Visa Inc. is a multinational financial services company that provides electronic payment services to consumers, businesses, and governments worldwide. In most instances, the services are provided via the company’s branded credit, debit, and prepaid cards.
Visa started life as a credit card program launched by the Bank of America in 1958. The program, known as BankAmericard, was the brainchild of leader Joseph P. Williams, the Customer Research Services Group, and an internal product development think tank.
Understanding Visa’s business model
The Visa Business Model revolves around facilitating the movement of money between consumers, merchants, businesses, strategic partners, governments, and financial institutions. In an industry where innovation has created new ways to pay, the company has had to evolve to stay relevant.
To that end, Visa extends, enhances, and invests in a proprietary electronic payments network known as VisaNet. The network is the largest and most sophisticated in the world and provides telecommunications, payment processing, payment authorization, and numerous value-added services such as fraud control and risk management.
According to its 2022 Annual Report, Visa also hopes to “become a network of networks, offering a single connection point for senders and receivers to enable money movement to all endpoints and to all form factors, using all available networks.”
How does Visa make money?
Visa makes money from four primary revenue streams:
- Service (fiscal year 2022 revenue of $13.4 billion) – revenue from services provided to clients in support of Visa payment service patronage.
- Data processing ($14.4 billion) – revenue earned from value-added services, payment authorization, payment settlement, and network access. This also includes any other maintenance or support service that facilitates transaction and information processing.
- International transaction ($9.8 billion) – revenue collected from currency conversions and the processing of cross-border transactions.
- Other ($2.0 billion) – a smaller stream that consists mostly of value-added services. These include license fees Visa collects for the use of its brand or technology and other fees related to account holder services, licensing, and certification.
Key foundations of Visa’s business model
Visa also defines four key pillars which fortify the core infrastructure of its business model. Let’s take a brief look at each to round out this article.
Technology platforms
These encompass hardware, software, data centers, and telecommunications infrastructure. Each has a unique operational footprint and architecture wrapped in multiple layers of security. Visa operates three data centers worldwide which serve as a critical part of continuous payment system availability.
Security
Visa’s security approach devalues sensitive and personal data via various cryptographic means. Security is embedded into the software development lifecycle, while management controls prevent unauthorized account access.
To ensure the integrity of its network and also to maintain service availability, the company has invested heavily in cybersecurity measures.
Brand
Visa’s brand equity enables the company to deliver added value to customers, merchants, partners, and financial institutions. The brand is associated with a diverse range of products and services that facilitate mutually beneficial relationships with key stakeholders.
The company also notes that it is the only brand in the world that serves as a top sponsor of FIFA, the NFL, and the Olympic Games.
Talent
Lastly, Visa recognizes that training and advancing the best global talent is vital to its long-term success. Visa employs around 26,500 staff from 80 countries, and each is supported to pursue personal career interests while also meeting their performance objectives
By considering an employee’s particular background, skills, accomplishments, and future ambitions, Visa can support meaningful dialogue about performance and drive development to help it meet its own growth objectives. It will also enable the company to retain talent in a competitive global market.
Key takeaways:
- Visa Inc. is a multinational financial services company that provides electronic payment services to consumers, businesses, and governments worldwide. In most instances, the services are provided via the company’s branded credit, debit, and prepaid cards.
- The Visa business model revolves around facilitating the movement of money between consumers, merchants, businesses, strategic partners, governments, and financial institutions. This is primarily offered via the proprietary network VisaNet.
- Visa also defines four key pillars which fortify the core infrastructure of its business model. These include technology platforms, security, brand, and talent.
Connected Business Models
Afterpay Business Model
Afterpay is a FinTech company providing as a core service the “buy now pay later” solution. When a consumer purchases a product, Afterpay pays the seller and asks the consumer to pay 25%. The remaining 75% is paid in three, fortnightly installments that are also interest-free. Afterpay, in turn, makes money via merchant and late fees.
Quadpay Business Model
Quadpay was an American fintech company founded by Adam Ezra and Brad Lindenberg in 2017. Ezra and Lindenberg witnessed the rising popularity of buy-now-pay-later service Afterpay in Australia and similar service Klarna in Europe. Quadpay collects a range of fees from both the merchant and the consumer via merchandise fees, convenience fees, late payment, and interchange fees.
Klarna Business Model
Klarna is a financial technology company allowing consumers to shop with a temporary Visa card. Thus it then performs a soft credit check and pays the merchant. Klarna makes money by charging merchants. Klarna also earns a percentage of interchange fees as a commission and for interests earned on customers’ accounts.
SoFi Business Model
SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization.
Chime Business Model
Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.
How Does Venmo Make Money
Venmo is a peer-to-peer payments app enabling users to share and make payments with friends for a variety of services. The service is free, but a 3% fee applies to credit cards. Venmo also launched a debit card in partnership with Mastercard. Venmo got acquired in 2012 by Braintree, and Braintree got acquired in 2013 by PayPal.
FinTech Business Models
Fintech business models leverage tech and digital to enhance the financial service industry. Fintech business models, therefore, apply tech to various financial service use cases. Fintech business model examples comprise Affirm, Chime, Coinbase, Klarna, Paypal, Stripe, Robinhood, and many others whose mission is to digitize the financial services industry.
List of FinTech Business Models
Acorns
Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.
Affirm
Started as a pay-later solution integrated to merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interests earned from the consumer loans, when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.
Alipay
Alipay is a Chinese mobile and online payment platform created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. Alipay, therefore, is the B2C component of Alibaba Group. Alipay makes money via escrows transaction fees, a range of value-added ancillary services, and through its Credit Pay Instalment fees.
Betterment
Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.
Braintree
Venmo is a peer-to-peer payments app enabling users to share and make payments with friends for a variety of services. The service is free, but a 3% fee applies to credit cards. Venmo also launched a debit card in partnership with Mastercard. Venmo got acquired in 2012 by Braintree, and Braintree got acquired in 2013 by PayPal.
Chime
Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.
Coinbase
Coinbase is among the most popular platforms for trading and storing crypto-assets, whose mission is “to create an open financial system for the world” by enabling customers to trade cryptocurrencies. Its platform serves both as a search and discovery engine for crypto assets. The company makes money primarily through fees earned for the transactions processed through the platform, custodial services offered, interest, and subscriptions.
Compass
Compass is a licensed American real-estate broker incorporating online real estate technology as a marketing medium. The company makes money via sales commissions (collected whenever a sale is facilitated or tenants are found for a rental property) and bridge loans (a service allowing the seller to purchase a home before the revenue from the sale of their previous home is available).
Dosh
