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Visa (V) & Mastercard (MA) recently reported their performance.

Today, we’ll cover the following:

What is payment processing?
The role of Visa and Mastercard.
How they make money.
The future of payment processing.

It's easier than ever to buy things with just a few taps on your phone or a swipe of your card. But have you ever wondered how those transactions work behind the scenes? That's where Visa and Mastercard come in.

These two companies are the superheroes of the payment processing world, working tirelessly behind the scenes to ensure your transactions are seamless and secure.

In this article, we'll take a closer look at what payment processing is, the role of Visa and Mastercard, how they make money, and the most significant trends to watch for in the world of payment processing.

According to Kantar BrandZ, Visa and Mastercard were among the top 12 most valuable global brands in 2022.

By the end of this article, you'll better understand how payment processing works and why companies like Visa and Mastercard play such a crucial role in the world of finance and technology.

So let's get started!

1. What is payment processing

Imagine you're a small business owner with a bustling storefront. Every day, you welcome dozens of customers, each with their own preferred method of payment. How do you ensure each transaction is secure and processed quickly and efficiently?

Payment processing is the behind-the-scenes magic that allows businesses to accept various payment methods, including credit and debit cards. When a customer swipes their card, the payment information is sent through a network of banks and payment processors to ensure the transaction is authorized and the funds are transferred securely.

When you use your payment card to make a purchase, here's how it works:

Authorization: The first step is getting authorization from your bank or credit card issuer. When you swipe your card or enter your information online, the merchant sends a request to your bank to make sure you have enough funds to cover the purchase.
Clearing: Once your bank approves the transaction, the information is sent to the merchant's bank. This is called clearing, ensuring the funds are transferred from your bank to the merchant's bank.
Settlement: Finally, the funds are settled, which means they're transferred from the merchant's bank account to their business account. This can take a few days, depending on the type of transaction and the banks involved.

From online shopping to mobile payments, payment processing is critical to making our financial lives easier and more convenient.

There are six critical categories you should know in the payment ecosystem:

Acquirers enable merchants to accept electronic payments. They can be financial institutions or independent payment processors.
Payment Networks are companies like Visa and Mastercard that provide the infrastructure for payment processing and facilitate the flow of funds between acquirers and issuers.
Issuers are financial institutions that issue payment cards to consumers and are responsible for authorizing and settling transactions. They are the bank names on your credit card.
Gateways provide a bridge between merchants and payment networks or acquirers, allowing them to process payments online. They encrypt payment information and provide added features.
ISOs are third-party payment service providers that work with acquirers and payment networks to provide payment processing services to merchants.

Some companies cover several categories.

For example:

💳 Visa & Mastercard: Priceless

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