Their names are likely on that piece of plastic sitting in your wallet right now -- Visa, MasterCard, Discover, and American Express. No matter which one you have (or even if you have them all!), these companies have impacted the spending habits of people worldwide. Not all payment companies are created equally though. Each follows one of two business models that have come to set the basis for the payments industry. Understanding which business model is used is necessary for understanding any company in this space. Check out this slideshow to see just how these companies make their money by helping us spend ours.

1. Everything You Need to
Know About the
Payments Industry
In Pictures!

2. !
In any payment
transaction,
there are
four parties
Cardholder
Acquirer
Issuer
Merchant
(Cardholder Bank)
(Merchant Bank)

3. Based on these
four parties
there are
two transaction
party systems
Four Party System
Three Party System

4. The Four
Party System
Used by Visa and
MasterCard
Goods
or
Services
Presents
card
for payment
Bill for
payment
Payment for bill
Asks for
authorization
Approve/Denies
transaction
and
extends credit
Confirms
transaction
Pays
transaction fee

5. $The Four
Party System
These companies make
money from transaction fees
and volume fees.
!
These companies DO NOT
issue cards or extend credit.
Transaction fee!
and
fee based on!
gross dollar volume
$
Transaction fee!
and
fee based on!
gross dollar volume

6. The Three
Party System
Used by Discover and
American Express
Goods
or
Services
Present
card
for payment
Bill for
payment
Payment for bill
Confirms
transaction
Pays
transaction fee
Note:!
Issuer
and
Acquirer
are the same

7. The Three
Party System
These companies make
money from transaction fees
and volume fees.
!
Plus!!
!
These companies DO issue
cards and extend credit
$
Card fees!
and
Interest fees
$
Transaction fee!
and
fee based on!
gross dollar volume