Case Study: Two Payment Networks, Similar Goals, Different Inclusion
A Case Study: The Visa Story, by HealthCarePays
Visa® and MasterCard® went public in 2008 and 2006 respectively. They issued 406 million and 61.5 million shares with per share prices at IPO of $44 and $46 respectively. MasterCard’s IPO yielded $2.4 billion. Visa’s IPO brought in $17.9 billion to become and remain the largest IPO in U.S. history.* The origin and journey of both MasterCard and Visa are not that different from that of HealthcarePays.
In the late 1950s, banks in California began issuing their own consumer credit cards. Most had disastrous results and quit. Bank of America’s start was as disastrous but the bank stuck with it. A few others, fearing BofA’s foothold in this new arena, banded together to create Mastercharge, renamed Mastercard®.
The banks had little experience in the credit space, no electronic capability, and no way to deal with the volumes of paper produced, let alone the fraud that rapidly mushroomed. By the late 1960s, with no idea of how to govern this new system, and because each bank was attempting to operate their own card network in a silo, credit card programs were hemorrhaging hundreds of millions of dollars in inefficiencies and fraud.
In 1968, Dee Hock, a 38-year-old assistant vice-president of a modest Seattle bank was selected to try to make sense of this emerging industry and turn it around. BofA turned over its BankAmericaCard asset as a core piece to Visa, as well as for its competitors to use, as a basis to finding an industry solution.
Visa and MasterCard created new entities where participation and ownership was open to relevant and affected parties. This simple concept made Visa and MasterCard the world’s top two largest retail electronic payments processing networks, handling an average of more than 175 million transactions every day. Their initial open and inclusive ownership structures encouraged participation and generated enormous success that eclipsed that of all others. They were, and are, about the payment network.
Over the next 15 years, both MasterCard and Visa strengthened their networks by moving from paper-based to electronic. They both added waste and fraud detection capabilities, which today know more about the financial spending patterns of their network participants than the participants themselves.
There was a cause and effect in the card payment network story. The cause was the financial insolvency of its member banks; the effect was the outcome of collaboration among competitors.
HealthcarePays is focused on using a national healthcare payment network where participation and ownership is inclusive and benefits the entire industry by finding cost saving efficiencies and fighting waste and fraud.
Because of healthcare laws and the increasing pressures on healthcare costs, the U.S. healthcare industry has arrived at a unique moment in history. Change, big change, is inevitable. The people at HealthcarePays, and our charter members, understand this. HealthcarePays was created from nothing as a member-owned organization. It reserves its ownership for employers, provider and health plans, offering a common ground, collaborative model to do as much as possible to lower the ever rising cost of healthcare.
Merchants in the U.S. were never afforded the ability to partake in the creation of the financial services networks. Merchants face the unchangeable reality they will never be more than the source of fees to maintain these networks; which generate enormous sums of revenue and profits.
HealthcarePays takes a more inclusive approach to the first national payment network for healthcare. HealthcarePays believes everyone within the industry should be able to join, own and provider oversight to the national payment utility for healthcare claims payments. Employers, and providers, this is your moment in history, to seize your rightful place as an owner . . . be more than a source of fees . . . be the leaders in the cause of combating healthcare’s historic past of greater-than-inflation cost increases.