[proxy_user]

You have to understand how the business is structured. Visa and MasterCard are payment networks, that provide services to the bank issuers. The banks that issue the cards set the interest rates and credit limits, and loan the money. Visa and MasterCard just process transactions and collect fees. Many people complain these fees are two high, and that Visa and MasterCard are monopolies

Now Discover has its own network, but it’s only used by Discover. What Capitol One has said is that they will run their own card business through this network, and open it up to other banks. This will provide a third competitor for Visa and MasterCard, and force them to lower fees.

Well, that’s how they’ll spin it. They will definitely make more money on their own cards if they have their own network, and don’t have to pay Visa or MasterCard their fees.

[Renfrew]

Thanks. Do you know how the relationships between the banks and the cards work? Who pays who?

Does Capital One pay MasterCard to use their networks, or does MasterCard give Capital One a slice of the merchant fees to get their customers?