Visa's founder, and his influence on today's fintech

Dee Hock once wrote that we're living on a "knife's edge" between socio-environmental disaster and a livable future. 

While that sounds scary, Hock also felt the key to the more desirable outcome could be found in simple shifts in beliefs. These minor adjustments to thinking could "massively alter behavior and results," he wrote.

Hock's belief in that potential stemmed in part from his experience helping to create Visa. During the late 1960s, he persuaded a disparate group of bank competitors to put aside just enough of their entrenched proprietary instinct and rancor to support a payment network that would become one of the world's largest organizations. 

Hock, who recently passed away at age 93, was also laying the groundwork for a concept that today influences dozens of innovations that require individual organizations to willingly participate in an ecosystem to bring their ideas to a wider audience.  

"He set the framework for fintech today. Not just for how financial institutions work, but for anytime multiple parties come together in a not-so-obvious manner," said Richard Crone, a payments consultant, whose father, Ken Crone, a former senior vice president of risk management at Visa, was a colleague of Hock's.

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Visa and the modern credit card industry grew out of what was a chaotic credit card market during the 1960s.

Visa got its start as BankAmericard, a California-based service from Bank of America, in the early 1960s. The credit card market at the time was filled with numerous bank-issued cards that weren't always interoperable and suffered from high debt and fraud. 

Hock was a vice president at one of BankAmericard's licensee banks. At a 1969 meeting of banks in Sausalito, California, Hock talked a group of other bankers into forming a committee. This committee, which Hock led, would try to improve the muddled credit card market. 

Hoch, who believed that a different approach from the top-down management hierarchy of most organizations would yield better results, helped build a consensus to launch National BankAmericard in 1970. Hock became the first CEO of the company, which was renamed VisaNet in 1973. 

"He was a visionary but down to earth. People could trust him and suspend disbelief long enough to go down a road together," Crone said. "That's how Visa was formed." 

Visa's structure was more decentralized and collaborative than most banks at the time, relying on the participation of the member banks to share responsibility for issues such as fraud and credit risk. These banks competed with each other, yet needed the Visa rail, and the best practices of that rail, to ensure consumers could securely make payments over as wide a geographic area as possible.  

Hock left Visa in 1984 and became an author, among other pursuits. Visa has grown to include more than 15,000 financial institutions in more than 200 countries, covering more than 100 million merchant locations and 3.8 billion cards. Visa controls about 40% of the global credit card market, according to Statista. China UnionPay controls about 32% of the global market and Mastercard about 24%. 

Mastercard traces its growth to the old MasterCharge, which built a network through a series of partnerships, and renamed itself as MasterCard in 1979, then later rebranded as Mastercard, dropping the capital C. UnionPay is China's national card network and has expanded to other countries, partly to provide "own currency" payments for travelers from China. 

As the card industry, driven by large cooperative networks, has grown over the past three decades, Hock's fame as one of the architects of that model has been modest. By Visa's own description in its tribute, Hock is "not a household name beyond the world of financial services" (though a number of executives in financial services, including Mastercard CEO Michael Miebach, mentioned Hock's influence in Visa CEO Alfred Kelly's LinkedIn message dedicated to Hoch).  

Hock himself liked to play a trick, according to Fast Company, as an author on the speaking circuit, well into the 1990s and years after Visa's founding. He would hold up a Visa card, and ask who in the audience knew what it was. Every hand would go up. He then asked who owned it and how it was governed. Usually very few people knew, if any. It was for Hock a mission accomplished, a vast network that was so common and ubiquitous that its genesis and details of operation were largely unknown to mainstream users. 

"Billions of people worldwide take for granted and benefit from the open card networks," said Eric Grover, a principal at Intrepid Ventures. "Mastercard and Hock’s baby Visa are the only genuinely global retail payment networks. But the open bankcard model was adopted by scores of national systems as well. Most people using products he enabled have never heard of him." 

Hock told his story in "One From Many," a book on the creation of Visa and how the decentralized collaborative philosophy has influenced other organizations including World Weather Watch and Alcoholics Anonymous. 

"A 'chaordic' organization was the punch phrase." Crone said of the book and the word Hock coined to describe a harmony of chaos and order. "At its essence all new fintech innovations that bolt into legacy banking systems are doing that, especially when you connect new parties to old systems or to competing parties and networks." 

It's a concept that survives in embedded finance or open banking, or innovation that uses application programming interfaces or other connective rails to allow customers to access financial services from multiple providers. Or it can be found in the trend of banks competing with and partnering with fintechs depending on the use case or need.  

"This was the concept of coopetition, or collaborative competition," Crone said. "Hock was practicing that before it was theory."