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Four major brands continue to dominate the electronic payments industry, with Visa and Mastercard standing out as the two largest payment processing networks globally. Visa and Mastercard do not directly issue credit or debit cards. Instead, they operate as payment networks, facilitating transactions between banks and merchants for credit card purchases.
In the comparison of Visa vs. Mastercard, both companies offer a broad spectrum of products through co-branded relationships with financial institutions, including credit, debit, and prepaid cards. In this article, we’ll take a closer look at the differences between the two and let you know which one is right for you.
Visa vs. Mastercard: A Brief Overview
Since its establishment in 1958 by Bank of America, Visa has evolved into the largest credit card network, holding a 47% share of total card payments[1]The Ascent. “Credit and Debit Card Market Share by Network and Issuer.” Accessed on May 15, 2024.. Beyond its core credit card services, Visa provides a comprehensive suite of financial offerings. These include prepaid, debit, and credit cards, as well as supplementary services such as ATMs, retail partnerships, theft protection, and business analytics. Visa sustains its financial health by generating revenue through fees levied on card issuers to facilitate transaction processing.
Established in 1966 by a consortium of banks to challenge Visa’s dominance, Mastercard underwent a significant transformation in 2006. Through an initial public offering (IPO), it transitioned from cooperative ownership to a dynamic global payment technology platform. Besides issuing prepaid, debit, and credit cards, Mastercard provides a diverse range of global business and finance services. The company’s revenue model is multifaceted, relying on interchange fees charged to banks for card issuance and earning fees at various stages of the payment process.
Benefits of Visa
Visa offers a range of benefits through its three-tier structure: Traditional, Signature, and Infinite. At the Traditional level, cardholders can access cardholder inquiry, lost/stolen card reporting, and auto rental collision damage waiver services. Signature benefits include an extended warranty, year-end summaries, travel and emergency assistance, and a concierge service. Infinite benefits encompass all Signature perks and additional features such as return protection, purchase protection, travel insurance, trip interruption and cancellation insurance, and lost luggage reimbursement.
It’s worth noting that Visa’s benefits extend beyond what the company provides, as issuers may offer additional benefits. While Visa and Mastercard share some categories of benefits, Visa, particularly through its Signature and Infinite tiers, offers a more extensive array, including purchase protection, exclusive experiences, and rewards. Additionally, Visa provides special programs like the Visa Signature Luxury Hotel Collection and various travel perks. It also provides emergency services such as roadside dispatch and assistance for lost or stolen cards.
Benefits of Mastercard
Mastercard also provides cardholder benefits across a three-tier structure: Standard, World, and World Elite. Although most Mastercard-branded credit cards are issued by various banks and financial institutions (not by Mastercard itself), Mastercard still provides some benefits directly to cardholders.
At the Standard level, these include zero fraud liability, Mastercard Global Service for lost or stolen cards, ID theft protection, McAfee antivirus protection, and unique experiences through their “Priceless” program. The World tier includes Mastercard Travel & Lifestyle Services, trip planning, hotel rate guarantees, and luxury hotel benefits. The World Elite tier adds concierge services, Priority Pass Digital for airport lounge access, and exclusive partner discounts.
What are the Main Similarities between Visa and Mastercard?
The main similarities between Visa vs. Mastercard lie in their fundamental roles as payment networks rather than card issuers. Both companies don’t directly issue credit cards but provide the technology for banks to process transactions between customers and merchants. The issuing bank plays a more significant role in determining interest rates, fees, rewards, and perks associated with a credit card.
One of the primary shared characteristics is their near-universal acceptance globally. Almost every merchant that accepts credit cards typically takes both Visa and Mastercard, which makes them reliable options, especially compared to less widely accepted networks like American Express and Discover.
Visa and Mastercard don’t set the terms and conditions for fees and reward tiers. They offer various card categories, including low-fee, premium, rewards, and frequent flyer credit cards. The specific benefits and features depend on the issuing bank. Both networks provide security features such as purchase protection, cell phone protection, and return protection.
Moreover, both Visa and Mastercard have adapted to digital payment options, offering contactless and mobile payment solutions like Tap & Go Payments and support for Apple Pay, Google Pay, and Samsung Pay.
What’s the Difference Between Visa and Mastercard?
Three key differentiators set apart Visa vs. Mastercard. These distinctions include:
Benefit Structures: The primary differences between Visa and Mastercard are the benefits each network offers, these distinctions are generally minor. The majority of the features and perks you receive with a credit card are determined by the card issuer.
Acceptance and Market Share: Both networks are widely accepted globally, with Visa accepted in 200+ countries and Mastercard in 210 countries. Visa holds a larger market share in the USA, accounting for 61% (as of 2022), compared to Mastercard’s 25%.[2]Statista. “Visa, Mastercard, Amex, Discover market share against each other in U.S. 2007-2022“. Accessed on May 15, 2024.
Exclusive Partnerships: Both Visa and Mastercard have exclusive partnerships with various businesses to enhance their market presence. These partnerships are rare; however, most businesses accept both.
Visa and Mastercard vs. Other Networks
American Express vs. Visa vs. Mastercard
American Express stands out by functioning as both a card issuer and payment network, issuing its own cards and setting terms. In contrast, Visa and Mastercard serve solely as payment networks, with banks acting as card issuers.
While both Visa and Mastercard are widely accepted internationally, American Express falls short, being accepted in only 160 countries compared to 200+ for the others. American Express has stricter eligibility requirements, often requiring a higher credit score, and offers a more limited card selection compared to the extensive options available through Visa and Mastercard.
Discover vs. Visa vs. Mastercard
Discover, Visa, and Mastercard all operate as payment processing networks, managing credit and debit card transactions. Unlike Visa and Mastercard, Discover issues cards directly, overseeing both issuance and network processing. While Visa and Mastercard enjoy extensive global acceptance in over 200 countries each, Discover is more limited. Each network offers different benefits, with Discover being renowned for customer-friendly policies like no annual fees and cashback rewards. Discover sets its own eligibility criteria as a direct issuer, providing a more straightforward application process. In contrast, Visa and Mastercard collaborate with various banks, making the application process much more varied.
Visa or Mastercard: Which is Better?
Visa and Mastercard, two of the leading global payment processing networks, act as intermediaries between banks and merchants. While they don’t directly issue credit or debit cards, they offer tiered benefits: Visa with Traditional, Signature, and Infinite cards, and Mastercard with Standard, World, and World Elite cards. Both networks are widely accepted and support digital payments but differ in operational methods, fee structures, market shares, and exclusive partnerships.
Understanding these distinctions is crucial for consumers when choosing between Visa and Mastercard. As a business owner, selecting the right merchant service provider for credit card processing is vital. PaymentCloud can help optimize your payment processing, enhance security, and improve customer satisfaction. Let us assist you in making the best decisions for your business.
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Frequently Asked Questions (FAQ)
How do Visa and Mastercard make money?
Visa and Mastercard generate revenue primarily through fees imposed on card issuers to facilitate transaction processing. These fees include interchange fees, which are charged to banks for card issuance and are a significant source of income for both companies. Additionally, both Visa and Mastercard charge fees at various stages of the payment process, contributing to their overall revenue.
What is the biggest difference between Visa and Mastercard?
The primary difference between Visa and Mastercard is the benefits that each network offers, and these distinctions are generally minor. The majority of the features and perks you receive with a credit card are determined by the card issuer.
Are Mastercard and Visa owned by the same company?
No, Mastercard and Visa are not owned by the same company. They are two distinct entities and operate independently. Each company has its own corporate structure, governance, and ownership. While both are major players in the electronic payments industry and share similarities, they compete as separate entities.
