Visa's (NYSE: V) outgoing chief executive sounds pretty happy about his retirement — as long as his successor keeps the share price up.
"I worry about competition, I worry about regulation, I worry about the customers we have and what we need to do to keep them engaged. … but now I don't have to worry about it anymore!" Joseph Saunders exulted in an interview on Wednesday.
He then teased his replacement, JPMorgan Chase (JPM) executive Charles Scharf, who will officially take over the world's largest payments company next week: "I mean, I will worry about it since I own Visa stock, so I'm very concerned that he does a good job. And I'm sure he will."
Saunders led Visa through its initial public offering in 2008 and helped it emerge relatively unscathed from the financial crisis. But he leaves Scharf a company facing mounting competition from several industries, increasingly tight regulation at home and abroad and a rapidly changing technological landscape.
Visa is resigned to the recent U.S. regulatory changes, if not happy about them — "it is what it is," Saunders told American Banker on Wednesday. In a joint interview, he and Scharf also discussed the other challenges facing the company and Visa's future strategy. A week after Citigroup (NYSE:C) abruptly replaced its CEO overnight, Saunders also weighed in on the "continuity of leadership," and why he decided to step down now. Following are excerpts from the joint interview:
Why did you decide to retire now and how did Visa settle on this timing to announce a new CEO?
Joseph Saunders: Our succession planning process has been pretty robust and detailed. I signed a contract a while ago that said I was going to be done on March 31, 2013, and when you're doing that you can't just go out and hire somebody and say, "Come in on March 12," and I'll have a couple of hours of conversation with them and just fade into the sunset. We always knew that there was going to be a transitional period. … Once you find the right person and they're available, it's wise to get them on board sooner rather than later.
Our year ends in September, so on November 1 we will be a month into our 2013, and I think the continuity of having someone run the company that will be here for most of the year is extraordinarily important. That influenced the timing.
As it relates to me, I just decided two and half years ago that I'd be a few months away from my 68th birthday and that I had other things on my personal agenda that I wanted to do. I wasn't ever going to be here for another three or four years, that just isn't who I am or what I wanted to be. With everything that's going on at Visa, with all the change that's going on around us, I think that continuity of leadership is important. I am just extraordinarily happy that we got the right person, that [he was] available now and that Visa can move along without a hitch.
What was the process of identifying Charlie as the right person?
Saunders: We looked at quite a few people on the outside, and there was a serious effort to decide whether we had an internal candidate that could run the company. And through a very lengthy and logical process Charlie emerged as the person that the entire board, including myself, felt was the right individual.
I've known Charlie for over 10 years. We've served on the Visa board going back to 2003, he has a wealth of experience at several different institutions, he has global experience, he's run technology in his jobs at various times, he has been extraordinarily creative and innovative as it comes to retail products, he has a strong banking background. I frankly don't think we could have found anybody better. There aren't very many people out there who have that basket of experience, including, I think, knowing the senior management here at Visa.
Given the importance of technology in Visa's recent strategy, how did Charlie's relative lack of experience focusing on technology influence Visa's decision?
Charles Scharf: In my last role, when I was running retail financial services [for JPMorgan Chase], we were very focused on payments, very broadly, in the context of that company, and that includes debit, prepaid, credit, and anything else you'd categorize in the payments stream. As I think about the opportunity here, it's to continue to build on the core business that exists.
Saunders: Chase is not exactly a sleeping giant. They're extraordinarily active in what's going on, and so when we talk about a [mobile] wallet….or we talk about offers or discounts at the point of sale, or any one of a number of things that are delivered through mobile technology, they're looking at it at the same time we are, with the same amount of scrutiny. The issue is always, what do we provide and what do they provide for themselves? It would be wrong to think that he hasn't been in the loop in that regard.
Scharf: One of the things I'm most proud of from my days at Chase is if we go back to what the consumer banking experience was when I stepped into the job versus the platform that exists today. Being at the forefront of technology is something I think of a hallmark that we created there. Whether it's the quick-deposit product that we offered ahead of all the other major competitors out there, bill-payment, instant-issue debit cards, alerts and whatnot, we've been very focused historically on technology as a way to add to the customer experience, and certainly the same opportunity exists here. It's what Visa's been working on and I'll continue to help accelerate it.
How are you going to approach the challenge of focusing on technology from a more business-to-business perspective? Those examples you cite from Chase were more business-to-consumer technology.
Scharf: Having served on the board for 8 years, I have a complete appreciation for the broad range of customers that Visa serves. Big banks are one of the constituencies; smaller banks and midsize banks here in the U.S. and other financial institutions across the globe are an increasingly important part of Visa's future, and I'm extremely focused on making sure we continue to capture that opportunity.
There are two "b"s in "b2b" and ultimately, having served on the other side of the "b," I've got a clearer understanding of the types of things that the receiver thinks about and what they're interested in. So, swapping sides — I think that's an enormous advantage. The fact that we also think about the end user — the consumer or businesses out there that the financial institutions sell their products through — it just makes for a complete understanding of the value chain that I personally feel very comfortable with.
Saunders: Visa looks at building infrastructure that benefits consumers. The "b2b" part of it is, financial institutions deliver those services to consumers, so we're all looking at the same thing. If you're at Chase, you're looking at "What can I do on my own, or what can Visa do for me that's better than if I try to do it on my own? So there isn't much difference to the dialogue, frankly.
Where do you see the biggest competitive threat, from the established other payments networks or the startups or the big technology and retail companies getting into payments?
Scharf: There are a lot of smart people out there that have different pieces of the value chain. When we think about what we provide, we think we've got the best network across the globe, we've got the greatest acceptance and we've got a great management team here to figure out how to use those attributes to help everyone else accomplish what they want to accomplish.
The competitive environment is broad, that's how we think about it, but we think we've got something unique here that if we continue to build and grow, other people will want to continue to use.
How do you see the regulatory and litigation environment facing Visa right now?
Saunders: We can only talk some about the litigation … but we believe that the [credit card interchange] settlement will be successful and that will put some things behind us that have been difficult to deal with.
The regulatory environment, right now in the United States, it is what it is. I mean, Durbin's been enacted, we've reacted to it, you've had the Credit Card Act. You've had a lot of regulation recently. … I want to be careful about how I say this, but I don't think that there's a huge push in Congress to push any more regulation at this industry in the short-to-moderate run, although we're very aware of what's going on and how different constituencies may be lobbying.
From the rest of the world's point of view — we don't just pay attention to what's going on in the United States — we have changed our whole philosophy as it relates to government relations, to one of inclusion and working with various countries. We worked very diligently in Russia when they enacted some legislation last year which came out in a way in a way that we're comfortable with. We always have issues and struggle to get to the point we'd like to get to in China. There have been huge regulatory changes in Brazil, and I could go on and on and on. But we're engaged and we're engaged in a pro-active way, and so far we've been successful — not successful in that we have gotten everything that we want, but successful in that we've maintained the ability for us to do business and grow in virtually all of those.
Joe, what are you most proud of during your time and what are you most glad to leave as Charlie's problem?
Saunders: I'm proud of the fact that I helped take a disparate association, put it together, take the company public, create a public company culture that could survive and thrive, and guide the success of the company through some very turbulent times, particularly in the financial services industry. I'm extraordinarily proud of what we've been able to accomplish from a technological point of view as it relates to reacting to what's happening all around us.
Of course I come to work every day and I'm concerned about what new competitors are doing. I'm concerned about how you access the payment network; I'm concerned about it both in a mature economy and an emerging economy, [meaning] the difference between what we're doing in Africa and what we're doing in California. I think that the challenges going forward are as significant or more significant than the challenges that we conquered in the past — they're just different. I think that somebody needs to be energized and focused, and I think that they have to steer the ship for a lengthy period of time, to make sure that strategically we're going in the right direction.
Charlie, what do you see as the most important priorities facing Visa and the biggest challenges?
Scharf: The focus of Visa has really been on three distinct things, which I firmly support. Number one is to grow and support the core business as it exists today, to focus on selling through financial institutions and supporting merchants and their customers ultimately so they can continue to grow their business. The second continuing great opportunity here is to continue to expand globally. Growth rates in the emerging countries continue in this environment to exceed growth rates in the developed countries. We provide a great service and a great product for financial institutions, governments and ultimately individuals, and that's something that we'll continue to do. The third is to continue to use technology as it evolves, so that we continue to leverage the core network that we have, which is enormously beneficial to the end user out there.
Having strong competitors and smart innovative people out there is a plus — it'll push our company even quicker and faster. Competition is a good thing, and I look forward to that. I'm completely confident that the platform that Visa has today and that Joe and his management team have built over the past bunch of years is the best platform to tackle that opportunity going forward.