Visa and Mastercard Sell Access to the Payment Rails (1 minute read)
Visa and Mastercard profit by operating the payment networks and charging usage fees, not by lending money like many assume.
What: An explanation of how Visa and Mastercard's business model works—they earn money by operating card networks and collecting assessment and usage fees at scale, while card issuers provide the credit and absorb fraud risk.
Why it matters: Clarifies a common misconception about payment networks versus issuers, helping developers understand the economic structure behind payment processing.
Takeaway: If you're building payment features, understand that network fees (Visa/Mastercard) are separate from interchange fees (which go to card issuers).
Decoder
- Interchange: The fee paid by the merchant's bank (acquirer) to the cardholder's bank (issuer), typically the largest portion of payment processing fees
- Acquirer: The bank or payment processor that handles card payments on behalf of merchants
- Issuer: The bank that issues credit or debit cards to consumers and fronts the money for transactions
- Assessment fees: The fees Visa and Mastercard charge for using their payment networks to route transactions
Original article
Visa and Mastercard do not earn money by lending, but by operating the card networks that route payments and collect assessment and usage fees at scale, while issuers supply the credit, absorb fraud risk, and capture most of the merchant fee through interchange.