How Mastercard and Visa Make Money & The Latest Payments News Updates

Hey Payments Fanatic!

Welcome to the inaugural edition of the "Connecting the Dots in Payments" newsletter. In each daily issue, I'll ensure you stay informed about the latest global payments updates and share a "golden nugget" to help you become more of a payments expert every day 😉

This newsletter is designed to be a quick read, just a few minutes each day, keeping you up-to-date and steadily enhancing your expertise in the payments industry.

If there are specific topics you'd like me to cover, or if you have interesting content or reports to share, please let me know. Your contributions can help enrich our payments community.

Interested in becoming a partner and getting your brand in front of the payments industry? Sign up here and I'll be in touch soon.

Enjoy the first edition, and be sure to subscribe so I can bring you more payments news and updates tomorrow!

Cheers,

Marcel

INSIGHTS

📊 Open Banking is already powering Account-to-Account (A2A) Payments across finance and retail applications, but what are the implications of the concept for cross-border payments now and in the future?

FXC Intelligence explored this in a new report, which includes insights from Plaid, Finastra, PPRO, and Thredd.

PAYMENTS NEWS

🇨🇦 Moneris and Square introduce Tap to Pay on iPhone in Canada. Canadian businesses can now accept in-person payments seamlessly and securely from most major contactless debit and credit cards, Apple Pay via an iPhone or Apple Watch, or other digital wallets directly on an iPhone. Tap to Pay on iPhone lets sellers accept contactless payments directly from their iPhone with no additional hardware or payment terminal required and at no additional cost.

🇨🇴 El Dorado, a platform that facilitates international payments and transfers using stable cryptocurrencies, has closed a seed investment round of $3 million. The Colombian paytech aims to grow its revenues by 900% in the region by 2024.

🇬🇧 Boodil has announced the launch of its new specialised payments platform developed for the travel industry, in collaboration with ‘The Advantage Travel Partnership’.  

🇨🇴 Fintech Lyra has integrated Apple Pay for payments with Visa and Mastercard in collaboration with local operators Credibanco and Redeban, becoming the only gateway to offer it in this manner, adding additional value to its customers.

🇺🇾 Fintech Kushki Announces Physical Card Integration with POS Terminals. For this, the firm plans to use the experience gained from the acquisition of the Mexican company Billpocket two years ago, with which it already has more than 500,000 terminals in operation.

🇪🇺 Scalapay, a Buy Now, Pay Later (BNPL) platform in Southern Europe, and Adyen announced the start of a strategic partnership that opens up new opportunities in the payments landscape. This collaboration will see Adyen processing installment payments made through Scalapay in Southern Europe and will allow its customers to access Scalapay's BNPL solution and benefit from all its features.

🇪🇺 Finastra partners with LGT to provide instant payment services in Austria and Liechtenstein. LGT will deploy Finastra’s payment hub using a model bank implementation approach to expedite its compliance with the EU instant payments regulatory timeline.regulatory timeline.

🇺🇸 Klarna labels CFPB BNPL rule 'baffling'. The US Consumer Financial Protection Bureau's new rule on buy now, pay later lenders has received a mixed reception from industry players, with Affirm welcoming the outcome but rival Klarna calling it "baffling".

🇺🇸 Affirm CEO Max Levchin on why he thinks CFPB regulation on BNPL is a 'good thing'. Watch the video here

🇬🇧Mastercard and Visa under fire from Payment Systems Regulator. The PSR in the UK has released an interim report focusing on Mastercard and Visa, revealing that the companies dominate the market, lacking effective competition in both core scheme and processing services, as well as some optional services.

🇧🇷 Centrobill has announced its offering of fully licensed PIX payments in Brazil in a move aimed at influencing the Brazilian fintech market. Read more

🇧🇷 PayRetailers Acquires Payment Company Transfeera in a Strategic Move to Expand Its Business in Brazil. In April, the company received a license from the Central Bank of Brazil to operate as a payment institution (IP).

GOLDEN NUGGET

How does VISA/Mastercard make money? This 6-step diagram shows the economics of the credit card payment flow.

1️⃣ The cardholder pays a merchant $100 to buy a product.

2️⃣ The merchant benefits from the use of the credit card with higher sales volume, and needs to compensate the issuer and the card network for providing the payment service.

The acquiring bank sets a fee with the merchant, called the “𝐦𝐞𝐫𝐜𝐡𝐚𝐧𝐭 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐟𝐞𝐞.”

3️⃣-4️⃣ The acquiring bank keeps $0.25 as the 𝐚𝐜𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐦𝐚𝐫𝐤𝐮𝐩, and $1.75 is paid to the issuing bank as the 𝐢𝐧𝐭𝐞𝐫𝐜𝐡𝐚𝐧𝐠𝐞 𝐟𝐞𝐞.

The merchant discount fee should cover the interchange fee.

The interchange fee is set by the card network because it is less efficient for each issuing bank to negotiate fees with each merchant.

5️⃣ The card network sets up the 𝐧𝐞𝐭𝐰𝐨𝐫𝐤 𝐚𝐬𝐬𝐞𝐬𝐬𝐦𝐞𝐧𝐭𝐬 𝐚𝐧𝐝 𝐟𝐞𝐞𝐬 with each bank, which pays the card network for its services every month.

For example, VISA charges a 0.11% assessment, plus a $0.0195 usage fee, for every swipe.

6️⃣ The cardholder pays the issuing bank for its services.

Why should the issuing bank be compensated?

► The issuer pays the merchant even if the cardholder fails to pay the issuer. ► The issuer pays the merchant before the cardholder pays the issuer. ► The issuer has other operating costs, including managing customer accounts, providing statements, fraud detection, risk management, clearing & settlement, etc.

Source: Alex Xu from ByteByteGo ➡️ Follow these accounts for more amazing updates like this one👌

Want your message in front of 100.000+ FinTech fanatics, founders, investors, and operators?

Shoot me a message on LinkedIn.