Visa, MasterCard, and American Express are three frontrunners in the world of payment processing. But how do they stack up against each other, and which one is best for your business? From fees to customer loyalty, these networks each bring unique strengths and challenges.
If you’ve ever wondered which card network delivers the most value or how they compare in terms of global reach, you’re in the right place. Let’s break it down and see what really sets them apart.
The Key Differences
Visa, Mastercard, and American Express are the most recognized names in the credit card industry, but each operates differently and offers unique benefits.
Before we dive into the specifics of each card network, let’s take a quick glance at the main differences between the three so you can compare and contrast what makes them stand out among their competitors.
How Each Card Network Operates
For merchants, understanding how these networks operate can make a difference in choosing the right payment options and managing costs. Visa, Mastercard, and American Express have distinct ways of processing payments, and their approaches come with different pros and cons for businesses.
When a credit card is used to make a purchase, the process that happens behind the scenes depends on the type of card payment model the network follows. Visa, Mastercard, and American Express each operate differently, and their models affect how payments are processed.
The 4-Party Model: Visa and Mastercard
Visa and Mastercard use what is called a 4-party card network. This model involves four main players: the consumer, the merchant, the issuer, and the acquirer. The card network acts as an intermediary between all these parties to ensure the transaction is processed smoothly.
Here’s how it works:
- The issuer, which is usually a bank or financial institution, provides a credit or debit card to the consumer.
- When the cardholder makes a purchase, they swipe or insert their card at the Point of Sale (POS) terminal provided by the merchant’s acquirer.
- The POS terminal sends the transaction details to the acquirer (the merchant’s bank or payment processor).
- The acquirer forwards the transaction to the card network (Visa or Mastercard), which then routes it to the issuer for approval.
- If the issuer approves the transaction, the funds are frozen, and the approval flows back through the network to the acquirer and the POS terminal. The payment is then completed, and the funds are eventually transferred to the merchant.
This multi-step process allows Visa and Mastercard to work as middlemen, connecting banks, consumers, and merchants. Because they are not directly involved in issuing cards or acquiring merchants, they rely on partnerships with banks and other financial institutions. This model also helps them maintain their vast acceptance in over 200 countries.
The 3-Party Model: American Express
American Express uses a 3-party card network, which simplifies the process by taking on multiple roles. In this model, the card network itself acts as the issuer, acquirer, and network, which is why it’s often referred to as a "closed-loop" system.
Here’s how it works:
- Like in the 4-party model, the cardholder swipes or inserts their card at the merchant’s POS terminal.
- The POS terminal sends the transaction details to the network, which is American Express.
- The network evaluates the transaction for approval because it also functions as the issuer and acquirer.
- Once approved, the funds are transferred, and the transaction is complete.
Because these networks handle everything in-house, they can offer a more streamlined process, often resulting in faster approvals and better control over rewards programs and customer service. However, this setup typically comes with higher fees for merchants, which can limit their acceptance at some businesses.
For example, you might notice that some smaller merchants accept Visa and Mastercard but not American Express, largely because of these higher fees.
Choosing the Right Card Network for Merchants
When selecting a card network, merchants often face a lot of choices, but these three will always be in the picture: Visa, MasterCard, and American Express. Each comes with its own set of benefits and challenges. But how do you decide which network fits your business best?
Start by asking: What types of customers do you serve? Do they prefer to use credit or debit cards?
For example, if your customers mostly use Visa and MasterCard, it may make sense to prioritize those networks. But if you’re catering to a higher-end market, American Express might be more suitable.
Don’t forget to consider transaction or interchange fees. Networks like American Express often have higher fees but may attract customers willing to spend more. Additionally, think about how each network handles fraud and chargebacks. Visa and MasterCard offer robust chargeback support, while American Express may be stricter but more straightforward.
Lastly, consider your growth plans. If you’re expanding internationally, networks like Visa and MasterCard provide global reach, while local networks could work better for a more specific audience.
The right choice depends on your business needs and the customers you serve.
Final Thoughts
Choosing between Visa, MasterCard, and American Express is going to depend on what you feel is needed for your business, customer base, and long-term goals.
Each network has its strengths, from global reach to premium customer service. The right choice ultimately depends on what aligns best with your strategy, cost considerations, and the experience you want to offer your customers. Whatever you decide, be sure it fits your business’s vision and helps you grow efficiently.
No matter which card network you choose, chargebacks are always a concern. High chargeback rates can harm your business, but there’s a way to take control. Chargeblast can help your business lower chargebacks, giving you the tools to protect your revenue while maintaining strong customer relationships. Sign up today or schedule a demo with us!
