How Does Visa & Mastercard Make Money
Arthur Bedel ?? ??
Global Payments Leader | Co-Founder of Connecting the dots in Payments... | FinTech Advisor | Ex-Pro Tennis Player
?????? ???????? Visa / 萬事達卡 ???????? ??????????? - deep dive into the most successful payments companies??
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Let’s take a look at the current payment ecosystem today:Core:
??Card Schemes - Visa , 萬事達卡 , American Express
Additional:
??Payment Orchestration - Gr4vy , Cybersource , ACI Worldwide
??Payment Methods - Klarna , 支付宝 , Accrue Savings , Trustly
??Token Vaults - VGS , Basis Theory , Spreedly
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This 6-step diagram shows the economics of the credit card payment flow (by Alex Xu ):
1?? The cardholder pays a merchant $100 to buy a product.
2?? The merchant benefits from the use of the credit card with higher sales volume, and needs to compensate the issuer and the card network for providing the payment service. The acquiring bank ( Nuvei / Stripe ) sets a fee with the merchant, called the “???????????????? ???????????????? ??????.”
3??-4?? The acquiring bank keeps $0.25 as the ?????????????????? ????????????, and $1.75 is paid to the issuing bank ( Chase / Revolut ) as the ?????????????????????? ??????. The merchant discount fee should cover the interchange fee. The interchange fee is set by the card network ( Visa / 萬事達卡 ) because it is less efficient for each issuing bank to negotiate fees with each merchant.
5?? The card network sets up the ?????????????? ?????????????????????? ?????? ???????? with each bank, which pays the card network for its services every month. For example, Visa charges a 0.11% assessment, plus a $0.0195 usage fee, for every swipe.
6?? The cardholder pays the issuing bank for its services. Why should the issuing bank be compensated?
? The issuer pays the merchant even if the cardholder fails to pay the issuer.
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? The issuer pays the merchant before the cardholder pays the issuer.
? The issuer has other operating costs, including managing customer accounts, providing statements, fraud detection, risk management, clearing & settlement, etc.
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Traditional card payments have been around for decades, ruling the overall payment space. They aren’t going anywhere buuuut other forces are driving innovation & need to be brought into your payment stack for cost efficiency, higher acceptance and speed:
??Real Time Payments
??Open Banking
??Buy Now Pay Later
??Digital Wallets & Super Apps
??Embedded Payments (white-labeling)
??Digical Currencies and #CBDCs
??Crypto Payments
Technology is driving & disrupting payments continuously! #OpenBanking, #EmbeddedFinance rise of digital currencies, #AI boom and many more forces are the future ??
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Source: Alex Xu & ByteByteGo
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Gerente de Produtos, Estratégia, Analytics, Precifica??o e Planejamento em Meios de Pagamentos
6 个月Arthur Bedel's article is an excellent resource for newcomers to the financial services sector. It demystifies how Visa and Mastercard profit, making it an essential read for anyone looking to understand the fundamentals of payment networks. The clarity and depth of the analysis are commendable, offering valuable insights into the complexities of digital transactions.
Digital Payment Specialist at @Payless Africa | Providing financial & Product Solutions for Tech companies
6 个月Insightful breakdown! Your analysis of the evolving payment landscape is spot-on. Traditional card payments remain fundamental, but embracing innovations like real-time payments and digital currencies is crucial for staying ahead. Your expertise shines through, and I eagerly anticipate further insights from The Payments Brews!
Diagnosing and Treating Payment Issues for State and Local Government Agencies | Resilient Sales Leader | Business Development Professional
6 个月Another insightful post!
The Payment Solutions Guy — I'll help you decrease processing fees by 20%, and improve approval rates (guaranteed) by finding the best Payment Providers for your business | Visit my website to learn how
6 个月It's fascinating to see the intricate process behind every transaction. The evolution of the payment industry is definitely an exciting journey to follow Arthur Bedel ?? ??
President @ AFCSOA ? 20+ Yrs in Fare Payments ? Award-Winning AFC & NFC Solutions Architect
6 个月"5?? The card network sets up the ?????????????? ?????????????????????? ?????? ???????? with each bank, which pays the card network for its services every month. For example,?Visa?charges a 0.11% assessment, plus a $0.0195 usage fee, for every swipe." It sounds a bit confusing. When you say each bank, does it mean acquiring banks pay assessments and usage fees, too?