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I don't think this analysis is correct. While it's true many merchants pay 1-3% in processing fees, many of the costs involved are real. Building the network,
by tuna-piano 6y ago
I don't think this analysis is correct.
While it's true many merchants pay 1-3% in processing fees, many of the costs involved are real. Building the network, fraud, rewards to consumers, etc.
Visa's net income is roughly $11 billion a year[1], and they process roughly $11 trillion a year[2]. So their take is ~.1%, not 3-5%.
Note that this ignores that banks may make money off these transactions as well. May be better to look at Discover (the lender and the network) instead of Visa. But I'd think the total take from these companies is much closer to .1% than even 1%.
[1]https://finance.yahoo.com/quote/V/financials/ https://finance.yahoo.com/quote/V/financials/
[2]https://usa.visa.com/dam/VCOM/download/corporate/media/visanet-technology/aboutvisafactsheet.pdf https://usa.visa.com/dam/VCOM/download/corporate/media/visan...
- tempsy 6y agothe 3-5% number is just a reference to the total “tax” merchants pay for payment processing as a whole - I get that most of that is the interchange fee that is paid out to issuers. but Visa and MC are the ones who dictate the interchange fee rates that issuers receive outside of the Durbin Amendment which capped debit interchange for large banks.
- JAlexoid 6y agoYou seem to think that Visa is a bigger thing, than it actually is. That 3% is the total cost to the merchant. Visa is just a payments network. It is not the payment processor(the company that the card terminals connect to). They are not the issuer - the banks that charge as well. Visa facilitates integration between different payment processors and issuers, they don't even handle fraud or low level stuff.