David Stepat, MSID, SID-AD’s Post

How does the worldwide card transaction landscape change with China's inclusion? UnionPay's meteoric rise tells a captivating tale. Let's look at the figures and see what it all means. Making Sense of the Data The annual worldwide transactions for Visa, Mastercard, UnionPay, American Express, and Discover from 2014 to 2023 are displayed in this visualisation created by Voronoi App. ## The Rise of UnionPay The international card transaction business, saw a dramatic change with the entry of UnionPay from China. In terms of transaction volume, UnionPay (established in 2002) overtook Mastercard in 2017. UnionPay came in second to Visa with 267 billion transactions globally by 2023, having logged 228 billion transactions worldwide. In addition, UnionPay's dominance in China and growing global reach have allowed it to surpass both Visa and Mastercard in terms of overall payment value. ## Yearly Breakdown of Transactions: - 2014: Visa (113B), UnionPay (20B), Mastercard (51B), American Express (7B), Discover (2B) - 2023: Visa (267B), UnionPay (228B), Mastercard (171B), American Express (11B), Discover (4B) ## The Dynamics of the Market China is UnionPay's biggest market. There, it links all ATMs and acts as the only interbank network. UnionPay mostly processes debit transactions, but its credit card offerings are expanding quickly as well. In the meantime, fintechs have changed from being competitors to partners with Visa and Mastercard which partnership demonstrates how Mastercard and Visa created the "highways" for the entire payments industry. ## China's Distinctive Position Given China's distinct economic landscape—where access to international card networks is restricted—UnionPay's growth is noteworthy and relevant. ## Things to keep in mind when considering "Internationalization" and accepted payment methods As someone who specializes in payments, I find these trends interesting. The numbers show that including China changes the global payment picture a lot, but it's harder to analyze because of the closed nature of China's economy. 1) UnionPay is so big because it's the top dog in China where other companies from outside face limitations. For businesses looking to grow in other countries, it might be smarter to focus on markets that let companies from all over compete. 2) While local ways to pay are getting more important, Visa and Mastercard are still the big players worldwide, if you don't count China. 3) To get a complete picture of the local and global market and to help you choose , think about both scenarios: with and without China. This two-sided approach, which recognizes China's special market features while focusing on useful insights for other global markets, helps companies make smart choices about expanding and adding new payment methods. ## What you should consider while thinking about "Internationalisation"? ## What are your thoughts on the expansion of UnionPay and its impact on the global payments landscape?

#Visa, #MasterCard, and related companies could potentially follow in the footsteps of once-dominant technologies like Polaroid and VHS, facing obsolescence. The rise of #openbanking and peer-to-peer (#P2P) transfers poses a significant challenge to traditional payment card networks. In today's digital age, the necessity of physical cards has dwindled considerably. These cards indeed represent a relic of the 20th century, as the world rapidly shifts towards more efficient and technologically advanced payment methods. The convenience, security, and cost-effectiveness of #digitalpayments and the emerging #blockchain and #cryptocurrency landscape could redefine how we transact, casting a shadow over the future relevance of credit and debit cards. However, it's essential to acknowledge that these companies have been proactive in adapting to this evolving landscape, incorporating digital solutions into their offerings to remain competitive in the ever-changing financial sector. Grab some popcorn and let's enjoy the show to see what unfolds! 🍿😄

Linked to my article last week on Financial inclusion... https://lnkd.in/eM2bbEfY Is Mastercard and Visa part of the problem? Because it sounds to me more like sour grapes rather than an actual objective opinion on the success of an innovative solution to a very real problem. The point of UPI has always been to drive digital payment adoption at a no or low cost. Something most regulators and fintech's are publicly aspiring to but very few are able to achieve. I have little doubt that the banks supporting the initiative have all benefited from the additional accounts that have been opened, the addditional data, the credit and transaction fees they've charged as a result. At the end of the day, it should not be about charging a fee for a basic human right but rather looking at how best you can build value adding solutions around it for which you can charge a fee, as PayTm have done with Soundbox.

VISA & MASTERCARDS WORST NIGHTMARE US talks a good game and many falsely believe Visa and Mastercard dominate the payments world Reality is totally different Two examples – also happen to have the biggest populations, China and India CHINA & INDIA Joint population 2.6 billion Alipay and WeChat in a little over 10 years are scaring anyone who cares to look  - 2021 Chinese mobile US$76 Trillion vs Visa global 2022 sales US$14.1 Trillion Even add MC/Amex/Discover/Diners you scrape up US$25 Trillion total - just 32% of China mobile Then look at India with Visa/MC are getting hammered (read pce) - similar in Korea local RTP is very strong Asia is the future growth in payments – the US could be locked out - now they wake up? #India #UPI #visa #mastercard #amex #discover https://lnkd.in/gijMBP7N

🚀 Mastercard has just unveiled a tie-up with China-based Alipay, setting the stage for an expansion in the global payments landscape. 💳 This strategic partnership marks a significant win for Mastercard as it offers a gateway to more than 1 billion user wallets. 🤝 By tapping into Alipay's extensive network, Mastercard not only strengthens its presence in China but also opens pathways to users in remote and/or underbanked areas. “That roadmap of making sure that we can service every single kind of payment to any endpoint — that’s what we’re working really hard on at this very moment,” Alan Marquand, Mastercard’s Head of Transfer Solutions, said in a recent interview. 🔍 As Mastercard takes a leap forward, the question arises: How will Visa respond to this strategic move? Dive deeper into the intricacies of cross-border strategies for payment giants here: https://lnkd.in/gdfm9w9m #FintechNews #Fintech #Mastercard #Alipay #Partnership #PaymentsInnovation #FinancialInclusion #Payments #Regulation #Compliance #Technology

Feeling the pinch: #Fintech businesses appear to be in need of consolidation as #payments plumbers' dream spring a leak. This piece in the weekend FT. Reading hardcopy but sure you can find a link online easily enough. As many of us have noted in presentations and news articles '[t]he once humdrum back office banking function has become an independent sector hungry for external investment. Share prices for new entrants like Adyen of the Netherlands and Block of the US soared during the pandemic as online payments boomed.' Then in 2022, a tech sell-off and worries about consumer weakness dragged shares down, Italy’s Nexi is one casualty with its shares trading below its 2019 listing price for most of this year. However speculation of a private equity bid sent them soaring last week. As per the FT article: "At its core, a payment is a communication between two banks; that of the merchant (known as the acquirer bank) and that of the customer (called the issuer bank). In between the two sit the card networks, the rails that allow banks to communicate. The best-known and biggest are Visa and Mastercard. National networks exist too, like UnionPay in China. A remaining challenge for fintechs is to break the power of the duopoly of Visa and Mastercard at the heart of retail payments. As Sir Ron Kalifa, who ran Worldpay after it was hived off from Royal Bank of Scotland, notes: “It takes an awful lot of engineering to connect every customer with every retailer in the world in the way Visa and Mastercard have done.” " If you don't have an online subscription, perhaps duck into local corner shop or petrol station to see if there are few copies of the ppaper still on the shelf.

Came across an insightful piece on Visual Capitalist comparing the transaction volumes of Visa, Mastercard, and UnionPay. It's fascinating to see how UnionPay's dominance in China significantly boosts its numbers, while Visa and Mastercard continue to expand their global influence. These trends highlight the dynamic nature of the global payments industry and the pivotal roles these companies play. As digital transactions become increasingly vital, understanding these shifts is crucial for anyone in fintech and financial services. https://lnkd.in/g6_9iWaS #Fintech #Payments #DigitalTransactions #Visa #Mastercard #UnionPay

When you have a good business model it can only be like this.

Why Mastercard and Visa Are Negotiating An Interchange Cap in China If you want to know what's next in payments, look for the clues left behind by those who move the industry. So when the news broke that MasterCard and Visa were negotiating with the Payment & Clearing Association of China to lower the interchange rates that apply to foreign shoppers when they purchase goods and services in China using their MasterCard or Visa card, I wasn't surprised. As a Payments Strategist, I anticipated this move ever since MasterCard's CEO announced that they were working with the government and business leaders, as well as collaborating with Alipay to allow international visitors to China to go cashless. This was further confirmed when Visa announced that they would allow international credit cards to be connected to Tencent's apps Weixin/WeChat and WeChat Pay As if that wasn't enough, Mastercard has taken an even more proactive approach by establishing a joint venture with NetsUnion Clearing Corp, leading to the formation of Mastercard NetsUnion Information Technology (Beijing) Co. Ltd., which allows MasterCard to start processing domestic payments in yuan. By also receiving the approval from the People's Bank of China Mastercard is now also allowed to clear payments domestically, which is unique for a non-Chinese card scheme. So why would both schemes entertain a proposal to lower the interchange rates, which are currently between 2 to 3%, as Chinese transactions qualify as an interregional transaction? In short: Collaborative Integration. From a Strategic perspective, MasterCard's strategy heavily relies on forming strategic partnerships (collaboration) with local entities such as AliPay and their JV with NetsUnion Clearing Corp. as they believe that is crucial to integrate within the Chinese payment ecosystem to expand their foothold in the Chinese market. The second component of their strategy focuses on seamlessly integrating their services within China's dominant digital payment platforms. By integrating within Alipay's platform and processing digital wallet transactions through its rails, it opens up a whole new market without disrupting how people pay or merchants accept payments in China. So is this similar to the EU and US Debit Caps? No. The majority of merchants, especially SMBs, in China, don't accept MasterCard and Visa due to their high fees, and because of the existing fully integrated infrastructures, they don't need to change. So, by proposing a cap on MasterCard and Visa interchange fees, the Payment & Clearing Association of China is actually helping the schemes capture more market share and indirectly stimulate travel to China. A Win-Win-Win-Win for China, the Schemes, the Merchants and Tourists. Let me know what you think about this expected cap. Do you think this will encourage more tourist-heavy countries to demand interchange caps? Check out my newsletter https://buff.ly/3RXzt7Z

Visa and Mastercard, two remarkable companies... ❌Are not banks ❌They don't issue cards ❌They don't provide credit & ❌They don't have a direct relationship with consumers or merchants They are basically #fintechs. Their role is to supply the technology and network infrastructure for banks to facilitate electronic transactions Some #Crazy Numbers: 🏆Visa ($530B market cap) is worth more than any #bank (10% more than JPMorgan Chase & Co. $480B market cap) and is 12th worldwide in the #marketcap ranking. 💰MasterCard ($395B), is worth significantly more than the 2nd most valuable bank worldwide (Bank of America, $265B), over 3X times American Express ($135B), and is 21st worldwide in the market cap ranking. 💵Visa's EBITDA margin on revenue for the trailing 12 months was an astounding 70%, while Mastercard's was 60%. Their EBIT margins were 67% and 57%, respectively. In comparison, among megacaps, only the Taiwanese semiconductor manufacturer TSMC, with a 68% EBITDA margin, rivals Visa and Mastercard in this metric, though it has a considerably lower EBIT margin of 46%. Saudi aramco's EBITDA margin is 54%, Microsoft is at 50%, NVIDIA 49%, Meta (Facebook) is 43%, Apple 33%, and Google 32%. 🥇Visa and Mastercard managed over💲23 trillion in gross transactions in 2022 (almost the size of the #US #GDP which was $25Tin 2022🤯 ) #Growth Prospects: 🌬️Visa and Mastercard have benefited from significant tailwinds. Factors such as the rise of 🛒 #ecommerce, COVID, increased preference for card over cash transactions, and government initiatives promoting electronic payments to combat tax and VAT fraud have all played a role. 🌱There's still significant room for growth in areas like traditional retail, expansion of ecommerce, & the transition of B2B or larger transactions to electronic formats. ⚠️#Threats to Consider: 🔏Regulatory Challenges:  there is a possibility that governments might attempt to break up the Visa and Mastercard duopoly 🌏Rising Competitors: China UnionPay, Alipay, and WeChat: In China, a near-cashless society, over 80% of daily consumption transactions occur on hashtag#mobile platforms, primarily through Alipay and WeChat Pay, which hold a combined 91% market share UnionPay accounted for 40% of global debit card purchase transactions, surpassing Visa (2022 #NielsenReport). UnionPay International has expanded globally, partnering with over 2,500 institutions and enabling card acceptance in 181 countries, with issuance in 79 countries. 🍎#ApplePay and #GooglePay: Currently serve fundamentally as wallets for Visa and Mastercard cards, and lack direct merchant relationships. But what could happen if they acquired someone like Square or PayPal (which have established merchant networks)? 🖍️PayPal: Presently processing "only" $1.3 trillion in transactions (although a significant increase from $150 billion a decade ago). PayPal could still emerge as a competitor in the future, but has a long way to go.