More than a dozen years into his retirement, Dee W. Hock loomed large over Visa's international board meetings this week.
Mr. Hock was no more present-physically-than he ever is at gatherings of the association he led during its first 15 years. But member bankers accustomed to the credit card visionary's long shadow found his presence a bit more literal than usual.
Visa's current management decided to balance its customary preoccupation with change and newness by paying a tribute to its illustrious past. Who better than a virtual Mr. Hock to symbolize the bridge between past and future?
At the opening of what Visa calls its all-board meeting Monday morning, Mr. Hock was one of the first larger-than-life images on the giant video screen, reminiscing about how things used to be.
"Somebody once asked what was the difference between running an association like Visa and a company like American Express," Mr. Hock said. When his American Express counterpart "James D. Robinson 3d said, 'March left,' everybody did," Mr. Hock said.
But if the president of Visa gave the same order, "I would have 15,000 bankers asking, 'Who the hell are you to tell us to march left?' ... . And some would say, 'Which way is left?' "
In a nutshell, the videotaped Mr. Hock set a perfect tone for the meeting, though Visa gave it the more conventional and vaguely inspirational theme of "Delivering the Promise."
It was a time for wrestling with philosophical and directional questions traceable to the Hock era. And top officials displayed a sense of history about it.
The purpose was "not to wallow in self-congratulation, but to see what has been achieved, often in the face of great adversity, (and) give us the courage and the vision to take this organization forward to meet the new challenges of the new millennium," said British banker Peter Ellwood, chairman of Visa's international and European Union boards of directors.
Mr. Ellwood spoke of the need for "strategic clarity," drawing from the past and present, because future challenges "will almost certainly be greater and more complex" than in the past.
"Dee Hock and Chuck Russell"-Edmund P. Jensen's only predecessors as presidents of Visa International-"were driven by (the promise of) providing a Visa card that was the best way to pay," Mr. Jensen said at the all-board session.
After reeling off the alternatives Visa claims superiority over-American Express, Diners, Discover, JCB, MasterCard-Mr. Jensen said, "It is the obligation of all Visa boards and staff to make sure it stays the best way to pay in the future."
He noted that Visa gained five market-share points over the last three years and has surpassed $1 trillion in annual sales, double MasterCard's volume. The California-based leader projects it will account for 8% of global personal consumption expenditures in 2000, up from 5.04% last year.
"There remains an undelivered promise-to overtake cash as the best way to pay," Mr. Jensen said. "While we have a way to go, we have our sights set on that goal."
Cash and check displacement is where it all came together: the last and biggest unrealized part of Mr. Hock's vision of "electronic exchange of value"; the ongoing balancing act within any association between cooperation and competition; and one of the hottest of banking industry topics-the smart card duel between MasterCard-Mondex and Visa.
Mr. Jensen went mano-a-mano against Mondex, and not just on the technical grounds that have had the associations sniping at each other for months. And that was just a start. Over three days in Hawaii, virtually the entire senior staff had gotten into the act, bashing one or another aspect of the Mondex plan to bankers, media representatives, or any other available audience.
In his public presentation to the assembled boards, Mr. Jensen professed "not to judge" Mondex. But he certainly sounded prosecutorial, raising questions about its corporate structure and profit motive and whether they might be inimical to the interests of a broad-based association of banks.
His questioning went deeper at a session Tuesday with journalists: "What is the objective of Mondex? Is it to create a new brand or acceptance mark? If not-if it's just a stored value (product)-then what does it mean when they say 'multi-application'?
"The industry has to say, 'We already own two really good acceptance marks, MasterCard and Visa, that took 25 years to develop.' If Mondex is a new acceptance mark, it can't win unless one of the others is weak, and I don't think so. Is it just technology? Are they creating a technology company (as) a way to create a fixed operating system that everybody would have to use? That's old-fashioned ... The industry would be foolish to allow it to happen."
Visa's smart card mantra is openness, based on the Java programming standard promoted by Sun Microsystems Inc. Group executive vice president Francois Dutray read a litany of why Visa's approach is better, including immediate availability of a Java-based platform and chips that cost $3 to $6 each, versus the more powerful $13 to $15 variety that Mondex will require.
The Visa smart card strategy, called the Partner Program, "does not use technology for technology's sake" and "is not designed for Visa to gain a competitive edge," Mr. Dutray said. "It is to serve the interests of members. We invite MasterCard to do the same-with an open platform."
Visa also has a problem with the fact that a small cadre of banks-about two dozen around the world-own equity positions in Mondex. Even though MasterCard has 51% of Mondex International, that doesn't spell a-s-s-o-c-i- a-t-i-o-n.
Using the United States as an example, Daniel Eitingon, Visa's president of global support services, said, "The Mondex consortium has a small amount of market share. That puts up a barrier to all institutions' working together to get this off the ground."
Interviewed by telephone from 5,000 miles away, a bemused Henry Mundt said it was all "camouflage." MasterCard International's executive vice president for global deposit access, to whom Mondex reports, said Visa is raising an extraneous issue because it must have come to recognize that Mondex is at a "more advanced stage."
"Mondex was an open system from the outset," Mr. Mundt said. "Everybody can play on their own terms and the market will be the ultimate arbiter."
Their contrasting number of cards notwithstanding-Mondex is approaching 100,000 on its unified operating system, Visa Cash is well up in the millions but with varying functions and sophistication-both sides claim leadership and they seem unreconcilable.
"That's what makes horse races," a reporter suggested to Mr. Dutray.
"In this case there doesn't need to be a race," he replied.
Mr. Jensen said it is too early to declare supremacy in smart cards: "This is the beginning of the first chapter of a very long book. This is going to look very different in five to 10 years. I hope the banking industry is not so inflexible that it won't be involved in what is happening."
From Visa's perspective, all would be forgiven if Mondex simply adopted Java for its multiple-application operating system, known as Multos. Competition would then presumably be focused on products and services.
While Mondex has said it is open to Java, it won't be available immediately. Mr. Dutray suggested it could be years before Mondex-Java is ready-which he said will leave banks locked into Multos at a costly disadvantage.
"In the end, these have to converge, and we are offering a system that will allow them to converge," said Mr. Eitingon. "If they (Mondex) move to an industry standard, which is Java, fine. But they are now proprietary."
"I just don't see any proprietary advantage on the technical side of chip," said Mr. Jensen.
Mr. Mundt and Mondex, meanwhile, are basking in a Canadian glow. Most of the major financial institutions in Canada, including Visa leaders Royal Bank and Canadian Imperial Bank of Commerce, have joined Mondex.
"It's Mondex 10, Visa O, and Visa has to be concerned about the beginning of a trend," Mr. Mundt said. In traditional credit cards, "Canada is one of their strongest markets."
Visa wants at least one notch on that scoreboard. It issued a press release Tuesday headlined "Scotiabank Committed to Visa Cash pilot." Bank of Nova Scotia, the Visa loyalist that held back from the mass move to Mondex, is going ahead with a previously announ-ced Visa Cash trial in Barrie, Ontario. It will be the first in Canada of reloadable Visa Cash cards and one of seven Visa smart card tests to be launched this year.
"The Barrie field trial will ensure a viable option remains in place for Visa Canada members," said Derek Fry, Visa's regional president.
The rivalry is beginning to sound every bit as heated as it was in Mr. Hock's day. He was repeatedly criticized for pushing the industry and his members too hard to innovate, while MasterCard had a reputation for being more deliberate and collegial.
In a way, Mr. Jensen is turning those tables, accusing MasterCard-Mondex of playing fast and loose with association principles.
"We believe members do not want the associations to compete on proprietary standards," Mr. Jensen said. "Members do not want to pay multiple times for fundamental interoperable platforms. This is where members should realize value in their cooperative structure."
Mr. Jensen pointed to a possible "watershed" where two of his nonbank nemeses, American Express Co. and First Data Corp., seek to offer "Visa- like services" while "Mondex establishes a new acceptance brand on a for- profit basis."
That set the Visa leaders down one more philosophical path, along the blurred line between cooperation and the profit motive: What if "unbounded, commercial structures" are better, and desired by the banks?
Visa chairman Ellwood, who is president of TSB Group in London, extolled Visa's management for understanding "that it must conduct its business by behaving and thinking like a corporation to help and enhance member profitability."
"Some business people do not view associations in the same light as corporations," Mr. Ellwood said. "Some business people say associations are ineffective compared to the corporate structure. Certainly Visa is an association. But increasingly it has the mind of a commercial entity ... .
"The world is changing, and we need to determine to what extent Visa can or should become more of a commercial entity on a selective basis, working for those members who wish it to become more commercial."
Mr. Jensen, who has articulated the vision of Visa as "less controlling and more enabling," willing to play any type of support or joint-venture role its members desire, said "it is premature" to scrap the association charter.
"Visa will remain an integral part of our members, not apart from them," he said. "Visa's mission is member profits, not its own profits. If it's the desire of members to substitute commercial services for cooperative services, then Visa must adapt."
