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Visa Debit and Visa MasterCards Have Joined the Cryptocurrency Ethereum Market.

Visa vs. Mastercard: What’s the Difference?
Here’s a look at the world’s two largest payment card network processors

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Visa vs. Mastercard: An Overview
The electronic payments industry is dominated by four companies. Visa, Mastercard, American Express, and Discover are responsible for handling the majority of the world’s card payments.1 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.2 While the two companies don’t extend credit or issue cards, they do partner to offer the broadest array of products encompassing credit, debit, and prepaid card options.

According to the Federal Reserve’s 2020 Diary of Consumer Payment Choice survey, 42% of Americans preferred to pay bills with a debit card, while 29% used a credit card, meaning that 71% had at least one or the other.3 Many people have a number of them, seeking to take advantage of all the rewards, cash back opportunities, and promotional benefits that issuers offer.

Credit cards often dominate the headlines, with nearly $1 trillion in outstanding revolving credit balances as of the end of the first quarter of 2021.4 Consumers are easily familiar with debit cards, which, along with credit cards and other forms of noncash payments, generate around $174.2 billion in transaction volume—representing $97.04 trillion in value—annually, according to the 2019 Federal Reserve Payments Study (the most recent available).5 As the financial technology market evolves, more prepaid card offerings are 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 2020.6

KEY TAKEAWAYS
Visa and Mastercard are the two largest payment processing networks in the world.
Visa and Mastercard do not issue cards directly to the public, as Discover and American Express do, but rather through member financial institutions.
Member banks and credit unions issue Visa and Mastercard credit and debit cards directly to their customers and, in many cases, through co-branded credit card partnerships with airlines, hotels, and national retailers.
Understanding Visa and Mastercard
Visa and Mastercard are the only network payment processors involved in all three areas of the payments market. Working exclusively as network processors, these two companies have a unique edge, but they operate differently.

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).78 As neither company extends 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 credit unions. The member financial institution then issues cards for individuals and businesses, either directly or in partnership 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 underwriting, interest rate structuring, and the full development of rewards programs.2

Card issuers can also offer other perks, such as 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 issuing 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, merchant acquiring banks, issuer banking, network processing, and cardholders. Network processors, and specifically Mastercard and Visa, have the freedom to structure their fees any way that they like. This structuring and reporting is one of the biggest 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:9

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 have their own fee structures. Service 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.10

While Visa is larger in terms of transactions, purchase volume, and cards in circulation, Visa and Mastercard have nearly identical global merchant acceptance footprints.
Mastercard Overview
In 2020, Mastercard generated total net revenue of $15.3 billion, with a payment volume of $6.3 trillion.11 Mastercard’s core products include 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.12

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