Richard Fairbank turned his predictions of the credit card business into the specialty-finance juggernaut that is now Capital One.
The founder, chairman and CEO of Capital One spoke Oct. 3 to Darden students and faculty about the importance of bold, authentic leadership for transformational companies. Fairbank's own rise from humble beginnings unfolded like a Horatio Alger tale, from his early days as a swimming instructor, through the MBA program at Stanford, followed by years of general consulting and the vague idea that he wanted to run a company. Fairbank began his career in consulting at Strategic Planning Associates (later Mercer Management).
Fairbank's visit to the school was part of the Darden 50th Anniversary Speaker Series, which brings major corporate, government and industry leaders to Darden to discuss business issues and trends, and their individual leadership philosophies.
While consulting, Fairbank saw that credit card businesses were being managed by traditional banks, but Fairbanks intuitively understood that credit cards aren't a banking business. As he said, they are an information-based business. In the mid-1980s, virtually all credit cards were marketed for basically the same annual fee with the same annual interest rate. Fairbanks decided the one-size-fits-all approach was losing potential customers. He put together a team and developed an information-based strategy or IBS, then sold Richmond, VA-based signet Bank on the concept of tailoring credit card products to consumers with different needs - and different credit risks. IBS integrates the traditionally separate functions of marketing, credit, risk operations and information technology into a flexible, decision-making structure that allows the company to offer financial services tailored to fit each individual needs.
"Signet (in 1988) agreed to sponsor the program and we were in business," Fairbank said. They lurched about in the early years on the vagaries of the economy, then the recession of the early 1990s nearly drove Signet under. Then, Capital One began to offer balance transfers of other debt to the company's customers and potential cardholders. That was the tuning point.
"It absolutely took off after that," Fairbank said.
Capital One was spun off from Signet in 1994 and Fairbank forged on as CEO and chairman. Today Capital One is the world's fourth-largest credit card company.
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Early forays into diversification, such as telecommunication, were failures, Fairbank admitted candidly. 'But from our failures we learned how to do expansions into new markets."
In time, Capital One would offer auto and small business loans, mortgages and commercial loans, and such traditional banking services as deposits and savings products. "Capital One is the only specialty finance company to morph into a bank," Fairbank said.
Fairbank shared key lessons he learned during the climb.
"It's all about great people," he said, although the reality is companies often get ordinary people in the haste to fill positions. "And respect the power of markets. Companies get way too internally focused and don't look reverentially at markets." Stock exchanges are littered with the corpses of defunct companies that lost sight of market direction and momentum.
Fairbanks also encouraged students to ponder their endgame - the ultimate goal for their companies. "Look at the end game and then move backwards to create bold moves in the midst of success," he said. "Suddenly, everything starts fitting into the puzzle."
Boldness and authenticity are the hallmarks of great leaders, Fairbanks added, saying he learned lessons in authenticity from his time working with children, who offer immediate and brutally honest feedback.
"Take the risk to really be yourself," he said. Only then, can authenticity be achieved and respect earned. Wise leaders also follow a regimen of self-improvement and introspection, gathering feedback on themselves so that they can transform and evolve with their companies, the executive said.
Based in McLean, VA, Capital One is a diversified Fortune 200 company with 50 million customer accounts worldwide and one of the most recognized brands in America. Capital One is also one of the leading credit card issuers in the UK and has created the second largest non-captive auto lender in the United States.