HOW DOES VISA/MASTERCARD MAKE MONEY?

Summary from the TLDR Web Dev newsletter

The credit card is often called the "most profitable product in banking" because it generates significant revenue through the payment flow process. When a cardholder pays a merchant $100 using a credit card, the merchant compensates the acquiring bank with a "merchant discount fee." The acquiring bank then keeps a portion (e.g., $0.25) as the acquiring markup and pays the issuing bank an interchange fee (e.g., $1.75) to cover the transaction. The issuing bank incurs costs like managing accounts, fraud detection, and clearing, which justify its compensation. Card networks like VISA charge banks for their services, but the interchange fee may vary for different merchants, typically being higher for smaller merchants.