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Viewsews
Vi
Brand value their own transactions, which is why they are exempt from heir own transactions, which is why they are exempt from
Brand value
t
D
Durbin Amendment debit card pricing caps.urbin Amendment debit card pricing caps.
and full disclosure
and full disclosure Visa's revenueisa's revenue
V
N
Keep in mind that electronic payment solutions account for hat electronic payment solutions account for
Keep in mind t
By Brandes Elitchy Brandes Elitch
B Now let's take a look at how Visa and MasterCard get paid. ow let's take a look at how Visa and MasterCard get paid.
mor
more than 60 percent of the personal consumption expen-e than 60 percent of the personal consumption expen-
C CrossCheck Inc.rossCheck Inc.
ditur
ditures (PCE) in the United States. PCE as a percent of es (PCE) in the United States. PCE as a percent of
F or the last 20 years, Sonoma County wineries have he last 20 years, Sonoma County wineries have available after taxes) has been about 94 percent in the last has been about 94 percent in the last
actual disposable income in the United States (the amount posable income in the United States (the amount
actual dis
or t
available after taxes)
produced what our local wine expert, Dan Berger, roduced what our local wine expert, Dan Berger,
p
f
few years. So we're talking about a lot of volume.ew years. So we're talking about a lot of volume.
calls "mammothly constructed red wines, with alls "mammothly constructed red wines, with
c
F impact, power, and pizzazz, and a slathering of impact, power, and pizzazz, and a slathering of
Keepin
oak,
oak, high alcohols, and softness." This is what American high alcohols, and softness." This is what American Keeping it simple, I'll use a $100 transaction amount. Let's g it simple, I'll use a $100 transaction amount. Let's
assume t
c consumers seem to prefer when you are talking about a onsumers seem to prefer when you are talking about a assume the average fully loaded rate a merchant pays is 2.5 he average fully loaded rate a merchant pays is 2.5
p
$50+ bottle of wine. They want something natural and 50+ bottle of wine. They want something natural and percent. The card brand would get 12 cents. The bank that ercent. The card brand would get 12 cents. The bank that
$
issued the card used would get $1.50. The processor would
or issued the card used would get $1.50. The processor would
organic that fits their notions of what a good wine should ganic that fits their notions of what a good wine should
get 11 cents. Finally, of particular interest to this audience,
b
be – without additives or enhancements (except perhaps e – without additives or enhancements (except perhaps get 11 cents. Finally, of particular interest to this audience,
the acquirer and the ISO would get 77 cents to share.
sulfur dioxide as a the acquirer and the ISO would get 77 cents to share.
sulfur dioxide as a preservative). preservative).
The card brands are surprisingly profitable. Visa has a total
But things are not always what they seem. Winemakers hings are not always what they seem. Winemakers
But t The card brands are surprisingly profitable. Visa has a total
value of close to $150 billion, yes, billion. Its share of mar-
ar
are not required to list all ingredients they use in addi-e not required to list all ingredients they use in addi- value of close to $150 billion, yes, billion. Its share of mar-
ket is almost 15 percent, according to CSIMarkets Inc. data.
tion to grapes and
tion to grapes and yeast. Due to genetic variations in yeast. Due to genetic variations in ket is almost 15 percent, according to CSIMarkets Inc. data.
Visa's net profit margin rose from 27 percent in 2008 to 40
taste buds, many consumers can't discern the effects of y consumers can't discern the effects of Visa's net profit margin rose from 27 percent in 2008 to 40
taste buds, man
percent in 2012.
additives an percent in 2012.
additives anyway. They habitually buy the same brands, yway. They habitually buy the same brands,
and a few brands dominate the landscape. You could say he landscape. You could say
and a few brands dominate t
One analyst, Alexander Poulos, characterized Visa as "a
a similar situation exists in the payments industry. It's all he payments industry. It's all
a similar situation exists in t One analyst, Alexander Poulos, characterized Visa as "a
cash flow machine with miniscule capital expenditure
a cash flow machine with miniscule capital expenditure
about branding.bout branding.
requirements and a balance sheet devoid of any long-term
requirements and a balance sheet devoid of any long-term
Dual dominanceual dominance
D debt." This advantage allowed Visa to triple its dividend
debt." This advantage allowed Visa to triple its dividend
in the 2008 to 2012 period. About 40 percent of Visa rev-
in the 2008 to 2012 period. About 40 percent of Visa rev-
Visa Inc. and MasterCard Worldwide are brands. The isa Inc. and MasterCard Worldwide are brands. The enue comes from assessment fees, 30 percent comes from
V
enue comes from assessment fees, 30 percent comes from
h transaction fees and the remaining 25 percent comes from
heavy lifting is done by the issuing banks that underwrite eavy lifting is done by the issuing banks that underwrite
transaction fees and the remaining 25 percent comes from
consumer and business credit cards. This is called "credit nsumer and business credit cards. This is called "credit
co cross-border fees.
cross-border fees.
r risk," and it is very real. isk," and it is very real.
More than half of Visa's gross dollar volume is generated
More than half of Visa's gross dollar volume is generated
Bank regulators would expect a bank to have much egulators would expect a bank to have much in the United States and is evenly split between debit and
Bank r
in the United States and is evenly split between debit and
less than 1 percent of its loans on nonaccrual, or they han 1 percent of its loans on nonaccrual, or they credit cards. Visa has long-term contracts with over 600
less t
credit cards. Visa has long-term contracts with over 600
wou financial institutions and accounts for 22 percent of all per-
would come under some intense regulatory supervision. ld come under some intense regulatory supervision.
financial institutions and accounts for 22 percent of all per-
H sonal consumption expenditures in the country, according
However, a large credit card issuer might have 4 percent of owever, a large credit card issuer might have 4 percent of
sonal consumption expenditures in the country, according
i
its loans on nonaccrual – a big difference. ts loans on nonaccrual – a big difference. to Trefis analysts. This is a mind-boggling statistic.
to Trefis analysts. This is a mind-boggling statistic.
M
The card issuing business is dominated by a handful of
The card issuing business is dominated by a handful of MasterCard's revenueasterCard's revenue
large commercial banks and a few nonbanks. The barriers
large commercial banks and a few nonbanks. The barriers
M
to entry are insurmountable – you would have to have MasterCard went public in 2006. Since then, its stock asterCard went public in 2006. Since then, its stock
to entry are insurmountable – you would have to have
h
millions of cards outstanding to make a go of it. When the
millions of cards outstanding to make a go of it. When the has gone up 1,400 percent (this is not a misprint). For as gone up 1,400 percent (this is not a misprint). For
M
brands were "Associations," owned by the member banks,
brands were "Associations," owned by the member banks, MasterCard, the average compounded annual dividend asterCard, the average compounded annual dividend
gr
the large issuing banks ran the show.
the large issuing banks ran the show. growth over this period has been 31 percent. Nearly 40 owth over this period has been 31 percent. Nearly 40
percent of MasterCard's revenue is generated in the United ercent of MasterCard's revenue is generated in the United
p
States. Assessment
It's not an exaggeration to say the acquiring side – what States. Assessment fees account for 30 percent of revenue, fees account for 30 percent of revenue,
It's not an exaggeration to say the acquiring side – what
transaction fees account for anot
ISOs do – was an afterthought for the brands. In fact,
ISOs do – was an afterthought for the brands. In fact, transaction fees account for another 30 percent and cross-her 30 percent and cross-
b
The Green Sheet was started to give ISOs the information border fees are 25 percent. order fees are 25 percent.
The Green Sheet was started to give ISOs the information
they needed to run their businesses, because the brands
they needed to run their businesses, because the brands
Consumer credit cards account for half the gross dollar
ignored them.
ignored them. Consumer credit cards account for half the gross dollar
value processed, debit cards account for 40 percent, and
value processed, debit cards account for 40 percent, and
commercial credit cards account for 10 percent. MasterCard
These brands don't actually process transactions; that is
These brands don't actually process transactions; that is commercial credit cards account for 10 percent. MasterCard
charges an authorization, settlement and switch fee of
done by the large processors − again a business of very
done by the large processors − again a business of very charges an authorization, settlement and switch fee of
about 8 cents per transaction and a connectivity fee of 8/10
large scale. Just to be clear, Discover Financial Services and
large scale. Just to be clear, Discover Financial Services and about 8 cents per transaction and a connectivity fee of 8/10
of a cent.
American Express Co. operate differently. They are brands,
American Express Co. operate differently. They are brands, of a cent.
too, but they carry their own credit risk, and they process
too, but they carry their own credit risk, and they process
Trefis estimated that if disposable income in the United
Trefis estimated that if disposable income in the United
28
28
Vi
Brand value their own transactions, which is why they are exempt from heir own transactions, which is why they are exempt from
Brand value
t
D
Durbin Amendment debit card pricing caps.urbin Amendment debit card pricing caps.
and full disclosure
and full disclosure Visa's revenueisa's revenue
V
N
Keep in mind that electronic payment solutions account for hat electronic payment solutions account for
Keep in mind t
By Brandes Elitchy Brandes Elitch
B Now let's take a look at how Visa and MasterCard get paid. ow let's take a look at how Visa and MasterCard get paid.
mor
more than 60 percent of the personal consumption expen-e than 60 percent of the personal consumption expen-
C CrossCheck Inc.rossCheck Inc.
ditur
ditures (PCE) in the United States. PCE as a percent of es (PCE) in the United States. PCE as a percent of
F or the last 20 years, Sonoma County wineries have he last 20 years, Sonoma County wineries have available after taxes) has been about 94 percent in the last has been about 94 percent in the last
actual disposable income in the United States (the amount posable income in the United States (the amount
actual dis
or t
available after taxes)
produced what our local wine expert, Dan Berger, roduced what our local wine expert, Dan Berger,
p
f
few years. So we're talking about a lot of volume.ew years. So we're talking about a lot of volume.
calls "mammothly constructed red wines, with alls "mammothly constructed red wines, with
c
F impact, power, and pizzazz, and a slathering of impact, power, and pizzazz, and a slathering of
Keepin
oak,
oak, high alcohols, and softness." This is what American high alcohols, and softness." This is what American Keeping it simple, I'll use a $100 transaction amount. Let's g it simple, I'll use a $100 transaction amount. Let's
assume t
c consumers seem to prefer when you are talking about a onsumers seem to prefer when you are talking about a assume the average fully loaded rate a merchant pays is 2.5 he average fully loaded rate a merchant pays is 2.5
p
$50+ bottle of wine. They want something natural and 50+ bottle of wine. They want something natural and percent. The card brand would get 12 cents. The bank that ercent. The card brand would get 12 cents. The bank that
$
issued the card used would get $1.50. The processor would
or issued the card used would get $1.50. The processor would
organic that fits their notions of what a good wine should ganic that fits their notions of what a good wine should
get 11 cents. Finally, of particular interest to this audience,
b
be – without additives or enhancements (except perhaps e – without additives or enhancements (except perhaps get 11 cents. Finally, of particular interest to this audience,
the acquirer and the ISO would get 77 cents to share.
sulfur dioxide as a the acquirer and the ISO would get 77 cents to share.
sulfur dioxide as a preservative). preservative).
The card brands are surprisingly profitable. Visa has a total
But things are not always what they seem. Winemakers hings are not always what they seem. Winemakers
But t The card brands are surprisingly profitable. Visa has a total
value of close to $150 billion, yes, billion. Its share of mar-
ar
are not required to list all ingredients they use in addi-e not required to list all ingredients they use in addi- value of close to $150 billion, yes, billion. Its share of mar-
ket is almost 15 percent, according to CSIMarkets Inc. data.
tion to grapes and
tion to grapes and yeast. Due to genetic variations in yeast. Due to genetic variations in ket is almost 15 percent, according to CSIMarkets Inc. data.
Visa's net profit margin rose from 27 percent in 2008 to 40
taste buds, many consumers can't discern the effects of y consumers can't discern the effects of Visa's net profit margin rose from 27 percent in 2008 to 40
taste buds, man
percent in 2012.
additives an percent in 2012.
additives anyway. They habitually buy the same brands, yway. They habitually buy the same brands,
and a few brands dominate the landscape. You could say he landscape. You could say
and a few brands dominate t
One analyst, Alexander Poulos, characterized Visa as "a
a similar situation exists in the payments industry. It's all he payments industry. It's all
a similar situation exists in t One analyst, Alexander Poulos, characterized Visa as "a
cash flow machine with miniscule capital expenditure
a cash flow machine with miniscule capital expenditure
about branding.bout branding.
requirements and a balance sheet devoid of any long-term
requirements and a balance sheet devoid of any long-term
Dual dominanceual dominance
D debt." This advantage allowed Visa to triple its dividend
debt." This advantage allowed Visa to triple its dividend
in the 2008 to 2012 period. About 40 percent of Visa rev-
in the 2008 to 2012 period. About 40 percent of Visa rev-
Visa Inc. and MasterCard Worldwide are brands. The isa Inc. and MasterCard Worldwide are brands. The enue comes from assessment fees, 30 percent comes from
V
enue comes from assessment fees, 30 percent comes from
h transaction fees and the remaining 25 percent comes from
heavy lifting is done by the issuing banks that underwrite eavy lifting is done by the issuing banks that underwrite
transaction fees and the remaining 25 percent comes from
consumer and business credit cards. This is called "credit nsumer and business credit cards. This is called "credit
co cross-border fees.
cross-border fees.
r risk," and it is very real. isk," and it is very real.
More than half of Visa's gross dollar volume is generated
More than half of Visa's gross dollar volume is generated
Bank regulators would expect a bank to have much egulators would expect a bank to have much in the United States and is evenly split between debit and
Bank r
in the United States and is evenly split between debit and
less than 1 percent of its loans on nonaccrual, or they han 1 percent of its loans on nonaccrual, or they credit cards. Visa has long-term contracts with over 600
less t
credit cards. Visa has long-term contracts with over 600
wou financial institutions and accounts for 22 percent of all per-
would come under some intense regulatory supervision. ld come under some intense regulatory supervision.
financial institutions and accounts for 22 percent of all per-
H sonal consumption expenditures in the country, according
However, a large credit card issuer might have 4 percent of owever, a large credit card issuer might have 4 percent of
sonal consumption expenditures in the country, according
i
its loans on nonaccrual – a big difference. ts loans on nonaccrual – a big difference. to Trefis analysts. This is a mind-boggling statistic.
to Trefis analysts. This is a mind-boggling statistic.
M
The card issuing business is dominated by a handful of
The card issuing business is dominated by a handful of MasterCard's revenueasterCard's revenue
large commercial banks and a few nonbanks. The barriers
large commercial banks and a few nonbanks. The barriers
M
to entry are insurmountable – you would have to have MasterCard went public in 2006. Since then, its stock asterCard went public in 2006. Since then, its stock
to entry are insurmountable – you would have to have
h
millions of cards outstanding to make a go of it. When the
millions of cards outstanding to make a go of it. When the has gone up 1,400 percent (this is not a misprint). For as gone up 1,400 percent (this is not a misprint). For
M
brands were "Associations," owned by the member banks,
brands were "Associations," owned by the member banks, MasterCard, the average compounded annual dividend asterCard, the average compounded annual dividend
gr
the large issuing banks ran the show.
the large issuing banks ran the show. growth over this period has been 31 percent. Nearly 40 owth over this period has been 31 percent. Nearly 40
percent of MasterCard's revenue is generated in the United ercent of MasterCard's revenue is generated in the United
p
States. Assessment
It's not an exaggeration to say the acquiring side – what States. Assessment fees account for 30 percent of revenue, fees account for 30 percent of revenue,
It's not an exaggeration to say the acquiring side – what
transaction fees account for anot
ISOs do – was an afterthought for the brands. In fact,
ISOs do – was an afterthought for the brands. In fact, transaction fees account for another 30 percent and cross-her 30 percent and cross-
b
The Green Sheet was started to give ISOs the information border fees are 25 percent. order fees are 25 percent.
The Green Sheet was started to give ISOs the information
they needed to run their businesses, because the brands
they needed to run their businesses, because the brands
Consumer credit cards account for half the gross dollar
ignored them.
ignored them. Consumer credit cards account for half the gross dollar
value processed, debit cards account for 40 percent, and
value processed, debit cards account for 40 percent, and
commercial credit cards account for 10 percent. MasterCard
These brands don't actually process transactions; that is
These brands don't actually process transactions; that is commercial credit cards account for 10 percent. MasterCard
charges an authorization, settlement and switch fee of
done by the large processors − again a business of very
done by the large processors − again a business of very charges an authorization, settlement and switch fee of
about 8 cents per transaction and a connectivity fee of 8/10
large scale. Just to be clear, Discover Financial Services and
large scale. Just to be clear, Discover Financial Services and about 8 cents per transaction and a connectivity fee of 8/10
of a cent.
American Express Co. operate differently. They are brands,
American Express Co. operate differently. They are brands, of a cent.
too, but they carry their own credit risk, and they process
too, but they carry their own credit risk, and they process
Trefis estimated that if disposable income in the United
Trefis estimated that if disposable income in the United
28
28
