The pitch for VISA goes something like this:
Offering cash has become as socially unacceptable for high-speed transactions as is writing checks is in the express line of your grocery store. Have you noticed the dirty looks? Have you seen the Visa ads on TV where everything in the store comes to a grinding halt when a customer pulls out cash from his wallet?
The game has changed. Today, 55% of all transactions in the U.S. are cashless.
American Express has its niche, and some people will always carry MasterCard. But large numbers of people will use Visa for cash.
"Life," like the ads say, " takes Visa."
The 1.5 billion Visas out there could very well double in quantity. It would follow that the $2 billion in Visa transactions may double, too. The Visa infrastructure, which has been 10 years in the making, can sustain a huge volume of business without a single dollar being spent on upgrades. Voila, it goes to Visa's bottom line.
Visa first changed the game the day its founder, Dee Hock, created a new type of organization.
He imagined the world's first virtual company in 1970, organizing itself to allow banks to compete for customers while collaborating around brand-building.
His name for this invention: the "chaordic organization." He made up that word by combining "chaos" and "order." Chaordic organizations are self-organizing and self-governing. They operate not through hierarchies of authority, but through networks of equals. It isn't power or coercion that makes them effective, rather it's clear shared purpose, ethical operating principles, and responsibility distributed through every node.
American Express has an (expensive) address: World Financial Center, New York, NY. But Visa's address is in your wallet. That was the brilliance Dee Hock's breakthrough.
Visa's second game changer was to get itself favored over cash. Now remember, Visa itself never extends credit-the banks behind each individual card do
that. Visa simply gets paid per transaction. So it is a riskless strategy to drive down the size of the average transaction.
Key here was to do away with the signature requirement on small purchases. That speeds up the line at Starbucks- and makes it convenient to use a card instead of cash. Visa's business has thrived, much to the chagrin of MasterCard.
Visa's third game changer is a play for Asia's rising middle class.
But milking that opportunity has been a challenge for Western businesses and investors. China plays by China rules, and China rules are very different.
However, scoring on the China retail market is huge. Retail sales in China grew 13% in 2006, 17% in 2007 and will likely top 20% in 2008. During the recent New Year's holiday, spending was up 60% from last year.
And yet most of this spending happens without a credit card. Cash or a complex system of credit notes ("chits")carried by local Mom and Pop stores is the current system.
The stage is set for Visa to dominate Asia and China. It comes in as a global brand, yet it operates as a local, being issued through local banks.
Game over.
Disclaimer: This info is for educational purposes only. Trading on this info is subject to risk of loss.
No comments:
Post a Comment