PERFORMANCE & THE PROFIT-MOTIVE

MasterCard and Visa are important parts of modern capitalism but neither began as a for-profit company:

MasterCard and Visa didn’t make, or even look, for profits for decades. MasterCard started as a not-for-profit membership association, in 1966, and Visa did the same, in 1971. Both associations managed their brands and ran the clearing and settlement systems for banks that issued cards or helped merchants accept cards. These card networks were allowed to charge their members just enough to cover cost and provide working capital. (For more on this, read Dee Hock’s book about starting up the Visa network.)

By the mid 2000s MasterCard and Visa were handling trillions of dollars of transactions between consumers and merchants around the world. Then the banks decided to turn the associations into for-profit companies, IPO them, and cash out. MasterCard IPO’d in 2006, and Visa followed two years later. Now they are very focused on making money. Around the world, though, many countries still have domestic payment networks that operate as not-for-profit platforms.

SOURCE: Harvard Business Review