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The Father of Fintech 💳

How Dee Hock built the world's largest payments company

Written by: Ryan Henderson & Braden Dennis

Happy Sunday! (Especially for Bob Iger)

This week we’re talking Tesla’s lackluster deliveries, Disney’s proxy battle, and the remarkable story behind the creation of Visa.

Let’s get to it.

News Roundup
  • Tesla’s Delivery Slump: EV maker Tesla reported its delivery and production numbers on Tuesday that came in well under what investors were hoping for. Tesla reported 386,810 deliveries for the quarter which is a decline of 9% relative to last year and the first year-over-year drop since 2020. Shares of Tesla closed down 6.4% this week.

  • Bob Iger Wins Proxy Battle: For the better part of a year now, the house of mouse has been under pressure from activist investors, and in particular, Nelson Peltz of Trian Partners. Due to faltering profitability and changes in the executive suite, many investors have been advocating for change and new faces on the company’s board. In fact, Peltz had the backing of many high profile people including the family of Walt Disney himself, JPMorgan CEO Jamie Dimon, and several others. However, Peltz’s bid for board seats was denied on Wednesday after tallying the votes from Disney’s shareholder meeting. Iger stated Disney shares closed down 3% this week.

  • Alphabet to Buy HubSpot? Reports came out this week that Google’s parent company Alphabet is apparently considering buying the inbound marketing company HubSpot. While it’s still just rumors for now, and there still hasn’t been an official bid, a tie up of this size would be far and away Google’s largest acquisition ever as HubSpot’s current market cap stands at ~$33 billion.

  • Boeing CEO to Step Down: After several difficult years at the helm, last week the Boeing Company announced that CEO Dave Calhoun would be stepping down at the end of 2024. They also announced that Chairman of the Board Larry Kellner will not be standing for reelection either. This C-Suite shakeup comes after months of scrutiny for the aerospace giant and several difficult years for the company. Boeing has yet to name a successor.

Company Spotlight


Have you ever thought to yourself "Man I'd love to have a toll-road on the entire global payments system"?

Well so did Dee Hock.

Here's how the "Father of Fintech" built Visa into the world's most powerful payments company:

The old way - To properly understand the role Visa plays in the payments ecosystem, it's helpful to look at the old way of facilitating transactions. In the early 1900's, installment credit was popularized.

This meant that merchants and manufacturers started letting people buy items without putting all the money down at the time of the purchase. This certainly wasn't ideal.

Merchants had to asses each individual customer's credit-worthiness and bear the risk of a late repayment, along with all the back office work of managing each account.

Due to these headaches, most banks at the time refused to write installment loans. Except for one, Bank of America.

Introducing BankAmericard - In 1958, Bank of America introduced the BankAmericard credit card. To get people to actually use it, BofA performed what's now referred to as "The Fresno Drop".

They pre-approved and sent cards to everyone in Fresno, California as 45% of the residents there already banked with BofA. This was actually quite successful as merchants were grateful to offload the headaches of managing the process.

BankAmericard expanded into other cities in CA and BofA attempted to expand nationwide. But that's where they ran into problems.

Due to regulation born out of the Great Depression, banks weren't allowed to have out of state customers, so they had to franchise the BankAmericard program out to other banks. This made authorizing transactions very difficult.

A Typical Transaction - Imagine you're buying a couch from the furniture mart and you and the furniture mart both have a different bank.

If you went to checkout with your BankAmericard, an attendant at the furniture mart would have to call their bank, who would then put the attendant on hold while they called you (the customer's) bank. Then your bank would put the furniture mart's bank on hold to go see if you had a large enough balance to approve the purchase. And throughout that whole process, you're just waiting there at the checkout stand.

But this was just the authorization phase.

Behind the scenes, the banks were sending reams of sales receipts and reimbursements to one another every day to actually settle the transactions. The entire system was wildly inefficient and costly for the banks involved.

The new solution - In 1968, Bank of America held a meeting with all its member banks to sort out the issue.

At the meeting, Dee Hock (a VP at the National Bank of Commerce in Seattle, WA) expressed his frustration of the current system and encouraged the formation of a separate organization that would be co-owned by all the member banks and solely focused on automating the backend.

In his biography Hock wrote: "Any organization that could guarantee, transport, and settle transactions in the form of arranged electronic particles twenty-four hours a day, seven days a week, around the globe, would have a market—every exchange of value in the world—that beggared the imagination." 

By the end of the meeting, Hock was tasked with building it. And after about a year and a half, the base for this business was established. This organization was initially known as National BankAmericard but would eventually be renamed Visa.

A network effect for the ages - As more and more banks adopted Visa to offload the burden of authorizing and settling transactions, Visa added increasingly more "rails" between banks.

As the leading connector between banks, there was a great incentive for the next potential bank to join.

This has become the enduring and self-reinforcing cycle that still drives Visa today.

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Meme of The Week

Large Cap Companies Trying to Impress Investors

We don’t want to name names (cough, cough, Match Group) but certain businesses seem eager to convince investors that they are an “AI” company.

Don’t get me wrong, we know AI can help companies boost their productivity. After all, FinChat itself has an AI assistant that helps investors save tons of time in their research process.

But if you’re a company that’s hoping to convince investors that you’re an AI beneficiary (and therefore you should be valued as such), a press release alone might not cut it.