .

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Creating a Visa is undeniably impressive work, bringing together thousands of banks around the world into a single system. Moreover, as we have learned, in each region decisions are made locally by their own banks.

For example, interbank commissions for interchange across Russia are set not by American but by Russian banks. Moreover, the idea of ​​“one bank - one vote” put in by Hawk says that even if you have 50% of the issue in the country, you have no more votes when making decisions.

Nevertheless, Dim Hawk himself regrets several points:

Only banks are members of Visa. What does this mean and what results?Had the will of the banks, the rights of cardholders against fraud would not have been protected at all. In the United States, where the industry has developed since the very beginning, these very rights are protected by law (Fair Credit Billing Act). If the cardholder finds a transaction that he did not commit, the bank must return the money to him or prove that the cardholder has yet committed the transaction. As the US Senate correctly noted, if banks created such an imperfect system in which you can copy the card number or the card itself and steal money, it is reasonable if they compensate such losses to cardholders.

What can not be said about many other countries, for example, Russia, receiving an average of 1.5% from each transaction, the banks do not really want to do the claim work. If many managers have heard about fraudulent transactions, then about returns “the service is not provided” - few have heard. And the Russian legislation, which says that the cardholder has a day to file an application to challenge the transaction, does not inspire optimism - “I heard a bell, but I don’t know where it is.”

Although the claim work is well described in the rules of Visa / MasterCard, there is no place to complain to the cardholder, only to decide through the court. Inside the MPS, only one participants can complain about others, and if all participants within one country have decided to sell insurance against card fraud, then they definitely will not complain about each other.

Also, American law skewed the claim work at Visa / MasterCard towards card holders - if the transaction was completed without entering a pin-code or 3d-secure, in 90% of cases the card holder’s rights are right, especially if TSP did not carefully make a portrait of the cardholder with an open passport next to with a face (friendly fraud).

And by the way, emv-chips and 3d-secure do not protect you, dear card holder, but first of all banks from friendly fraud. But very often it is presented in a completely different way.

As for the TSP, they have the only way to reduce the tariffs of the IPU - it's endless courts. In Europe, this is exactly how the interchange fee was reduced to 0.2% on debit cards and 0.3% on credit cards.

In Russia, it is easier to say that Visa is an American system, and 1.5% that banks receive for transactions on their cards are so low that they do not have enough strength to do even claim work.

Say thank you for letting us keep your money in our banks!

There is no ban on dual Visa / MasterCard membership. How is Visa different from MasterCard? And that, and that are accepted all over the world and become attached to any account. If banks were competing with each other not only for issuing, but also for the brand, the quality of service and the fight against fraud would be a level higher.

I still do not quite understand how the Gold card is better than Classic, except that they call me a doctor abroad, for whom I will pay myself anyway.

Previous parts:
Haordic Organization Visa (Part 1)
Haordic Organization Visa (Part 2)
Haordic Organization Visa (Part 3)