The Surprising Truth About Visa and MasterCard

Recently, The Motley Fool's Matt Koppenheffer interviewed Jason Oxman, the CEO of Electronic Transactions Association.

Oxman has decades of experience as he's worked as the senior vice president of industry affairs at the Consumer Electronics Association, as well as general counsel for the Association for Local Telecommunications Services and vice president at Covad Communications Company. His past and current experiences give him great ability to analyze the climate of the payments technology industry and gauge its evolutionary movements into alternative payments.

In the following video, Matt and Jason delve into the international payments industry and the use of independent sales organizations to further adoptions rates.

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Matt Koppenheffer: One of the things that I've heard as well is the market in the U.S. -- and I'm learning a lot while I'm here, in addition to what I already know -- but the independent sales organizations; the folks that go out and acquire merchants, who aren't running a processing network, that aren't Visa, that aren't MasterCard, that's very prevalent, that's very big here in the U.S. But most of the acquisitions overseas happen through banks.

Jason Oxman: Right.

Koppenheffer: It sounds like that's starting to change, maybe a little bit in Europe before everywhere else. Is that one of the triggers that will increase international adoption, having more ISOs overseas as well?

Oxman: Yes, I think the ISO market, which has grown up and is very mature here in the U.S., is the reason that credit card acceptance is so ubiquitous here in the U.S.

You noted Visa and MasterCard, for example; they operate networks. They are not card issuers, and they do not acquire merchants. They are the network operator, so they do not have direct relationships with the 8 million merchants in the U.S. who accept electronic payments.

It's the ISOs that have those relationships, and there are a large numbers of ISOs in the U.S., many of whom are members of ETA -- we are the ISO trade association, so we represent the ISO industry -- and that ubiquity of ISOs here in the U.S. is why merchants have access to those payment networks.

As you noted, outside of the U.S., ISOs are very rare and, in fact, the way most credit card markets -- in Europe, for example -- grew up was with those state-sponsored, or state-owned, or state-endorsed banks that actually act as the acquirer for merchants, giving merchants access.

In a country that may have, certainly, not as many merchants as there are in the U.S., but may have hundreds of thousands or millions of merchants, the banks don't have the resources to provide service to each of them, so ISOs partnering with financial institutions in Europe ...

We've seen some great companies; EVO is a great company, a New York-based company which is expanding globally, particularly aggressive in Europe because of the opportunity for ISOs to partner with financial institutions and provide service to merchants in Europe, to give them the access they don't currently have to the payment networks.

The article The Surprising Truth About Visa and MasterCard originally appeared on

Matt Koppenheffer has no position in any stocks mentioned. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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