Visa And Mastercard Market Analysis

710 Words 3 Pages
Defining the Market
The four major purchase transactions worldwide in the consumer payment industry are done by Visa, MasterCard, Union Play and Amex. In 2014, together Visa and MasterCard represented about 84% of the market share (Visa with about 58% and MasterCard about 26% of the market share) (see appendix I). In the Notably, Visa and MasterCard are set up as a cooperatives of banks. According to mainstream economics, when firms instead of competing decides to collude. They may jointly agree to set prices and maximizer the sum of their profit (Varian 2009). On other words, monopolistic market market power.
For instance, the Visa and Card association have member banks, the “issuing banks” and the “acquirer banks” (see top member banks
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The price the consumer pays is transferred to the acquiring bank and then to the merchant. The merchant pays a merchant discount to the acquiring bank and the acquiring bank pays an interchange fee to the issuing bank. The card association (Visa and MasterCard) serve as a clearinghouse for each of these transactions and extract a small transaction fee from both sides. The card associations set the interchange fee, the others card business enterprises rarely deviate from set interchange fee. Member banks set the terms they charge to consumers and the merchants discount, as well as contract for extra benefit such as reward programs.” (Rysman 2007: pg. …show more content…
Foregoing the costs of windrowing, converting currency cash. And of course, it may also allow the consumer to sacrifice future consumption in order to increase present consumption. Likewise, the seller basic tradeoff in accepting a payment card is that acceptance may attract more consumers. Even more, the benefits in from lower cash holding, faster payment, easy accounting, saved trips to the bank. All these characteristics fall under “card usage” and both merchant and consumer pay a fee in exchange for the service. (Hesse and Soven 2006: pg. 553) (Bedre-Defolie and Calvano 2013: pg.

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