What do Visa and Mastercard do? An intro to card networks

I play the credit card "game" because I hate feeling like I'm leaving money on the table, but I really wish I didn't have to. Some degrees of fees make sense, to run the network, and handle fraud, but it's ridiculous that people have this sense that shopping should somehow fund your vacation.

Where I am it's increasingly common to see credit card fees when checking out. I get it, because merchants are being charged 3-5% of their total revenue. I wish there was a low fee credit card network that merchants didn't charge a fee for, so I could continue the simplicity of digital payments but opt out of this crazy Visa Infinite rewards accounting boondoggle.

Well I don't really know what they do, but what I know is that Visa transactions costs are 0,22 € out of a payment of 1 €, Mastercard's is 0,23 €, and the French CB network is 0,17 €.

All of them do the same : ensure I get the money from the customer. Of course it's a larger project to run this in the whole world, but shouldn't it scale to less along with the number of billions of customers instead of the other way round ?

This is an insane amount of money. They killed micro-transactions, they killed the business model of the Web in favor of ads, the only popular way to do microtransactions right now.

Visa and Mastercard are legacy companies providing a service that is outdated in the modern world. China generally doesn't use Credit cards because when they "Modernized" there was new technology and infrastructure so you didn't need a nosey middel-man to handle the transaction. Instead they use apps. Scandinavia is hopefully moving away from these card-providers soon. They have the bankaxept system that works flawlessly in their area and have started introducing Apps for payments and microtransactions. For some reason some of the apps require a debit-card, but i hope they will drop that requirement soon.

I just hope these leeches on society will sone go bankrupt.

I remember reading a comment here a while back about merchants being offered a discount on the processing fee if they also transmitted detailed data about the purchase (essentially the data that would be on the receipt). That data could then be resold on to advertisers. Does anyone remember this or have links to more data? (Not having much luck with search, maybe I'm hallucinating the whole thing.)

There used to be an account on Twitter that was heavily involved in this industry. Every now and then I'd glean some slightly useful information from their posts. My favourite one being "the name verification isn't a thing - you can enter anything". So I've been doing that ever since and it's _always_ passed.

If anyone is interested in this topic from a historical standpoint, the Acquired episode on Visa is phenomenal: https://www.acquired.fm/episodes/visa

I find this interesting as a technology, as a business process, and above all as a system for managing trust on a global scale across different jurisdictions. In a sense, the credit card system accomplishes something that even the UN, international law, Interpol and military mights cannot do: it enables individuals to enter into trustworthy global agreements with minimal effort and risk, and at very low transaction costs.

The error that people make when criticizing card fees on merchants is that customers pay the cost. That’s not necessarily true.

There are benefits for merchants to accepting credit cards. More impulse buys, buying more per transaction. An owner may choose to absorb the merchant fee because the increase in sales (even at the lower profit per unit) means higher profits overall.

Accurate summary. Had been working on issuing side for almost 5 years. Some of the issuing providers offer really good APIs, some of them are really bad. But overall the card networks are easier to implement than parsing banking data directly

>The merchant pays 2.5%

The best way to pay for poor services already rendered and move on with life is to simply pay via card. Didn't like that haircut? Terrible food at the restaurant? Hold onto your cash and slip them the card.

I like the vibe and overall writing style of this blog! Keep up the short little segments. Charcoal Grill and Doing Things Ten Times are my favorites:

* https://tautology.town/2026/02/14/learning-charcoal-grilling...

* https://tautology.town/2026/04/03/ten-times.html

In brazil we have pix with 0 fees.

If AI becomes a true commodity do you think OpenRouter/Stripe will evolve into this type of network that visa/mastercard represent today?

VisaNet & friends make the modern consumer world go round. The fees they extract are a drop in the bucket compared to the economic activity that they enable with their networks. Many businesses simply couldn't exist without something approximating this.

https://investor.visa.com/news/news-details/2016/Visa-Commis...

> The issuing bank keeps 2%

Is this why the best cash back credit cards give 2%?

Related : GNU Taler.

You can apply to a fund to implement this system.

https://nlnet.nl/taler/

Credit cards are the OG of rent seeking for the 21'st century. They recognized upfront that no one would pay their ridiculous middleman fees so they backdoor-ed the fee with the merchants and had them pass it on in price. Its on of the most insidious extraction engines ever made, Jesus would definitely flip their tables lol.

Now they do all kinds of accounting tricks to pretend that they have thin profit margins because they split up every part of the business into hundreds of 1-3% chunks of the profit. To sidestep regulation that already barely exists.

In my opinion, the only solution is everyone (individuals as well as corporations) gets a direct account with the federal reserve as long as you can associate a taxpayer identification with the account. Using it is voluntary but it is free of cost, paid for by taxes, and moving money to and from accounts is free of cost. Depositors would get the same overnight interest rate that banks do, and this interest is added every day. I think if we could make this happen, the chokehold of Mastercard and Visa can be greatly diminished. The disintermediation of commercial banks, the loss of credit card perks, and the added cost of customer service should be an acceptable cost of removing the parasites visa and master card from our economy.

most importantly, this opens up a lot of money that the federal reserve can hold directly, something that will become more and more important as bond yields go sky high.

Aside from the technical aspect I strongly encourage everyone to also read about VISA’s founder Dee Hock, still a very underrated figure in leadership and finance.

How much do interchange fees increase prices in the US?

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Some light self-promotion but also longer term thoughts:

A large part of the promise of crypto and stablecoins was to displace Visa and Mastercard rent-seeking. This didn't seem to happen. Most modern neobanks, our own included (https://peanut.me), actually seem to EMBRACE Visa and Mastercard. Almost all offer an actual Fiat card within their app, instead of boldly saying "No, pay with crypto, the future of money!"

This is somewhat disappointing in the short term, but longterm i believe it offers a clear transitory path to full decentralized money adoption. Already today we're seeing a growth in direct peer to peer payments in peanut, and merchants slowly starting to adopt it as well. I imagine the same is happening across the industry. In a competitive economy, the better currency (read: crypto, stablecoins) wins and eventually absorbs adoption.

my 2 cents

Don’t forget arbitrage, which is the withholding of transferred funds for 7 days while the capital remains in visa’s accounts for “investing” / speculation.

It’s like if you gave your buddy $100 to give to his room mate, and he decides to wait a week and gamble it on Kalshi

They tax our entire economy at X rate, while maintaining their infrastructure only requires Y cost ... and X is significantly higher than Y.

From the actual article:

> The payment processor keeps 0.35% ($0.35), then pays 2% ($2.00) to the cardholder’s issuing bank and 0.15% ($0.15) to Visa. The 2% is the interchange fee, commonly known as interchange. The 0.15% is the network assessment fee. 8

In other words, they get 0.35% of every transaction ... and it does not require anything close to that to maintain their network.

in short they're TRUST networks.

which is also why crypto bros get confused.

Now try security of bitcoin

Europeans really need to stop handing their money over to Trump-Visa and Trump-Card here. Canadians learned that lesson already. Why do european politicians not learn anything? Leyen even signed a surrender treaty where european taxpayers lose money that goes into the USA. I say stop it with the proxy-control from Washington.

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TL,DR: They steal from businesses that take card payments with giant commissions.

You're welcome!

this article doesn’t do a good job of simplifying. the vast majority of Visa’s revenue comes from one thing called the ISO 8601 / ISO 20022 message, which is the name for a Visa’s authorization. the core service is transmitting this message between an issuer (cardholder bank) and an acquirer (merchant bank). all other revenue streams are basically a microservice on top of this core message transmission service.