Almost everyone carries a Visa or Mastercard and almost nobody can say what the company does. This explainer, written by an engineer with years in payments, starts with what card networks are not:

  • They do not issue cards — issuing banks do
  • They do not run checkouts or point of sale — processors do
  • They do not onboard or underwrite merchants — merchant acquiring does
  • They do not make cards or POS hardware

What is left is the network role, which breaks into four jobs:

  • Run the telecommunications network that forwards authorization messages between issuers and acquirers. Mastercard calls this “switching” — it sees itself as a network switch.
  • Coordinate the banking network. Settlement is done net: every participant’s debits and credits are totalled daily and money moves once. Visa also acts as an adapter between national banking systems, including currency conversion.
  • Set incentives through interchange and network assessment fees.
  • Set and enforce rules, with a dispute mechanism behind them.

The fee split on a $100 transaction is the part that surprises people. The merchant pays about 2.5%. The processor keeps 0.35%, the issuing bank keeps 2%, and the network takes 0.15%. The bank that everyone ignores captures most of the money, by an order of magnitude over the network — which is why rewards programs exist and why fintechs are racing into card issuing. Interchange is also a policy lever: it varies by card type, spend category, and transaction metadata, and the EU’s 0.3% cap is why European rewards cards are thin.

The settlement role is where the engineering scale shows. Visa’s 2024 filing puts average daily settlement exposure at $84.3 billion, peaking at $137.4 billion, with $11.2 billion of liquidity held specifically to cover a participant that fails to settle.

Disputes are also designed as an economic system rather than a policy afterthought. The issuer and acquirer exchange evidence until one accepts liability; if neither yields, Visa reviews the case and charges $600 ($1,000 for appeals), and the loser pays the transaction amount plus the fee. Merchants refund proactively because any dispute costs them $15-30 even when they win. Arbitration is not a fair system, the author notes, but it is an efficient one.

Worth reading if you work on systems that move money or messages between parties who do not trust each other — and as a reminder that “the network” here is three networks stacked: telecom, financial, and rules.