Most people recognize Visa and Mastercard as payment card brands, but their actual function often remains unclear. According to a breakdown of card network operations, these companies are not card issuers, banks, payment processors, or merchant acquirers—roles filled by separate entities like Chase, Square, or Stripe.
Instead, Visa and Mastercard operate as card networks, facilitating transactions by connecting cardholders and their banks to merchants and acquiring institutions. This role encompasses four key responsibilities: running a telecommunications network to route transaction messages, coordinating a banking network to move money and settle transactions, setting incentives to encourage network participation, and establishing and enforcing network rules.
On the telecommunications side, card networks maintain highly secure data centers connected by leased fiber optic cables. Visa’s flagship facility, Operations Center East, spans 140,000 square feet and is designed to withstand earthquakes and winds up to 170 miles per hour. The facility features hydraulic bollards, security gates, roving security teams, and biometric scans. When a cardholder uses their card, the network routes an authorization request from the merchant to the issuer, which approves or declines it. The approved transaction places a temporary hold on the account. Later, when the final amount is submitted—such as after a tip is added—the money transfer, or clearing, is initiated.
On the banking side, Visa coordinates settlement by routing money between network participants. Rather than moving funds individually for each transaction, Visa performs net settlement daily, totaling each participant’s debits and credits and moving only the net amount. This approach simplifies operations and reduces friction. For international transactions, Visa acts as an adapter between banking systems, handling currency conversion and leveraging its global banking relationships. According to Visa’s 2024 SEC filing, the company held $11.2 billion in liquidity to cover daily settlements, with average daily settlement exposure of $84.3 billion in fiscal 2024.
Financially, card networks generate revenue through fees. In a typical U.S. credit card transaction, the merchant pays a 2.5% merchant discount rate. Of this, the issuing bank receives 2% as an interchange fee, Visa receives 0.15% as a network assessment fee, and the payment processor retains the remainder. The issuing bank captures the largest share because it traditionally bears most transaction risk, including credit risk and fraud liability.
Key facts
- Visa and Mastercard operate card networks that connect issuers, cardholders, merchants, and acquirers—they do not issue cards, process payments, or acquire merchants themselves.
- Card networks maintain secure telecommunications infrastructure and banking relationships to route transaction authorizations and settle money transfers.
- Visa held $11.2 billion in liquidity as of September 30, 2024, to cover daily settlement obligations, with average daily exposure of $84.3 billion in fiscal 2024.
- In a typical U.S. credit card transaction, the issuing bank receives the largest fee (2% interchange), while the network receives a smaller assessment fee (0.15%).