Posted on April 15, 2023
The success behind two payment network giants
The use of credit and debit cards are not a new-age practice. In fact, people have started using cards as a standard mode of payment since the early 1900s. When we speak about cards, for an end customer, Visa and Mastercard remain the top-of-the-mind recall options. These card payment network giants are the most popular in the global market.
Around 200 countries across the globe accept these two card networks. Not a journey that can be summed up easily, but we bring you some key titbits for a light read and some much-needed inspiration!
What’s the core difference between both?
While both are payment processing firms and act as a bridge between merchants and banks, Mastercard issues licenses to financial institutions, whereas Visa offers membership via their member financial institutions that offer Visa cards.
Firstly, let’s dive into the world of Visa
Visa, an American financial corporation was founded in 1958 by Bank of America (BOA). From its inception to till date the number of transactions that Visa has under its name has touched the skies.
Known for being an innovative, reliable, and secure payments network, the working model of Visa is surely one to note.
A Visa transaction occurs when a customer pays for its services at a merchant using a Visa-powered card. Since Visa is not a bank and does not issue cards, it earns money by facilitating the transfer of funds between customers, merchants, and financial institutions.
For each card transaction, an interchange fee is charged between the acquiring (merchant bank) and issuing banks (customer bank).
Transaction fees, payment volumes, and value-added services such as dispute management, problem processing, information services, and loyalty programs among others contribute to Visa’s bottom line. All this revenue that is generated gets placed into different buckets such as service revenue, international transitional revenues, data processing revenues, and others.
Visa aims at becoming the go-to payment hub while simultaneously increasing the breadth and quality of the services it offers and it’s safe to say this payment network giant has got its path strong and covered.
Success for Visa can be attributed to a number of factors:
- Pioneering the credit card industry: Visa is one of the first companies to introduce the concept of a universal credit card and is a pioneer in the modern-day card industry.
- Global network of partnerships: With endless partnerships across financial institutions, merchants, and governments, Visa provides its services to a wide range of audience in a number of countries.
- Strong brand recognition: Visa has built a strong brand over the years, with high levels of consumer trust and loyalty which has been a key to its success.
- Strategic acquisitions: Over the years, Visa has made strategic acquisitions to expand its product offerings and market reach. For example, the acquisition of CyberSource, a leading provider of e-commerce payment management services, helped Visa expand its offerings in the digital commerce space.
- Strong commitment to security: Visa has a strong commitment to security and has implemented multiple measures to protect its customers’ financial information which have helped build trust in the Visa brand and maintain its position as a leader in the industry.
The mastermind of Mastercard
Mastercard was established in 1966 and is currently the second-largest payment processing company across the globe.
When talking about the business model of Mastercard, it resonates greatly with Visa. This company also acts as a go-between for customers, merchants, and financial institutions.
Mastercard, Maestro, and Cirrus are all payment brands that are used by Mastercard to provide their various services and solutions. With its central global payments network as its backbone, Mastercard facilitates a variety of payment options for its customers and merchants. An interchange fee is charged for every transaction that passes through its core network, which connects the card issuer and the merchant.
Mastercard’s business model relies on these primary revenue streams, with domestic assessments accounting for almost 45% of total revenue. Cross-border volume fee comes next in line, contributing to nearly 25% of the revenue. The transaction processing fee, including both domestic and cross-border transactions, also acts as a major revenue-generating factor.
Success for Mastercard can be attributed to a number of factors:
- Expansion into new markets: Since its arrival, Mastercard has continued to expand its presence into global markets, which has paved the way for the company to tap into a huge growth spectrum.
- Focus on innovation: With a strong culture of innovation, Mastercard has been at the forefront of developing new payment technologies that focus on meeting the evolving needs of the customers.
- Investment in security: By consistently investing in security and fraud prevention technologies, Mastercard has always put customer safety at its core.
- Strong financial performance: A combination of organic growth and strategic acquisitions has driven a solid financial performance for the company.
- An overall success: Mastercard has built a strong brand identity with a reputation for reliability, security, and innovation.
As of January 2023, Visa’s net worth is over $400 billion, and Mastercard’s net worth is over $300 billion. Keeping up with the rapid changes in the payment ecosystem, the leading card networks are always fine-tuning their offerings to better meet the demands of their customers.
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