Did you know Visa and Mastercard don’t issue debit or credit cards? I know you are thinking, how is that possible? Well here is the fact.

The multibillion-dollar companies are in fact digital payment intermediaries that process global transactions while ensuring our information remains secure.

It seems almost obvious – except we never paid it much thought prior to covering the multi-currency wars.

Sure, challenger banks like Revolut and YouTrip have shaken up the game with greater transparency and by cutting out hidden fees – but their physical cards, too, are powered by Visa and Mastercard respectively.

All the bells and whistles – rewards, cashback and dreaded interest rates – are offered by the issuing financial institutions, and not Visa or Mastercard. Let’s take a closer look.

• Visa and Mastercard Financial Figures
• The Four-Party Payment Model
• Visa
• Mastercard
• The Profit Drivers Behind Visa And Mastercard’s Success
• What Does MasterCard And VISA do?
• What is The Difference Between MasterCard And VISA?
• Is it Good to Have Both VISA And MasterCard?
• How Does MasterCard And VISA Make Money?
• Which is Better VISA or MasterCard?
• Is MasterCard Owned by VISA?
• Is VISA And MasterCard Better For International Travel?
• Does VISA Lend Money?
• Is MasterCard a Credit or Debit Card?
• How Much Does VISA Make on Each Transaction?
• How Much Cash Does VISA Have?
• Which is The Cheapest Credit Card Processing Company?
• How Many Transactions Does VISA Have Per Day?
• Does VISA Make Money on Debit Cards?
• Which Bank Owns VISA Card?
• What is The Difference Between a Credit Card Surcharge And a Convenience Fee?

Visa and Mastercard Financial Figures

In 2018, Mastercard made US$14.9 billion in revenue – an exponential 20% increase in year-on-year growth.

Read Also: Credit Cards With Rewards Systems

But Visa has so far remained ahead of the game, with $22.9 billion in revenue for the fiscal year ended 30 Sep 2019.

Before delving into how the digital payment giants make their money, though, here’s an overview of the numbers behind Visa’s and Mastercard’s success.

	Visa (For fiscal year ended 30 Sep 2019)	Mastercard (For year ended 2018)
Market Capitalisation	$391.9 billion (Accurate as at Nov 20, 5.40pm GMT-5)	$284.65 billion (Accurate as at Nov 20, 6.22pm GMT-5)
Payments Volume	$8.8 trillion	$4 trillion
Data Processing & Service Revenue	$20 billion (~0.22% of payments volume)	$13.4 billion (~0.22% of payments volume)
International Transaction Revenue	$7.8 billion	$4.9 billion
Other Revenue	$1.3 billion	$3.3 billion
Client Incentives	($6.1 billion)	($6.8 billion)
Net Revenue	$22.9 billion (Up 11% YoY)	$14.9 billion (20% growth YoY)

The Four-Party Payment Model

That’s a lot of numbers, so let’s break things down in slightly technical terms. Visa and Mastercard run on a payment model that involves the following parties:

• The merchant
• The acquirer, aka the merchant’s bank
• The intermediaries (Visa/Mastercard, in this case)
• The issuer, aka an institution that provides consumers a credit line or debit card – like a bank or government entity (e.g. CPF or HDB).

Let’s assume Brenda (the consumer) wants body moisturiser from beauty chain Sephora (the merchant). For this, she opts to pay with her Visa-powered DBS debit card. In this case, DBS is the card-issuer, and Visa the intermediary. 

Sephora sends Brenda’s account information over a secure network to its bank (the acquirer), Amex – which then requests permission from Visa to transact with Brenda’s DBS card.

Upon DBS’ authorisation, the transaction is made and response issued to Sephora. Of course, all of this happens at light speed thanks to Visa’s ultra-fast and secure payment network.

In simpler terms, without digital payment middlemen like Visa and Mastercard, we’d probably be at far higher risk of fraud.

But here’s where things get interesting: Visa and Mastercard don’t profit directly from Sephora’s sale of lipstick to Brenda.

And that applies to every purchase made, really.

For instance, card issuers like Amex, DBS and OCBC earn the full sum of interest on credit card purchases.

So, No – your money sits with neither Visa nor Mastercard, since they’re merely middlemen that aren’t capable of loaning money. That altogether eliminates the companies’ default risk, meaning Visa and Mastercard enjoy higher overall valuation than, say, American Express.

Visa

Visa is a global payments technology company. It connects consumers, businesses, financial institutions, and governments in over 200 countries. It operates the world’s largest retail electronic payments network. It is the world’s most recognized global financial services brand.

How Visa Credit Card Payment Processing Works?

Visa serves a two-sided market. It serves cardholders, issuers, and issuer processors on one side. On the other side, it serves merchants, acquirers, and acquirer processors.

Visa neither issues cards to the cardholders nor solicit merchants to accept its cards. These are the responsibilities of the issuers and the acquirers respectively.

• Cardholders are the individuals that possess a Visa payment card.
• Issuers are the financial institutions that issue Visa cards to the cardholders, extend the credit to them, and determine the interest rates or the other fees charged to them.
• Issuer Processors are the third-party institutions with proprietary technology platforms to handle the transaction processing for those issuers that do not have in-house capabilities. Issuers often outsource the transaction processing to the issuer processors.
• Merchants are the businesses that accept Visa cards as a payment mechanism for their goods and services.
• Acquirers are the financial institutions that solicit merchants to accept Visa cards. They offer Visa network connectivity and payments acceptance services to the merchants. They establish merchant discount rates for card acceptance.
• Acquirer Processors are the third party institutions with proprietary technology platforms to handle the transaction processing for those acquirers that do not have in-house capabilities. Acquirers often outsource the transaction processing to the acquirer processors.

A typical Visa transaction begins when the cardholder presents a Visa-branded card to a merchant for the payment of goods or services. The first step of the transaction is the authorization.

It is the process of approving or declining a transaction before a purchase is finalized. The following points illustrates the steps involved in the authorization process.

1. The cardholder provides a Visa card to the merchant for the payment. The merchant point of sale (pos) terminal reads the account number and other data encoded on the card’s magnetic stripe or electronic chip.
2. The merchant terminal transmits the card information and transaction amount to the acquirer or the acquirer processor.
3. The acquirer or acquirer processor combines the transaction information into an authorization request message and transmits it to Visa.
4. Visa identifies the appropriate card issuing bank and routes the authorization request to the issuer or the issuer processor for review.
5. The issuer or the issuer processor receives the request and then executes a series of inquiries into its account systems to assess the potential risk of fraud for the transaction; establish that the account is in good standing; and verify that the cardholder has sufficient credit to cover the amount of the transaction. Then it approves or denies the transaction and returns an authorization response message to Visa.
6. Visa routes the authorization response to the acquirer or the acquirer processor.
7. The acquirer or the acquirer processor transmits the result of the authorization request to the merchant terminal.

If the transaction is approved, the merchant delivers the goods or services to the cardholder. Now, the money needs to be transferred to the merchant account with the acquirer. This is part of the clearing and settlement process.

In the clearing process,

• The merchant transmits sales draft information for the transaction, including account numbers and transaction amounts, to the acquirer or acquirer processor.
• The acquirer or acquirer processor format this information into a clearing message and transmit it to Visa.
• Visa routes the clearing message to the card issuer and calculates the settlement obligation of the issuer and the amount due to the acquirer, net of certain applicable fees and charges.

In the settlement process,

• The issuer sends funds to Visa’s designated settlement bank in the amount of its settlement obligation.
• The settlement bank, in the direction of Visa, transfers funds due to the acquirer.

Now, what do issuers, acquirers, and Visa get out of this transaction? If the cardholder makes a $100 payment, it is not completely transferred to the merchant account as was informed by Ezassignmenthelp expert’s information.

The merchant gets the amount net of the merchant discount fee. If the merchant discount fee is 2.4%, then the merchant would receive $97.60 from the transaction.

The rest of $2.40 is split unevenly between the issuer and the acquirer, depending upon the interchange rate. In case of an interchange rate of 1.8%, the issuer will keep $1.80 and the acquirer will keep $0.60.

Issuer gets to keep more of the merchant discount fee because of a higher risk of payment default from the cardholder. Visa does not make money from individual transactions.

Instead, it earns revenues from the issuers and acquirers based upon the overall payment volumes and number of transactions processed.

Key Elements Of Visa Business Model

The primary customers of Visa are issuers and acquirers. Visa offers a wide range of branded payments product platforms to the issuers, which they use to develop and offer credit, debit, prepaid, and cash access programs for the cardholders (individuals, businesses, and government entities).

In addition, Visa provides transaction processing services (primarily authorization, clearing, and settlement) and various other value-added services such as risk management, debit issuer processing, loyalty services, dispute management, and value-added information services.

The primary customers of issuers are cardholders. Issuers issue cards to the cardholders and establish and maintain their accounts. Issuers establish applicable cardholder terms, including fees, interest rates, and payment schedules for cardholders.

During the payment transactions, issuers authorize cardholder transactions and fund settlement obligations for the cardholders’ purchases. Issuers collect the payments from the cardholder and assume the risk of non-payments or late payments from them.

The primary customers of acquirers are merchants. Acquirers provide the payments network connectivity to the merchants and establish and maintain their accounts.

Acquirers establish any applicable merchant fees and/or discount rates. During the payment transactions, acquirers receive settlement funds from issuers and credit merchants for the value of payment transactions.

Acquirers assume the risk of merchant non-fulfillment of transaction obligation. Acquirers assume the responsibility for merchant compliance with network security and other rules.

Visa generates revenues primarily from fees paid by the financial institutions based on payments volume (total monetary value of transactions for goods and services that are purchased with Visa-branded cards), transactions processed, and certain other related services.

Visa does not earn revenues from any of the following:

• Interest or fees paid by cardholders on Visa-branded cards. The issuers earn that.
• Discount fees paid by merchants for the acceptance of the payment. The acquirers earn that.
• Interchange fees. On purchase transactions, the acquirers pay an interchange reimbursement fee to the issuers. Although Visa administers the collection and remittance of interchange fees through the settlement process, Visa generally does not receive any portion of the interchange fees.

VISA operating revenues are principally comprised of service revenues, data processing revenues, and international revenues. These are reduced by costs incurred under client incentive arrangements.

• Service revenues. These are earned for providing financial institution clients with the support services for the delivery of Visa-branded payment products and solutions. These are generated from the payment volume on Visa-branded cards and payment products for purchased goods and services.
• Data processing revenues. These consist of revenues earned for authorization, clearing, settlement, network access, and other maintenance and support services that facilitate transaction and information processing. These are generated from the number of transactions processed.
• International transaction revenues. These consist of revenues earned for cross-border transaction processing and currency conversion activities. These are primarily generated from cross-border payments and cash volume.
• Client incentives. These consist of long-term contracts with financial institution clients for various programs designed to build payments volume, increase Visa-branded card acceptance, and win merchant routing transactions. These incentives are accounted for as reductions to operating revenues.

How Visa Business Model Is Different From American Express?

Visa and American Express both offer payment cards. But, their approach to making money is different.

Visa operates an open-loop network and has a transaction-centric business model. American Express operates a closed-loop network and has a spend-centric business model.

In a closed-loop network, payment services are provided directly to the cardholders and merchants by the owner of the network. American express acts as both the issuer and the acquirer.

American Express makes money primarily from the merchant discount fees. It focuses on generating revenues primarily by driving spending on its cards through attractive reward programs for card members.

This helps them earn more discount revenue from merchants. Hence, they have a “spend-centric” business model.

Open-loop networks are multi-party and operate through a system that connects issuers and acquirers. The network owner manages the information and flow of value between them. 

Visa operates an open-loop network. Visa does not make money from the merchant discount fees or cardholder membership fees. Merchant discount fees are split unevenly between the issuers and acquirers depending upon the interchange rate.

VISA earns revenue primarily on the payment volume and the transaction volume carried out through their cards. Hence, Visa has a “transaction-centric” business model

Mastercard

When most people think of Mastercard, Inc. (MA), they think of credit cards. While it’s true that the Mastercard brand is one of the top worldwide labels for debit, credit, and prepaid cards, Mastercard doesn’t consider itself to be a “credit card company,” per se.

Rather, Mastercard is a “technology company in the global payments industry,” according to its 2018 annual report. As such, Mastercard connects the many different participants in various kinds of transactions: consumers, merchants, financial institutions, governments, and more.

The large majority of Mastercard’s revenue comes from fees paid by its customers; in this case, its customers are not everyday consumers. Rather,

Mastercard’s customers are financial institutions like banks that pay a fee to issue credit and debit cards with the Mastercard brand. These fees can take multiple forms, as we’ll see below.

Much like Mastercard’s perennial competitor Visa Inc. (V), Mastercard enjoyed decades of privately-held success before an early 2000s initial public offering (IPO).

Indeed, Mastercard actually began as a response to what would eventually become Visa. When Bank of America Corp. (BAC) launched a bankcard in the late 1950s, a coalition of regional credit card providers came together to launch Mastercard in 1966.

At that point, it was known as “Interbank,” a reflection of the new card’s connectivity across different financial institutions. Since that time, the company has gone through numerous expansions and rebranding processes, but it has enjoyed consistent popularity among an increasingly global base.

Investors love MasterCard. The credit card operator reported revenues of $15 billion in 2018, a 20% increase over the previous year. As of July 22, 2019, Mastercard has a market capitalization of $284.4 billion. But for all the investor hype, end users seem equally satisfied. 

The seamlessness with which you make a Mastercard transaction belies a comprehensive network of merchants, financial institutions, and settlement banks, each of which receives a cut of a process that takes mere milliseconds. 

Mastercard’s Business Model

Mastercard facilitates transactions in more than 150 currencies across over 210 countries and territories.

Though the company does not have a monopoly on the payments industry—not only because of similar operations like Visa, but increasingly also because of new payment service providers as well—it is nonetheless hugely successful across the globe.

A big part of this success has to do with the Mastercard brand and the cache it holds.

A typical Mastercard transaction involves five parties: besides the payments processor itself, the event includes a consumer or account holder and his or her issuer bank, as well as a merchant and his or her acquirer bank.

Typically, an account holder uses a Mastercard-branded card to make a purchase with a merchant. Once the transaction is authorized, the issuer bank pays the cost of the transaction (less an interchange fee) to the acquirer bank.

The account holder is then charged the cost of the transaction, less a merchant discount. Interchange fees are key in providing value to merchants who accept Mastercard payment products; Mastercard does not generate revenue from these fees. The merchant discount fee helps to cover costs for the acquirer bank.

Where does Mastercard earn money in this system? Mastercard charges the financial institutions that issue cards a fee based on gross dollar volume, or GDV, of account holder activity.

The company also earns revenue from switched transaction fees covering authorization, clearing, settlement, and certain cross-border and domestic transactions.

Mastercard’s Domestic and International Fee Business

When you make a purchase with a Mastercard, you’re borrowing the funds from the issuing bank whose name is imprinted on your card.

There are thousands of such banks. Mastercard makes money by charging them to use its multi-noded, light-speed payment network.

The biggest distinction in Mastercard’s income statement is between intra-national revenue—fees charged to cardholders’ and merchants’ financial institutions, which are processed in the same country that a transaction takes place—and cross-border volume fees.

The former category, officially known as “domestic assessments,” accounted for $6.1 billion of MasterCard’s $21.8 billion in gross revenue for the latest fiscal year. As for cross-border volume fees, they totaled $5 billion.

Mastercard’s Transaction Processing Fee Business

MasterCard’s third major revenue category, called transaction processing fees, netted revenues of $7.4 billion in 2018. Those fees are charged to the merchants’ financial institutions and come in two subcategories: “connectivity” and “transaction switching.”

Connectivity fees come out of users participating in the Mastercard network, charging to use the network, and getting a cut of each step in the process.

Mastercard also collects a transaction switching fee every time the issuer receives an approval for authorization, every time the transaction information clears between the two parties’ banks, and every time the funds actually settle.

Again, these cuts are nanoscopic, but they amass. In fact, Mastercard’s transaction processing fees are increasing even faster from year-to-year than domestic assessments.

Future Plans

Mastercard sees one of its major advantages over up-and-coming payments systems its capacity to be a multi-rail network, covering domestic, cross-border, card-based, and account-to-account transactions.

In the future, the company will continue to develop and strengthen each of these channels.

For the traditional credit, debit, prepaid, and commercial products, the company will continue to offer consumers and financial institutions a greater variety of options, both in terms of the products themselves as well as in payment plans and systems.

Mastercard International

Key to Mastercard’s growth is diversification across new markets. In 2018, the number of UK banks participating in the company’s account-to-account debit service Pay by Bank grew to six.

France, Canada, and ten other countries are all in the pipeline as well. The company is also working to expand its services into countries like India and throughout Africa, where electronic payment services are minimal.

Key Challenges

Although Mastercard is a dominant player in the global payments services industry, it nonetheless faces significant challenges.

One of the biggest is government regulation; the company has faced numerous antitrust suits throughout its history, and regulation continually changes in many of the regions in which Mastercard does business.

It must remain flexible and vigilant to ensure its business thrives. Particularly given the company’s international and cross-border business, this is a crucial component of its continued success.

Maintaining the Mastercard Appeal

Mastercard must continue to provide an enticing and worthwhile set of products to each segment of its transaction ecosystem.

Financial institutions must continue to believe that it is in their best interest to issue cards with the Mastercard logo, while merchants must be prevented from charging surcharges on products in order to offset fees.

Finally, cardholders must find the entire process to be simple, efficient, and competitive when compared with other payment systems.

Also, given the intense competition from both well-established rivals, as well as new technologies and companies, Mastercard must ensure that its offerings are at least on par with the competition, if not superior.

The Profit Drivers Behind Visa And Mastercard’s Success

There’re three ways in which fees are collected – service revenue, data processing revenue and international transaction revenue – and they form the pillars of both companies’ success.

Service Revenue

Service revenue is pegged to something called payment volume – meaning that more a product costs, the more Mastercard or Visa earn, albeit in small amounts.

It sounds nanoscopic at best, but every bit really does count.

In the fiscal year ended 30 Sep 2019, Visa processed US$8.8 trillion in transactions; Mastercard, meantime, processed around US$4 trillion for the year ended 2018. 

Then there’s the fact that both companies will never be impacted negatively by inflation. It isn’t that they’re resistant to inflation; rather, inflation only boosts their growth.

So if a kitchen mixer that cost $300 is now $500 as a result of consumer inflation, Visa and Mastercard earn more off it than before.

Data Processing Revenue

Data processing revenue refers to the fees collected based on the number of transactions made, rather than the value of each transaction.

These transactions could include transferring money to another bank account (think PayNow, or Mastercard’s own Mastercard Send), or approving a purchase between consumer and merchant – as in the case of Brenda successfully purchasing lipstick from Sephora.

At every step of the process, both companies collect a small fee – from authorising a transaction or transmitting transaction information between the issuer (e.g. Brenda’s bank-issued card) and acquirer (e.g. Sephora’s bank).

It’s only fair, given card-issuing entities are using these digital payment intermediaries’ brand and services.

International Transaction Revenue

We mentioned earlier Visa and Mastercard are resistant to inflation.

The irony, though, is the averse impact that a recession or a large-scale terrorist attack – anything that’d affect the global economy, really – would have on the digital payment giants.

Visa’s international transactions revenue totalled US$7.8 billion for the fiscal year ended 30 Sep 2019; meanwhile, Mastercard’s stood at US$4.9 billion for the year ended 2018.

To put things into perspective, these amounts made up roughly one-third of both companies’ revenue. It’s clear the two companies rely heavily on tourism to boost their cross-border and currency conversion revenue.

Sure, the likes of new-fangled multi-currency cards have eradicated needless conversion fees while youre on holiday, but they’re still powered by Visa and Mastercard.

The Future Of Visa And Mastercard

Exploring New Markets

Expanding into untapped or underdeveloped markets is an avenue Mastercard’s begun exploring; many parts of Africa and India, for instance, don’t yet offer electronic modes of payment.

Naturally, (my guess is) the move would begin in tourist-heavy spots, given the sizeable revenue Mastercard generates from overseas transactions.

Tightened Security

Then there’s Visa, whose country-specific plans to strengthen payment security are detailed in the so-called Future of Security Roadmap.

Among its initiatives are to devalue data by i) rendering stolen account details useless, and ii) better protecting personal data, such as bank account details.

Tokenisation

Tokenisation sounds like a bit of a confuzzling term, but it simply means that your account information – like your 16-digit account number – is replaced with a digital identifier. How’s that for a neat way of reducing the risk of fraud.

What Does MasterCard And VISA do?

MasterCard and Visa work very similarly to one another. They are payment networks, which process payments when you spend using your credit, debit or prepaid card.

Visa and MasterCard are both companies that handle transactions when you spend on your credit, debit or prepaid card. They’re the middlemen between you, your bank and a retailer.

Their process is to:

1. Check with your card provider if the transaction should be accepted or declined
2. Confirm to the retailer that your payment can be made
3. Process the payment between your card provider and the retailer.

They are the two biggest processing networks worldwide. They don’t issue credit cards, which is a common misconception about them. That’s the difference between Visa and MasterCard and other networks that handle card payments (like American Express and Discover).

Visa and MasterCard don’t give credit or cards whereas American Express and Discover (which is more commonly used in the USA), do offer credit and issue cards.

In the UK, credit cards are issued by banks and it’s the banks that set the fees and interest rates. The cards are co-branded, demonstrating the relationship between the card issuer and the processing network.

What is The Difference Between MasterCard And VISA?

The main difference between MasterCard and Visa is that they both offer different extra benefits and rewards.

They also have different security schemes.

And MasterCard offers price protection. If you pay for something on your Mastercard and then the price of it is reduced within 60 days, MasterCard will usually refund you the difference. But you should check your Visa card, too, as some card providers have similar price protection policies.

As they’re so similar, it’s best not to focus too much on the difference between Visa and MasterCard when you’re choosing. You’re better off finding the right card for your own personal situation and lifestyle. This might be based on the rates on offer, or perhaps the benefits. 

There’s hardly any difference between Visa and MasterCard when it comes to where you can use them.

Both Visa and MasterCard can be used almost anywhere globally that accepts card payments, either in store or online. It’s rare that a retailer would accept one but not the other, so it isn’t really a case of Visa vs MasterCard when it comes to where they’re accepted. Either would be a fine choice.

This isn’t the same for American Express. American Express is also a payment network. But it charges the retailer higher transaction fees to process your payment. That means some vendors don’t accept American Express because it costs them more.

If you want to use your card abroad, most countries accept Visa and MasterCard equally.

Is it Good to Have Both VISA And MasterCard?

If you are applying for your first card, remember that MasterCard and Visa are quite similar. You will want to look at the various benefits offered by the banks that issue the cards. If you are planning to keep a balance from month to month, you may want to consider a card with a low interest rate. If you are looking for rewards and are able to pay off the balance in full each month, a card with a good reward program may better fit you.

If you have a Visa and want another credit card, it may be wise to get a MasterCard (and vice versa). The same is true for banks. If you have a card from Chase, try looking into a different card issuer. Having variety will aid you should anything happen to one of the institutions. Also, since the different lenders are in competition, you may receive offers for better credit card deals in the future.

MasterCard and Visa are both solid credit card choices. Having a card from each company will give you more credit options. And having cards from different banks will get you access to the best reward programs, interest rates, and other benefits. Start looking online today. Then pick out the credit cards that work best for you.

How Does MasterCard And VISA Make Money?

Both Visa and MasterCard operate immense payment networks. They are, in every sense of the word, the middlemen. They don’t extend credit to a cardholder (in the case of a credit card), and they don’t send or receive payments from their own resources. They make money by facilitating transactions made with their products.

This is the big difference between Visa and MasterCard and more exclusive brands such as American Express and Discover Financial Services’ Discover. Those two typically operate as card issuers and creditors at the same time. Most American Express holders borrow money from the company when they swipe its plastic.

With Visa or MasterCard, here’s how the process goes. A cardholder pays for a good or service. That transaction is transmitted to the merchant’s bank (the “acquirer” in industry parlance), which relays it through Visa or MasterCard’s network to the financial institution that issued the purchaser’s card (the “issuer”).

If the cardholder has sufficient credit for the purchase (with credit cards) or the cardholder has enough money in their account (with debit/gift cards), the issuer authorizes the transaction. The acquirer then makes the final authorization.

Which is Better VISA or MasterCard?

For most people, it doesn’t really matter whether they get a VISA or a MasterCard. Both are equally secure and offer similar benefits. While VISA has a slightly higher market share and greater amount of transactions worldwide, both VISA and MasterCard are equally well-accepted by merchants.

Although MasterCard’s upper tiers provide a better set of benefits, there are a lot more perks offered by the issuing banks themselves. You really need to consider each card individually before applying. For example, banks often provide benefits like annual fee waivers, cashback promotions and sign-up bonuses, cash rebates, air miles, and even travel insurance.

At the end of the day, any real choice between the two networks should always come down to how the actual terms, benefits, and fees of a card fit with your budget.

Is MasterCard Owned by VISA?

Not at all. They are competitors. They are two separate entities, with both VISA and Mastercard being American companies, (and they are also listed as VISA and Mastercard respectively outside the US as well).

The reason why they are both mentioned in the same name comes from the fact that they operate in almost all the countries of the world. If a Bank is not working with VISA, then it is working with Mastercard and vice versa. Nowadays, many banks opt to work with both.

The naming of both VISA and Mastercard in the same sentence comes from the POS terminals industry salesmen, where the POS network operators had a great advantage in selling/leasing out POS machines that would capture and do transactions on both VISA and Mastercard, hence the terminology stayed from an acceptance point of view VISA/Mastercard.

Is VISA And MasterCard Better For International Travel?

Both types of cards are accepted widely around the globe, at tens of millions of merchants and in more than 200 countries. On rare occasions, certain merchants will strike deals with certain networks: The most famous U.S. example is Costco, which only accepts Visa cards.

In 2016, Visa accounted for $139 billion of worldwide purchase transactions, trailed by Mastercard with $67.3 billion. Since American Express and Discover aren’t accepted as widely, they only accounted for a fraction of that: $7.2 and $2.3 billion, respectively.

But aside from differences in acceptance and transaction volume, the main difference between Visa and Mastercard — and the one you’re most likely to notice — is that they occasionally offer slightly different benefits.

Does VISA Lend Money?

The broad term “credit card companies” includes two kinds of enterprises: issuers and networks.

• Issuers are banks and credit unions that issue credit cards, such as Chase, Citi, Synchrony or PenFed Credit Union. When you use a credit card, you’re borrowing money from the issuer. Retail credit cards that bear the name of a store, gas company or other merchant are typically issued by a bank under contract with that retailer. Hence these are often referred to as “co-branded” credit cards.
• Networks are companies that process credit card transactions. The major networks in the U.S. are Visa, Mastercard, American Express and Discover. American Express and Discover are both networks and issuers.

When you use a credit card, money moves electronically through many hands, from the issuer, through the network, to the merchant’s bank. The network also makes sure that the transaction is attributed to the proper cardholder — you — so that your issuer can bill you.

Where the money comes from

You are a key ingredient in a credit card company’s moneymaking recipe, as are the merchants where you use your cards.

Interest

The majority of revenue for mass-market credit card issuers comes from interest payments, according to the Consumer Financial Protection Bureau. However, interest is avoidable. Issuers typically charge interest only when you carry a balance from month to month. Pay your balance in full, and you’ll pay no interest.

Is MasterCard a Credit or Debit Card?

Many debit cards and credit cards have similar features. Typically, both cards carry the logo of a major credit card company, such as Visa or Mastercard, and both can be swiped at retailers to purchase goods and services. A debit card, however, uses funds from your bank account.

A credit card uses a credit line that can be paid back later, which gives you more time to pay. A customer’s credit line depends on their creditworthiness, and they can decide how and when to spend the line of credit and are usually billed on a monthly cycle.

A debit card may come with an overdraft line of credit connected to a customer’s checking account to cover overspending. A credit card has a specified amount of credit attached to it, and if a consumer tries to spend beyond the credit limit, the card will be denied.

How Much Does VISA Make on Each Transaction?

Earnings of VISA or MasterCard on transactions are known as Interchange. This is a tough question to answer because it is not fixed (it is not static).

Interchange fees are determined by a large number of complex variables. To simplify the cost for merchants, credit card companies compute interchange into flat rate plus a percentage of the sales total (including taxes).

It depends on Card Type, Business Segment, transaction type, etc. MasterCard and VISA change the percentage twice every year (generally in April and October)

A rough estimate would be 2% of the transaction amount. But VISA and MasterCard share a part of it with the card-issuing bank and other network partners.

How Much Cash Does VISA Have?

Visa cash on hand from 2007 to 2021. Cash on hand can be defined as cash deposits at financial institutions that can immediately be withdrawn at any time, and investments maturing in one year or less that are highly liquid and therefore regarded as cash equivalents and reported with or near cash line items.

• Visa cash on hand for the quarter ending March 31, 2021 was $19.446B, a 44.96% increase year-over-year.
• Visa cash on hand for 2020 was $20.942B, a 57.71% increase from 2019.
• Visa cash on hand for 2019 was $13.279B, a 0.6% increase from 2018.
• Visa cash on hand for 2018 was $13.2B, a 8.77% decline from 2017.

Which is The Cheapest Credit Card Processing Company?

When you’re looking for a lower-cost credit card processor, we recommend taking into consideration the rate, monthly fees, the features that come with your account, ease of use, and how much time it saves you.

What may be right for one business may be a terrible fit for another. Take a look at our list below and find out which one would be the best fit for your small business.

1. Payment Depot

We like Payment Depot’s model because it combines all your recurring fees (e.g., payment security, virtual terminal) into a single subscription fee, starting at $49/month for the basic plan. We also like that the company charges some of the lowest credit card processing fees with the elimination of the percentage markup.

In addition to its transparent pricing model, Payment Depot has numerous integrations, including:

• QuickBooks
• Authorize.Net
• Opencart
• WooCommerce

You can get set up right away with what you need and have plenty of options when it comes time to expand.

Payment Depot also offers a variety of reasonably-priced card processing hardware, including contactless readers.

With excellent customer support and consistently good reviews from merchants who use Payment Depot, we think this company offers some of the best value for the price.

2. Stax By Fattmerchant

Stax by Fattmerchant consistently ranks as one of our best-rated all-in-one merchant account providers. The company offers a 0% markup rate and a subscription pricing model. Plus, free invoicing, a virtual terminal, and POS software all come standard with the account.

Stax has subscription-based pricing — you’ll get processing for $99/month (if you process under $5 million annually) and the Stax Pay software package for $49-$129/month (depending on your subscription level). Don’t let that monthly fee discourage you. The truth is that the 0% markup could save a high-volume business so much money that it more than pays for the monthly fee.

We also like the robust feature set, including invoicing and billing features, inventory management, and advanced reporting. Stax also offers several add-on features if you need them, such as an ACH subscription, same-day funding, dispute manager, EBT processing, and more.

To adapt to changing consumer habits from the pandemic, Stax now offers an entire suite of products designed for brick-and-mortar merchants looking to move online and upgrade hardware to contactless payments.

Stax is a top processor pick because of its versatility, predictability, reliability, and value for many business types. Whether you run a standard retail business, an online store, a phone order business, a professional services business, or any other kind of business, we recommend Stax as a good place to start your search for a processor.

3. PaymentCloud

PaymentCloud is best for businesses in the high-risk category looking for reasonable rates and fees. With excellent customer support and a specialty in high-risk credit card processing, we find this company consistently delivers excellent value.

PaymentCloud doesn’t seem to take advantage of a high-risk business, unlike many other high-risk processors we’ve reviewed. The company keeps costs low by partnering with bigger banks to maximize the odds of your approval and ongoing stability. It also doesn’t have an exorbitant markup past the interchange fee.

The company offers a variety of tools for eCommerce sales, including:

• Shopping cart integration (e.g., Shopify, 3DCart)
• eCheck and ACH processing
• Payment gateway (e.g., Authorize.Net, USAePay)

You also have several options for card processing hardware for in-person sales, including contactless terminals. Keep in mind, though, that processing hardware ultimately depends on the back-end processor, so not every terminal or reader will be available to you.

4. Square Payments

Square is best for businesses looking for a robust feature-set for a small price tag. The Square POS is free and includes great security and features, such as reporting, free invoicing and virtual terminal, free email marketing features, and more.

While Square may not offer the absolute lowest credit card processing fees, Square is a third-party processor with convenience at the core of its service. As such, the company makes taking credit cards more accessible to small businesses. It also provides many features you won’t find anywhere else, and it doesn’t charge extra for them.

What we really love about Square are all of the free features that build on the overall value. At your dashboard, you’ll find the features we previously mentioned. You’ll also have built-in payment security, a customer directory, a free store website, and now Square Online Checkout — payment links or buttons you can place just about anywhere. Square was built with a very low learning curve in mind; the UI is incredibly easy to navigate and find what you need.

You can buy a variety of processing hardware from Square. It has a solution for contactless payments for every piece of hardware, including QR codes for mobile devices. You are pandemic-ready no matter which hardware you use.

5. National Processing

National Processing is best for those looking for the features and stability of a full-service merchant account. It offers:

• Low interchange-plus rates
• Ability to accept ACH/echecks
• Contactless payments-ready Clover hardware

National Processing has a great reputation, with few complaints and quite a bit of praise from customers — something we don’t often see with merchant account providers.

National Processing is a great service for businesses that want low-fee credit card processing from a reliable company. However, if you’re hoping for a software suite with POS analytics and lots of ancillary software options, you might want to consider Square. If you just want something secure to accept debit, credit, and ACH, you’ll likely be more than happy with National Processing.

How Many Transactions Does VISA Have Per Day?

Credit card payments in 2018 totaled $44.7 billion in the U.S. alone, according to The 2019 Federal Reserve Payments Study. The speed at which these transactions process is awe-inspiring. Credit cards can settle 5,000 transactions per second.

There were 368.92 billion purchase transactions for goods and services worldwide in 2018, according to 2020 research from The Nilson Report. If you divide that figure by 365, roughly 1.01 billion credit card transactions occur every day around the world.

Some 2.8 billion credit cards are in use worldwide, according to the Shift report cited above. Consumers in some countries are better at keeping credit card debt low, while others have more trouble. Out of the top 10 countries by gross domestic product:

• The U.S. has the highest average credit card debt.
• India has the lowest average credit card debt.

And then there’s China. With approximately $605 billion in revenue, China is the largest contributing country to global payment revenues in the world, according to the 2019 McKinsey Global Payments Map. In fact, it surpasses the United States by more than $100 billion.

As a payment transaction method, ApplePay is rising fast in the U.S. and beyond. In 2020, Forbes reported that:

• Apple Pay accounts for 5% of all global credit card purchase volume.
• Projections are that Apple will manage 10% of global credit card transactions by 2025.

A 2020 PYMNTS.com study also reported that ApplePay is on a major trajectory:

• 8% of users with ApplePay-enabled devices are utilizing the mobile wallet to make in-store purchases at the point of sale, compared with 5% in March 2020.
• In the U.S., 8 million consumers are equipped to use ApplePay to make payments at the physical POS in eligible store locations.
• ApplePay is poised to facilitate $889 billion in brick-and-mortar sales.

Does VISA Make Money on Debit Cards?

Visa makes its profits by selling services as a middleman between financial institutions and merchants. The company does not profit from the interest charged on Visa-branded card payments, which instead goes to the card-issuing financial institution.

Visa so dominates the market that it has only a handful of big rivals, including Mastercard Inc. (MA), as well as digital payments companies like PayPal Holdings Inc.

Which Bank Owns VISA Card?

Visa is the brand name of Visa International Service Association, a company owned by some 20,000 member banks that are licensed to issue Visa cards under their own names (for example, Bank of America Visa or Wells Fargo Visa). Visa International itself does not issue cards or provide credit to cardholders.

Rather, each member bank issues the cards, setting its own terms of agreement (such as the annual fee for using the card, the interest rate that will be charged on outstanding credit balances, and late-payment penalties) with cardholders.

Member banks are also responsible for contacting merchants with requests that they accept Visa cards and for providing the necessary technical support for these merchants to handle Visa purchase transactions.

The banks that issue Visa cards compete with one another for cardholders, yet they are all bound together by the need to cooperate so that participating merchants can take a Visa card issued by any bank.

What is The Difference Between a Credit Card Surcharge And a Convenience Fee?

Surcharges and convenience fees are ways for businesses to recoup some of the money they spend on processing fees. A surcharge is a fee you can add to every credit card purchase made by your customers. A convenience fee is a charge added when your customers make a purchase using a nonstandard payment type.

Both surcharges and convenience fees are regulated by credit card companies and governments, so it’s crucial to tell them apart if you plan on using one.

What is a surcharge?

Surcharges are regulated fees that some businesses add to every transaction where a credit card is used. Businesses can only choose to assess a surcharge to their customers when surcharges are legal in their state.

Surcharges are illegal in 11 American states and territories:

• California
• Colorado
• Connecticut
• Florida
• Kansas
• Maine
• Massachusetts
• New York
• Oklahoma
• Texas
• Puerto Rico

Both credit card companies and state governments regulate the terms of how and where surcharges may be used. So if you plan to assess a surcharge to your customers, it’s crucial that you talk to your credit card processing provider as well as seek additional legal counsel if necessary.

Read Also: Why do People Use Debit Cards Instead of Credit Cards?

Most credit card companies cap the surcharge total at 4%. That said, most states that allow surcharges give businesses the right to choose the transaction percentage assessed to customers.

What are convenience fees?

Convenience fees can only be charged when the method of payment is considered nonstandard. Movie theaters often charge convenience fees for tickets purchased online, for example, because box office ticket sales are considered standard.

The most common example of convenience fees, however, are fees assessed for nonstandard tax and tuition payments. A convenience fee may be assessed when, say, a credit card is used to pay tuition instead of cash, check, or an ACH transfer.

In fact, certain credit card companies regulate convenience fees to apply in only very specific situations. For instance, Mastercard allows convenience fees for only government, education, and tax-related payments.

Your credit card processing provider may have built-in convenience fee capabilities with their hardware and software, so you should call them before attempting to assess convenience fees. And again, be sure to get a legal opinion on whether you can assess convenience fees in your state.

Surcharges and convenience fees are different in both application and regulation. Convenience fees can be assessed only in special circumstances, while surcharges are assessed for every single credit card transaction.

Though surcharges and convenience fees offer a way to offset the cost of processing fees, they can be a legal pain to implement properly. Certain states outright ban extra fees, while other states heavily regulate them. So don’t go it alone—consult your credit card processing provider and get legal counsel before implementing either.