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Visa vs. MasterCard: What are they?

Curious about the differences between Visa and Mastercard. Firstly, let’s address the four major companies that the electronic payments industries are dominated by. These are American Express, MasterCard, Visa, and Discover. These four companies are responsible for handling the bulk of the world’s electronic payments.

What this implies is that all of Visa and MasterCard’s payments are issued through some form of co-branded relationship. Oftentimes, people have a number of these and get the benefits of all the cashback opportunities, rewards, and promotional benefits that the issuers have to offer. Credit unions and member banks are the ones who issue either MasterCard or Visa directly to customers. In many cases, these institutions do so through co-brand credit card partnerships with hotels, airlines, and national retailers.

Understanding the difference between Visa and MasterCard

Both MasterCard and Visa work exclusively as network processors and have a unique edge to them while operating differently. Both companies are also publicly traded.

For Visa, the trading symbol is V and its commands are $365 billion market capitalization. On the other hand, the MasterCard trading symbol is MA and it follows closely behind Visa with a market cap of $293 billion. Since neither of the companies entends credit or issued credit cards through a banking division, they both have a broad portfolio of offerings that are co-branded.

The business models of both these companies are also very similar. As specified earlier, they do not issue cards directly to their customers but, instead, partner with Credit unions and member banks who are the ones that issue either MasterCard or Visa directly to customers.

Setting the Terms and Conditions

The issuing financial institution sets the terms and conditions for the payment cards. This includes features like the electronic payment card’s fees, rewards, terms and conditions, and other features. Typically, retailers usually work through a third-party financial institution. When it comes to a credit card, the issuing bank is responsible for the interest rate structuring, the underwriting, and the overall development of the reward programs for these cards.

Those who issue these types of cards also offer other perks like fraud protection, identity theft business purchase discounts, and car rental insurance. While the difference between Visa and Mastercard’s interest rates, reward programs, and credit limits exist, the perks themselves are decided by the issuing institutions. On top of this, Visa and MasterCard compete for a co-branded relationship that will also take part in drafting the car’s terms.

Overall, the card payments industry is one that remains complex, involving merchant acquiring banks, merchants themselves, issuer banking, cardholders themselves, and the network processing chain. The network processors are specifically MasterCard and Visa, both of whom have the freedom to structure their fees in any manner that they see fit. The structuring and reporting make for one of the biggest differences between Visa and Mastercard cards.

Visa

With its total revenue of $23 billion and payments at a volume of $8.8 trillion in the year 2019, Visa is the second dominant electronic payments company currently on the market. Keep in mind that Visa’s core products include prepaid cards, debit cards, and credit cards. In addition to global ATM services and business solutions, the reportable business segments of the company are the following:

  • Data processing
  • Service
  • International Transactions
  • Other10

Both MasterCard and Visa earn the majority of their revenue from data processing fees and service fees, but both companies characterize these fees in a different way while also having their own unique fee structures. Service fees are charged to the issuer and are always based on card volume. In addition to this, both MasterCard and Visa charge data processing fees as well. These fees are charged to the issuer who will, in turn, retrieve these fees by charging merchants for each individual transaction.

Oftentimes, data processing fees are very small. They are fixed in nature and apply to transactions on a per transaction basis. Hence, data processing fees tend to cover the cost of providing transactional information that is communicated on the network. In general, Visa is known for offering three different types of card levels. These are infinite, signature, and base. Each of these categories comes with standardized provisions for its issuers.

MasterCard

In the financial year of 2019, MasterCard generated a sum total of $16.9 billion in revenue. Its core products include consumer debit, consumer credit, prepaid cards, and commercial products business. In fact, MasterCard has one reportable business segment that is referred to as ‘Payment Solutions’ which is broken out by geographies across the United States. Similar to Visa, MasterCard earns the majority of its revenue from data processing fees and services. However. as stated earlier, MasterCard characterizes its fees differently.

The service fees for MasterCard are negotiated and are calculated as a percentage of the global dollar’s volume. Data processing fees are known referred to as switching fees. These types of fees are fixed and small. They have a set cost per transaction and are charged to the issuer. MasterCard is known for offering three different card levels: base, world, and elite.

Now that we’ve established the essential differences between Visa and Mastercard, here’s how you can shop better using a Finserv MARKETS  credit card. Visit Finserv MARKETS, choose from India’s finest credit card providers to pick the card for yourself, and instantly get approved to convert any purchases into easy EMIs. What’s more - the process for applying for a credit card on Finserv MARKETS is completely paperless and hassle-free. Apply online to find the best credit card for you. 

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