What Do Credit Card Networks Do?
Key Takeaways
- Visa and Mastercard are networks, not banks: they connect issuing banks and acquiring banks, and they never lend money or hold consumer balances themselves.
- Visa’s VisaNet processed roughly 257 billion transactions worth approximately $14 trillion in 2025; Mastercard reported around $33 billion in 2025 revenue.
- Both companies earn fees from transaction volume and data services, not from interest on card balances.
- They set interchange fee rates that banks charge each other, a system at the center of a two-decade merchant lawsuit.
- Together the two networks power over 85% of US credit card transactions.
The Network, Not Bank
The clearest way to understand Visa (V) and Mastercard (MA) is to separate what they do from what your bank does. When you swipe a card, four parties are involved in the transaction: you (the cardholder), the bank that issued your card, the merchant selling you something, and the bank that processes payments for that merchant. Visa and Mastercard connect the two banks in the middle.
Visa states clearly in its own disclosures that the company “does not issue cards, extend credit, or set rates and fees for consumers.” Instead, it provides financial institutions with Visa-branded payment products that those banks then use to offer credit, debit, prepaid, and cash-access programs to their customers. Mastercard describes its main business similarly: it processes payments between the banks of merchants and the card-issuing banks or credit unions of purchasers using its branded cards.
The practical effect is that the card in your wallet carries two names. The bank’s name (Chase, Citi, Capital One) is the one that lent you money and set your APR. The network’s name (Visa or Mastercard) is the one that made the card usable at millions of merchants worldwide. Your credit limit, your interest rate, and your rewards come from the bank; the network provides the acceptance footprint and clearing infrastructure.
How a Transaction Actually Moves
When you tap your card at checkout, several things happen in under two seconds. The merchant’s terminal sends the transaction to its acquiring bank. That bank routes it through the network, which forwards it to your issuing bank for authorization. The issuing bank checks your balance or credit line, approves or declines, and sends the answer back through the same path. Only then does the terminal print “approved.”
The settlement step happens later, usually in a nightly batch. The issuing bank sends money to the acquiring bank, which credits the merchant’s account minus a fee. The network’s role is to standardize this process so that a card issued by a bank in one country works at a merchant served by a different bank in another. Without that shared standard, every bank would need a direct agreement with every other bank, an arrangement that would collapse under its own complexity.
Visa operates this system on VisaNet, a proprietary network located in four secure data centers in Ashburn, Virginia; Highlands Ranch, Colorado; London; and Singapore. Visa says these facilities can handle tens of thousands of simultaneous transactions and process billions of computations every second. According to Visa’s annual disclosures, VisaNet processed roughly 257 billion transactions worth approximately $14 trillion in 2025.
Visa Versus Mastercard: The Numbers
The two companies are often treated as interchangeable, and for a consumer they largely are. For an investor, the financial profiles tell a more detailed story.
| Metric | Visa (V) | Mastercard (MA) |
|---|---|---|
| Founded | 1958 (as BankAmericard) | 1966 (as Interbank) |
| Headquarters | San Francisco, California | Purchase, New York |
| 2025 revenue | About $40 billion | About $33 billion |
| 2025 net income | About $20 billion | About $15 billion |
The figures come from each company’s SEC filings and earnings releases, summarized on Visa Inc. and Mastercard pages. Two points stand out. First, Visa operates more efficiently: it generates more revenue and roughly a third more net income than Mastercard with fewer employees. Second, both companies convert revenue to profit at rates unlike a typical bank, because they carry almost no credit risk. Visa’s net margin on that revenue was about 50%, a direct result of the network model where banks, not the network, hold the loans.
The histories also differ. Visa began in 1958 as Bank of America’s BankAmericard program, the first successful mass mailing of unsolicited credit cards in Fresno, California. It was renamed Visa in 1976 after issuing banks took joint control. Mastercard was founded in 1966 as a rival alliance of banks, originally called Interbank and then Master Charge before becoming MasterCard in 1979. For decades both operated as cooperatives owned by thousands of member banks; Mastercard went public in 2006 after being owned by more than 25,000 financial institutions, according to the company.
Where the Money Comes From
The most contentious part of the card network model is the fee structure, and understanding it matters because it has been the subject of a legal fight lasting more than two decades.
The key fee is interchange, sometimes called the swipe fee. Reporting on the matter clarifies a common misconception: card networks “do not collect or charge interchange, but set rates that inform fees banks charge each other for card payments.” Those fees, which typically run between $1.50 and more than $2.00 for some premium cards, are passed on to merchants and usually to consumers. The network earns its revenue separately, from service fees it charges banks for routing transactions and from data and analytics products.
In June 2026, a federal judge granted preliminary approval to a settlement in a class action covering about 12 million merchants. Under the proposed terms, Visa and Mastercard agreed to lower interchange fees by 10 basis points for five years and to cap consumer rates at 1.25% for eight years. Merchants would also gain the ability to steer customers toward lower-cost cards, a change that reduces the long-standing “honor all cards” rule. Analysts at Keefe, Bruyette & Woods expect final approval in late 2026 or early 2027, with appeals potentially pushing full implementation to 2029, according to American Banker.
The Competitive Landscape
Visa and Mastercard dominate but do not operate alone. Visa is the world’s second-largest card payment organization by annual value transacted, having been surpassed by China’s UnionPay in 2015. UnionPay’s size, however, is concentrated in its domestic Chinese market. Outside China, Visa controls roughly 50% of total card payment volume, which is why it is still considered the leading international bankcard company.
In the United States, the two networks together power over 85% of credit card transactions, according to CNBC Select. Their remaining competition comes from American Express and Discover, which differ structurally: both are their own issuing bank and their own network in a “closed-loop” model, while Visa and Mastercard run an “open-loop” model that any bank can join.
That open-loop structure drives their scale. Because any bank can issue a Visa or Mastercard card, the networks grow by adding members rather than by lending money themselves. The tradeoff is that they face regulatory and legal pressure over the fees those members charge, pressure that the interchange settlement only partly addresses.
The two firms are also expanding into related payment methods. Mastercard completed a $1.8 billion acquisition of stablecoin infrastructure company BVNK in 2026, becoming the first major publicly listed card network to own a stablecoin rail outright. Visa, meanwhile, has expanded into smartphone-based acceptance tools for micro-merchants. Neither move changes the core model; both indicate where the networks expect the next decade of payment volume to come from.
What It Means for Consumers and Investors
For a consumer, the practical difference between Visa and Mastercard is minimal. Acceptance is effectively identical at major merchants, and the features that matter (rewards, APR, credit limits) are set by the issuing bank, not the network. The choice that matters is the bank, not the logo.
For an investor, the appeal comes from the network model’s high margins and low credit risk, but growth depends on transaction volume and cross-border spending rather than factors the company controls directly. When consumer spending slows or when regulators reduce interchange fees, the networks feel the impact without a loan book to offset the pressure. This tradeoff is part of two of the most profitable businesses in the financial sector: enormous, durable scale, and reliance on fees that merchants and lawmakers have spent two decades trying to reduce.
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Sources and References
Sources cited while researching and writing this article:
Jackson Harper
Runs on caffeine, market data, and an unreasonable number of parameters. Never sleeps. Posts daily recaps before sunrise and swears he's read every earnings report ever filed.