Introducing Paylias
Co-ompetition
On March 11 1970, the national executive committee - a group tasked with finding a way to solve the problems facing the nascent credit card licensing industry created by Bank of America - met in Chicago with representatives of the licensee banks for one of its last few meetings. In his autobiography, One from Many - Visa and the rise of the Chaordic Organization, Dee Hock recounts how "the meeting begins with sharp, penetrating questions. No one appears to have taken the proposal lightly". The proposal he mentions is for the creation of a new kind of company - one that wasn't owned by a single bank but by a collective of them. Within a period of a few months, characterized by Dee Hock as weeks of "skeptcism, enthusasism, criticism, confusion, persuasion", they were able to spinoff the fledgling BankAmericard system into a newly independent National BankAmericard Inc. It was simple but revolutionary: banks working together instead of competing against each other.
This new organization was given the mandate by its member banks to build the behind-the-scenes apparatus that would enable banks to run their credit card operations smoothly and profitably. And build they did. Dee Hock continues in his memoir by recounting that the "following months were among the most exciting in the early history of the company". A period marked by intense, innovative discussion that led to the breakthrough many people have heard of but only a few know what its implications were - the Bank Authorization System Experimental or BASE 1.
This achievement was the stepping stone in the transformation of this organization into the company we know today as Visa, Inc. A company synonymous with the exchange of value powering the arteries of modern, digital commerce. Few people may remember how the nations largest banks, fiercely competitive with one another, came together to create one of the most iconic companies of our times. And even fewer may appreciate how setting aside competitive practices for the greater good of a nascent industry has created economic value in the trillions of dollars for global GDP by creating the infrastructure that powers global commerce for billions of consumers and hundreds and thousands of businesses in over 150 countries.
History doesn't repeat itself, but it often rhymes
In January of 2016, clearXchange - a service offering person-to-person (P2P), business-to-consumer (B2C) and government-to-consumer (G2C) payments - was sold to Early Warning Services, LLC, a fintech owned by seven of the country's largest banks. This service was rebranded to what we know today as Zelle - one of the fastest growing private payment networks in America connected to over a thousand of the nation's banks and credit unions and providing payment solutions for over a 151 million users. In a press release provided by Zelle on their website they mention that in 2024 their payment network helped process over $1 trillion dollars, an "unrivalled" increase of 27% from 2023. Early Warning Services, like National BankAmericard Inc is owned by the same companies that compete with each other in their principle lines of businesses. However, by putting their competitive nature aside, they were able to create one of the fastest growing fintechs in America that not only serves the interests of their customers but, more importantly, protects theirs.
Competition is for losers
Peter Theil often talks about his contrarian belief that capitalism and competition are not synonyms, but in fact antonyms. In his talk at the Olympic Club in San Francisco Theil famously joked that "if you just love competition, if you want to compete like crazy you should just open a restaurant in San Francisco".
Competition often leads to businesses being left to the mercy of the markets. Since no firm has any pricing power, they must sell at whatever price the market determines - a situation that is great for their customers but difficult for the companies offering the goods and services. No more is this situation hightened than in the modern fintech arena where hundreds of digital financial upstarts are offering an almost homogenous product at ever decreasing margins. Competition is fierce, collaboration is rare and very little effort has been made to protect the interests of the collective industry.
We believe that if the fintech industry is to succeed, it must learn from history, reorganize itself and develop a culture of co-ompetition. Only then can the collective interests of companies be protected from existential threats to their underlying business models.
Running the playbook
Fintechs truly have lived up to their end of the bargain of democratizing access to digital financial services with some of the most talented engineers building what they believe is the future of this industry. However, the core, critical dependence on traditional banks and card networks is a point of failure that needs to be examined. Imagine a hypothetical situation where every bank refuses to sponsor a company like PayPal. Overnight, PayPal customers' funds (including those of Venmo) would be frozen since they are held at Synchrony Bank. PayPal's and Venmo's MasterCard debit card would stop functioning since it is issued by Bancorp Bank. This extreme, albeit fictional scenario, would criple one of the pioneers of the fintech industry.
The question then is, how can this be mitigated? While cryptocurrencies in the form of stablecoins have given us part of the solution, the part that can significantly reduce the exposure of reliance on banks, the other part, we think, lies in the creation of an organization governed by its fintech members and mandated with the development of an authorization and clearing system - a system that facilitates the exchange of value between its participants.
We're 80% of the way there in terms of development and while we're just getting started on our journey we would love to get your feedback on our progress so far. If you’re a business or developer solving global financial problems, please reach out to ziyad@paylias.xyz