Visa vs. Mastercard: An Overview

The electronic payments industry is dominated by four companies. Visa, 澳洲幸运5官方开奖结果体彩网:Mastercard, 澳洲幸运5官方开奖结果体彩网:American Express, and Discover are responsible for handling the majority of the world’s card payments. Visa and Mastercard present distinct offerings, as neither company is involved with extending credit or issuing cards. This means that all Visa and Mastercard payment cards are issued through some type of co-branded relationship. While the two companies don’t extend c🌸redit or issue cards, they do partner to offer the broadest array of products encompassing credit, debit, and pr🌊epaid card options.

According to the Federal Reserve’s 2020 Diary of Consumer Payment Choice survey, 42% of Americans preferred to pay bills with a 澳洲幸运5官方开奖结果体彩网:debit card, while 29% used a 澳洲幸运5官方开奖结果体彩网:credit card, meaning that 71% had at least one or the other. Many people have a number of them, seeking to take advantage of all the rewards, cash back opport൲unities, a♍nd promotional benefits that issuers offer.

Credit cards often dominate the headlines, with nearly $1 trillion in outstanding 澳洲幸运5官方开奖结果体彩网:revolving credit balances as of the end of the first quarter of 2021. Consumers are easily familiar with debit cards, which, along with credit cards and other forms of non-cash payments, accounted for around 174.2 billion payment transactions in 2018—representing $97.04 trillion in value—annually, according to the 2019 Federal Reserve Payments Study (the most recent available). As the financial technology market evolves, more prepaid card offerings ar🐈e also being brought to market, generating around $294.44 billion in annual volume in 2020, an increase of 38.1% over 2019, no doubt fueled by the economic crisis of 2020.

Understanding Visa and Mastercard

Visa and Mastercard are the only network payment processors involved in all three areas of th🍬e payments market. Working exclusively as network processors, these two companies have a unique edge, but they operate differently.

澳洲幸运🍸5官方开奖结果体彩网:Visa and Mastercard are both publicly traded. Visa (trading symbol V) commands a $497.5 billion market capitalization, while Mastercard (trading symbol MA) follows closely behind at $359.8 billion (market caps as of May 18, 2021). As neither company extཧ൲ends credit or issues cards through a banking division, both have a broad portfolio of co-branded offerings.

The business models of both companies are very similar. Visa and Mastercard do not issue cards directly to the public but rather through partner member financial institutions such as banks and 澳洲幸运5官方开奖结果体彩网:credit unions. The member financial institution then issues cards for individuals and businesses, either directly or in partnershꦆip with airline, hotel, or retail brands.

Setting Terms and Conditions

The issuing financial institution sets the payment card’s terms and conditions, including fees, rewards, and other features. (Retailers usually work with a third-party financial institution.) For credit cards, the issuing bank is responsible for 澳洲幸运5官方开奖结果体彩网:underwriting, interest rate structuring, and the full development of rewards programs.

Card issuers can also offer other perks, such as 澳洲幸运5官方开奖结果体彩网:identity theft and fraud protection, car rental insurance, and business purchase discounts. While differences in interest🍎 rates, credit limits, rewards programs, and perks are controlled by the isꦬsuing financial institution, Visa and Mastercard compete for the co-branded relationship and take part in the drafting of card terms.

Overall, the card payment industry is complex, involving merchants, 澳洲幸运5官方开奖结果体彩网:merchant acquiring banks, issuer banking, network processing, and cardholders. Network processors, and specifically Mastercard and Visa, have𒁏 the freedom to structure their fees any way that they like. This structuring and reporting is one of the biggeဣst differences between the two largest network processors.

Visa Card Overview

In 2020, Visa generated $21.8 billion in net revenue with a payments volume of $8.8 trillion. Visa’s core products include credit, debit, and prepaid cards as well as business solutions and global ATM services. The company’s reportable business segments include the following:

• Service ($9.8 billion in 2020)
• Data Processing ($11.0 billion in 2020)
• International Transactions ($6.3 billion in 2020)
• Other ($1.4 billion in 2020)

Both Visa and Mastercard earn the majority of their revenue from service and data processing fees, but the two companies characterize these fees differently and 澳洲幸运5官方开奖结果体彩网:have their own fee structures. ൲Service fees are charged to the issuer and based on card volume.

Data processing fees are🥂 also generally charged to the issuer, who in turn retrieves these fees by charging merchants for each individual transaction. Data processing fees are typically very small, fixed fees, charged on a per-transaction basis, that cover the costs of providing transactional information communicated on the network.

In general, Visa is known for offering three card levels: traditional, signature, and infinite. These categories come with standardized provisions for issuers.

Mastercard Overview

In 2020, Mastercard generated total net revenue of $15.3 billion, with a payment volume of $6.3 trillion. Mastercard’s core products in🧸clude consumer credit, consumer debit, prepaid cards, and a🎉 commercial product business. Mastercard has one reportable business segment, known as Payment Solutions, which is broken out by geographies across the United States and other countries.

Like Visa, Mastercard earns the majority of its revenue from service and data processing fees. However, it characterizes the fees differently🗹. Service fees for Mastercard ❀are negotiated and calculated as a percentage of global dollar volume. Data processing fees are known as “switching fees,” which are a small, fixed cost per transaction charged to the issuer.

Mastercard is known for offering three card levels: standard, world, and world elite.