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I think you misunderstood the GP: there is debt, but it's owned by banks, not by VISA and MasterCard. They just provide the payment network.
by plonk 4y ago
I think you misunderstood the GP: there is debt, but it's owned by banks, not by VISA and MasterCard. They just provide the payment network.
- notch898a 4y agoDo the banks directly transfer to one another? I'm genuinely naive on this topic. I don't even get the value add of visa at that point.
- plonk 4y agoNot an expert either. As I understand it, credit card networks provide the infrastructure that lets entities settle payments: providing cards and authentication, routing payments from consumer's bank to seller's bank, handling clawbacks, etc. At world scale it's got to be a huge engineering problem.
- quickthrowman 4y agoYes, banks do net settlement with each other. They tally up all the debits and credits on both sides and then make a single transfer to settle between each other. Say Bank A owes Bank B $200, and Bank B owes Bank A $150. Bank A will send Bank B $50, as that is the net amount after subtracting 150 from 200. https://en.m.wikipedia.org/wiki/Net_settlement https://en.m.wikipedia.org/wiki/Net_settlement