What’s the point of Visa and Mastercard if it’s always from a bank? AmEx cards are produced and processed by them only and not any other processor, so why can’t banks make credit cards without Visa or Mastercard, or vice-versa?

Question

What’s the point of Visa and Mastercard if it’s always from a bank? AmEx cards are produced and processed by them only and not any other processor, so why can’t banks make credit cards without Visa or Mastercard, or vice-versa?

In: 942

Answer 1

Consider that the financial world operates on trust centers. In order to purchase something with a card, the person accepting the card has to trust that it’s valid and has sufficient funds.

Visa, MasterCard, and AmEx have an international reputation for being trusted by merchants that when they say a person has money and it can be moved it’s true. Financial Institutions can also be confident that requests for money are valid.

This is ultimately so the bank can attract customers by giving access to funds on a national and international scale and the merchant can sell to people in their shop from anywhere in the world.

Extras:

There are actually regional networks or trust centers that banks also partner with. NYCE and SHAZAM are two examples in the US. Typically, if a card is multi-branded (can check the backside of the card for other networks) it will first check if both the merchant and customer are on the regional network the merchant is connected to. If so, they will move the money.

If not, they will check if the one not on that network is on a regional network they partner with. IE the merchant is a NYCE processor and the customer is on SHAZAM they may have a reciprocity agreement.

If there’s no reciprocity, they kick it up to MasterCard or Visa for processing.

This process kind of changes with the introduction of the chip, since part of the rules for chip cards is if there’s an option it’s up to the cardholder.

Source: worked as a dev in payment processing for the better part of a decade.