Still Learning: The Dominance of Visa, Mastercard, and PayPal

Still Learning

These notes are from an excellent piece by Tae Kim at Barron's on the domination of Visa, Mastercard, and PayPal in digital payments.

Visa and Mastercard take an average of just 15 basis points (0.15%) per transaction. The merchant gets 98%, and the bank that issued the card keeps about 1.5%.

A take rate that low gives little incentive for other players in the value chain (i.e. the merchant or the bank) to try and displace Visa and Mastercard.

Bitcoin is not a viable competitor at this time. Bitcoin's network could handle about 7 transactions per second today vs. 65,000 per second by Visa.

For banks like Chase that issue the cards, just 20% of their credit card revenue comes from the transactions themselves. Instead, the cards act as a lead generator for future loans and related fees.

Nearly 80% of the top 500 internet retailers offer the PayPal checkout button as an option.

That is 7x more than its closest competitor, Amazon Pay, at 11%.
Checkout represents 70% of PayPal's payment volume and 85% of its revenue.

Note: PayPal also owns Venmo.

43% of global consumer purchases in 2018 were made on cards. In 2010, it was just 28%

In the UK, for example, 60% of all payments in 2008 were made with cash. Last year, that had fallen to 28%. By 2028, it's projected to be only 10%
Global purchase volume on cards can continue to grow at least 10% per year for 5-10 more years.

For Visa, outside the U.S., tap-to-pay is used for almost half of in-person transactions.

Note: tap-to-pay credit cards are expected to be rolled out by the major banks by the end of this year.