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This is how Visa works (intermeta.com.br)
931 points by eduardordm on Aug 17, 2012 | hide | past | web | favorite | 97 comments

Just to give some context.

RedeConv is a electronic payment company, it does not offer any credit from what I saw like Visa does, electronic payment is a market that only recently the Visa brand began exploring in Brazil, offering prepaid cards for payments of employee meals (this is what Visa Vale is basically), providing means for this type of electronic payment and offering credit for payments are not the same thing in Brazil.

In this case the company in question to blame is not exactly Visa but Cielo that probably is just upset about losing market in electronic payments, which is what I believe RedeConv provides, Cielo began as a Joint venture between Visa and some Brazilian banks some years ago, the name of the company was VisaNet until it was renamed in 2010 I believe, the company is one of the most profitables in the Brazilian stock exchange where it's listed and its profit increases after every quarter, I personally own some Cielo stocks.

EDIT: Eduardo, if you can record one or more conversations from merchants relating about that you can denounce Cielo to the CADE (the Brazilian equivalent of the FTC). Before doing that you should call a lawyer first so he can inform you how you should do it legally.

Just adding: CBSS (now called Alelo) is a Visa company that operates Visa Vale cards. Cielo is a gateway, actually we are Cielo partners, never had a problem with them.

Good, I stand corrected, anyway look for a lawyer, he will give you proper recommendations on what to do next.

Plenty of multinationals play "dirty" in Latin America, I've heard similar stories about several other companies here from people that work for smaller, local competitors.

That said, I highly doubt that it's a policy of the home office, it's really just the end result of hiring people who get results in the region, in a situation where oversight is difficult to impossible.

Let's say you were a US-based multinational that wanted to expand your market share overseas, at any means necessary, even if it means using tactics that would be frowned upon or illegal in the US.

Isn't the "this was an unauthorized move by a subcontractor" the exact defense you would plan to use then when the dirty tactics were exposed?

Unfortunately, it works.

I'm not sure if it's a closed case quite yet. A few months ago the NY Times unearthed that Walmart's Mexico subsidiary was responsible for bribing lots of government officials, and that the home office in the US covered it up and promoted the people in charge.


The case is still pending, AFAIK, but the law itself doesn't make the practice non-existent.

Oracle just settled a case today based upon their Indian subsidiary keeping a secret slush fund. It ended up being a "pay a fine with no statement of wrongdoing", but the FCPA does have some teeth.


Also, NoPiece pointed out in this discussion that the FCPA probably applies only to goverment officials: http://news.ycombinator.com/item?id=4397414

(Is this what you were referencing in saying 'go down and then back up'? not sure what you were getting at there, sorry...)

"this was an unauthorized move by a subcontractor" works. Ask airbnb, etc.

ahh yes, if you are reading this thread please go down and then back up here.

> in a situation where oversight is difficult to impossible.

That excuse no longer washes.

In an ideal world, yes, but I reside in a very similar country, and have seen and heard too many similar stories to be naive. I think the best thing that can be done is to blog about it like this; someone in Visa corporate will take notice and changes will be made, hopefully for the better.

Visa is a multi-billion dollar international company with strict regulatory controls.

For them to say that "preventing some of our employees from breaking the law is hard" is not good enough.

I accept that no organisation is going to achieve total legal compliance. But sometimes it feels as if some companies feel above the law; as if they are untouchable.

As if, indeed, they are too big to fail.

"too big to fail"

I wonder if facebook fails, will that be a good thing where a lot of developers get on the market thus allowing startups to hire :P?

That is just an excuse. If big companies really care, they can make it happen. For example I know several people who work at Walmart in Chile, and they've told me about the very strict rules the company has for negotiating contracts and dealing with vendors, breaking those rules is considered a very serious issue and usually ends on the person who broke those rules getting fired.

It washed just fine last year right here for airbnb: http://news.ycombinator.com/item?id=2815183

Willful ignorance.

Do you really want to know how sausages are made? :)

If I'm running a multi-million dollar SausageCo, Inc., then yes, I would very much like to know how the sausages I'm responsible for are made.

True, you would want to keep an eye on your product. But you may not really get into the details of your sales team's methods. Especially a rep who seems to have a gift of stealing away customers from your competitor. That's what you pay them to do, after all - get those contracts.

As long as there's no major negative attention drawn I'm sure it would be quite easy for VISA to ignore.

How many months ago was it that Wal-Mart got caught up in a similar scandal in Mexico?

Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle

http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-me... (paywalls, etc.)

By DAVID BARSTOW Published: April 21, 2012

  > MEXICO CITY — In September 2005, a senior Wal-Mart lawyer received 
  > an alarming e-mail from a former executive at the company’s largest 
  > foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up 
  > conversations, the former executive described how Wal-Mart de Mexico 
  > had orchestrated a campaign of bribery to win market dominance.

Do a search on Chiquita Banana and murder to get some truly horrific actions by companies in Latin America. I'm a little skeptical that the home offices are ignorant.

Not sure what Chiquita has to do with foreign companies getting used to locally common forms of corruption.

Their corporate headquarters is in Cincinnati, OH and they have gone beyond the local standards corruption in a couple of widely reported ways.

I never said or implied that Chiquita was engaged in local forms of corruption. I asked what Chiquita has to do with OTHER companies engaged in local forms of corruption. Please don't be so dishonest as to continue assigning me claims I did not make.

Truthfully, I really missed the boat on what you meant then. I was adding another example of companies from the USA that have had less than stellar dealing with Latin America. I WAS implying that Chiquita did the same crud only larger.

I don't speak Portuguese, but is this the contact info for visa in the region? [1]. Maybe a few letters to some choice managers there could get Visa to act a little more responsible. if not, I'd push as high as you can get in the organization to petition. There is a corporate visa page [2], there may be something useful in there. [edit] CEO is Joseph Sanders. There may be a PO box listed for him [3] at

Joseph W. Saunders Chief Executive Officer Visa Inc. P.O. Box 8999 San Francisco, CA 94128-8999

phone: 650-432-3200 [4]

I had an employee that worked for me dig up the CEO contact info for a big insurance company and make a stink about a $500 charge and it was taken care of the next day. hopefully something like that will work for you.

[1] http://www.visa.com.br/Conteudo.asp?pg=7

[2] http://corporate.visa.com/index.shtml

[3] http://www.sec.gov/Archives/edgar/data/1403161/0000000000120...

[4] http://www.labormarketinfo.edd.ca.gov/aspdotnet/databrowsing...

[5] google search: site:.gov joseph saunders CA


1) Portuguese spoken in the region: sorry guys - my lack of world travel showing.

2) CEO is Joseph Sanders

3) might have found phone number

Small correction, but Brazilians generally speak Portuguese, not Spanish (for that reason, as well as a few important others such as its size, Brazil is commonly considered a distinct market from the rest of Latin America)

"I don't speak spanish"

Really? I think you mean Portuguese.

sorry to reply to my own post, You may want to try another number as well, 415-932-2100 from [1]. It is from 2008, but maybe someones there with some authority.

also, it was filed last year [2], but another corporate address is listed as

[1] http://www.sec.gov/Archives/edgar/data/1403161/0001193125080...


Random idea:

If I remember correctly, the US has extremely strict anti-bribery laws that apply to bribes made outside the US jurisdiction as well. These might only apply to government bribes (corruption), but if they apply here too, you could consider rattling the global Visa parent company's chain in the US in some way.

IANAL, but I think the FCPA (Foreign Corrupt Practices Act) only covers bribes to foreign government officials.

My understanding is that this is not correct. The US does have strong AntiCorruption Laws that deal with US entities operating overseas.

Transparency International have good references. http://www.transparency-usa.org/links/index.html

A quick search found this signed by Brazil and US in 1996.


'(3) TRANSNATIONAL BRIBERY.--Current United States law provides criminal sanctions for transnational bribery. Therefore,it is the understanding of the United States of America that no additional legislation is needed for the United States to comply with the obligation imposed in article VIII of the Convention.'


Sadly large companies can afford to drive smaller companies out of business suspect means and then fight charges in court. The court system moves slowly and is prohibitively expensive for small companies, so the small company is likely to run out of money long before they are able to force the hand of a larger company.

"I built a small credit card company, we have around 500k users and 2k merchants."

URL of this company? Links to some of the merchants that you've lost or currently have? Clear scan of the document in the photo?

The company is called Redeconv (www.redeconv.com.br). I didn't want to attract attention to the company itself, we are just regional. I can provide the xerox of contracts we had and the forms I'll post that to the blog post later today.

Regardless of this story, I find it very cool that in Brazil you can just setup your own credit card company. Are there many regional CC networks like yours in Brazil? How did you get the idea?

Credit card company is generic term. In our case we are a PAT (we provide employees benefits). We never "touch" the money, your employer is, indirectly, who pays the merchants. We cannot provide loans (credit). For that, we need a lot of cash (FDIC insurances, etc)

So what you're providing is similar to meal tickets or coupons?


FDIC? In Brazil?

It's called FGC here (credit guarantee fund), he was just using familiar terms.

On an unrelated note:

You don't provide any contact info in your profile and I don't really understand Portuguese either so I'll use this comment to inform you that your website renders horribly in my browser. It looks unreadable and unprofessional. Using Firefox 14.0.1 on Linux.

Also: '©1998-2012' Props, that is quite a while.

The website is pretty readable in Chrome using the Google Translate feature. I don't think it's fair to quickly assume that a regional, small business' website would be published in both your language and their language.

I didn't say anything about the language being the problem. I just was not able to find any simple contact info and I informed him his site does not render correctly using a comment. I didn't say I'm assuming anything. You haven't read my comment closely.

I think chmod775 was talking about actual readability, not the language. To be fair (Firefox 17, W7), it isn't perfect: http://imgur.com/WKoE8

(and it's not just because of the language--I modified the text to some English: http://imgur.com/8uss8)

Here's how it looks for me: http://ompldr.org/vZjUzYQ

Nice! Protect the fragile Visa- don't let this upstart hurt them!

The fact that you have been downvoted clearly indicates that the majority of people's browsers still don't implement the brand-new <sarcasm> tag in version 7.1 of the HTML specification.

... or, perhaps, that vacuous snark does nothing to improve the quality of the conversation, regardless of whether it's intended to be trolling or pandering sarcasm.

Before we convict them in the court of public opinion, can we have some impartial evidence? A single blog post isn't much.

Very true. The only "proof" I have is testimonial proof and some xerox, this is why the only thing possible to me to do is a blog post.

If you can I would try and see if you can find more local companies that have suffered from these practices, get them to post as well and increase the legitimacy of the claims.

It might be more accurate for the headline to read "This is how Brazil works." In the US we tend to take for granted how much a functioning regulatory system, far from retarding healthy growth, is essential for promoting it.

> In the US we tend to take for granted how much a functioning regulatory system

Really? Which people are in jail because of the mortgage fraud?

And Jon Corzine's MF? Who is going to jail because of that?

I find that the US has pockets of enforcement.

My point wasn't that there isn't corruption in the US, or that there is a remedy for every bad act. Only that there is recourse here for the kind of graft the article describes, and that many in the US don't fully appreciate what a so-called 'free market' really looks like.

Great point. And, I would add, the statue of limitations is about to run out on prosecutions for the mortgage crisis which has had practically zero convictions. The savings and loans crisis of late 80's had 1000 felony convictions. We maybe on our way to being like Brazil.

You remark shows that you didn't even bother to read the entire article.

They're not a credit card company, but a provider of employee benefits (hence they don't even touch the money). They just happen to use small rectangular plastic cards as a medium for carrying balance information.

I fail to see any connection between your comment and the one you're replying to...

I actually did read the entire article. Can you elaborate on why it matters what business they're in? I'm not sure you understood my original comment, or perhaps you replied to the wrong thread.

> a provider of employee benefits

What kind of service is that? What do they actually do?

He is only getting attention because he cited Visa though. If he used the title you suggested, most folks would just "meh" at the title.

Since I was dealing with compliance, FCPA and such for the last 15 years, here are my two cents:

- in case people involved in the unethical behavior are either employees of Visa OR employees of Visa subsidiaries, joint ventures or partnerships, such behavior does constitute a violation of at least Visa's internal Code of Business Conduct and Ethics [1], not sure about FCPA due to lack of details;

- compliance matters are a serious business for most all multinational companies, especially public/US based;

- this Code is an internal Visa document, that implies that Reporting any Illegal or Unethical Behavior [2] shall/can be done by Visa's employees, but you are not an employee;

I would recommend to write an e-mail, describing your facts, and send it to 4-5 Visa employees, including US HQ. Having multiple recipients, including HQ people, will ensure that one of those will report this case internally. Your e-mail will trigger internal investigation of this matter, and hopefully favorable resolution [i.e. discontinuation of such practices].

Of course, speak with lawyer before doing anything. Also, I would advise against talking to press, at least for now.

1 [http://investor.visa.com/phoenix.zhtml?c=215693&p=irol-g...]

2 [http://investor.visa.com/phoenix.zhtml?c=215693&p=irol-g...]

Hey Eduardo, I tried to commend on your blog, but it seems that someone entered an html tag in the last comment and didn't close it. It screwed your comment system.

I'm from Brazil too, and this kind of stuff didn't surprise me. But you have to contact a lawyer and ask for help. Our legal system isn´t the best, but we have to make some effort to make it better.

Best wishes!

While this is preposterous behavior, I am very surprised it's even possible to operate your own payment card network. Visa/MasterCard is the one monopoly I thought was practically unbreakable. Even PayPal, who is supposed to be a Visa competitor, issues Visa cards.

If I'm understanding, this is a stored value card or something like a debit card the employee can get paid on then spend from.

This happened in Brazil. From the figures in the blog post it seems as though Visa isn't quite so entrenched there.

Visa is huge in Brazil. However, OP is not exactly in the credit card processing market (cf. eduardordm's comments in this thread).

He doesn't have machines on stores on anything like that, IIUC.

Visa is huge in Brazil, as is Mastercard - and while the stores offer very "flexible" options for payment (like 8 installments w/ no fees), the CC companies charge very high interest rates when the bill isn't payed on time. AMEX is kinda elite and not that widespread.

There are also smaller CC networks that are born with supermarkets, Walmart has something called Hipercard.

Depends, on Rio and São Paulo every low class have a credit card today and Visa is really big in these two towns, maybe they are smaller elsewhere in Brazil but I don't believe that's the case.

I just wanted to give Eduardo a shout-out to build a company that provides a tangible benefit for low-income families. I know that in the US it's hard for this segment of the population to get into the electronics payment system, and I imagine that in Brazil it's similar. It's great to see that the system is free for the end-user. In the US, most companies that target this market are predatory and charge exorbitant fees[1], like the now defunct Kardashian Kard[2]

Somehow I'm not surprised that Visa/Cielo is playing dirty to get their market share back. I hope you find a way to fight back.

[1] http://www.nytimes.com/2012/04/26/business/chasing-fees-bank... [2] http://www.reuters.com/article/2010/11/30/us-kardashian-debi...

Whether or not this particular story is true, there is a structural problem with debit transactions. Neither merchants nor consumers should be penalized for electronic transactions in which credit is not involved. Perhaps this means that the infrastructure of bank cards, which was predominantly spread by credit card companies, would fall on vendors and banks, but my guess is that they would benefit enough from the increased liquidity that they would want to create such a system.

Levying a 5-7 percent tax on vendors is simply unfair, when profit margins, particularly on less expensive items are often less than that.

There is still reasons that debit transactions should attract a charge. There is definitely still fraud risk as well as comms/infrastructure/support. 5-7% is high, but 0% is also unrealistic.

Debit cards issued by banks without any involvement from credit card companies are prevalent in many countries, including Canada and Germany. In Germany, the fees for electronic cash transactions are 0.3% with a minimum of 8 cents.

More votes indeed.

The sad reality is that you might lose even more ground to Visa. At this stage it might be worth to get it on camera somehow or ask those merchants to go on record and take legal actions against Visa. But you likely figured this out already :)

Boa sorte ! A outra batalha sera com a justica brasileira.

If he only managed to find out because he had friends, I pretty much doubt anyone is going to get in trouble with this...

I just got a VISA-card some weeks ago and I'm going to give it back to my bank and close the account tomorrow. Good thing VISA's not the only one offering such services. (I never used it yet anyways)

Some large companies are just not able to have some self discipline. Others do.


This is beyond unethical, what is Jack Dorsey's and Square's board's response? In my opinion Jack and his board needs to either prove this guy wrong or part ways with Visa.

Winning at the startup game is fun and all, but standing up for what you believe in is far more important in the long run.

Am I wrong? Is there something I am missing?

- http://techcrunch.com/2011/04/27/visa-makes-a-strategic-inve...

Don't know if this will help but perhaps you can get the story in the newspaper?

If not perhaps you could buy some advertising stating that the company's "death" has been highly exaggerated, why your product is better, and because people love it so much, even dirty tricks can't kill it.

Avoid negativity and bitterness, keep the message focused (less is more), and it might help rally the public to your side.

Seems like I have heard this story before. Some local re-seller of Visa products/services (Visa is in employee benefits???) being overly aggressive is what it turned out to be. If I had time I'd do some more searching for similar stories.

Indeed what Visa did is not moral, but this is the law of the Jungle, no matter how despicable they find their opponents to be, losing is losing. They need real revolution to win the game.

Is anybody really surprised at this?

It's less of an issue of surprise, and more of an issue of still not right which way you turn it.

I'm not really hip to the Brazilian legal system, but in the US this would be highly illegal.

Sadly, "highly illegal" is often not correlated with "goes to jail", or even "stopping the behavior".

For example: have you ever wondered about the aggressive charity street canvassers that have sprung up over the last few years? The people who would do just about anything to get you to stop on your commute, talk to them, and hand over your credit card?

The aggressive tactics they employ are often illegal, and many instances of outright lies and fabrications have been documented.

But that hasn't really curbed the behavior - the charities and canvassing contractors (yes, they are predominantly for-profit canvassing agencies that only represent the charities, they are not the charities themselves) know full well that a great deal of abuse happens, but by keeping everything at arms-length they can shift blame and diffuse responsibility up the chain.

Whenever a canvasser is caught lying to get the donation, they are a "rogue" employee, cut loose, and the behavior continues. Whenever this happens at a large enough scale to attract media attention, the canvassing agency itself is "rogue" and cut loose by the charity. So on and so forth - nobody actually gets into trouble at any point, except maybe the canvasser on the street who has nobody to redirect the blame onto.

So yeah, even in the US, if you are savvy (and evil) enough, illegality ain't got shit on you.

Same thing happens in the UK, to the point that I thought you were talking about UK chuggers until I got the last sentence.

VISA's tactics don't surprise me. What is sad is that we think it's OK because you can do anything as long as you're maximising shareholder value.

Happens in Germany too. I often ask if they work for a agency or the charity. Not once was there someone working/volunteering for the charity.

For example: pretty much any of the larger banks over the last decade.

This incident is not surprising. On a bigger picture, the whole system of plastic cards and bank transactions is archaic. As is their elitist attitude. It feels alien to me to experience in 2012 when cloud operations are so ubiquitous and cost effective.

How can one justify a fee of 50 euros for a 700 euros transaction except than greed? It's as if my actual banknotes are being transported, then in principle it takes a single press of a key.

It is also ironic how big social networks persuade us to disclose all we can about our private lives, while the banking system remains a secret society with black magic operations and fees formation.

I really look forward to the guys like Dwolla to disrupt the hell out of them. Time to move on.

He needs to talk to a lawyer.



You stated on March 27, 2012 on your blog [1] having 6K merchants. Have you lost that many of merchants ??? Without proof it's hard to believe in your words... Please provide proof and facts and I am sure you will win this battle. Or at least get some compensation for the 4K merchant losses you have lost...

[1] - http://eduardo.intermeta.com.br/square-should-have-its-own-c...

We have 2k employee-benefits merchants and more than 10k in general now.

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