Financial services (3 of 5)

Payments and fintech

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Payments companies move money from the person paying to the person being paid, by card, bank transfer, wallet or app, and each company in the chain takes a small fee.

The big idea: A payment passes through a chain of companies and each takes a tiny cut, often well under 1 percent of the amount. So payments businesses win through huge volume, a low cost for each transaction and low fraud, and the more people and shops use a network, the more useful it becomes. Regulators and national systems shape the fees as much as companies do.

One unit, in numbers: One USD 100 credit card payment in the US: USD 2.50 comes in, and USD 0.35 (14%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: Very wide: about 60 percent at card schemes, about 50 percent EBITDA at efficient acquirers, 15 to 20 percent at wallets that report revenue before fees, and losses at many young fintechsRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: LowLittle money is tied up in buildings, machines or stock, so growing is cheap. More on capital intensity
The number to watch: Total payment volume (TPV)The value of all payments processed in a period; the base that fees are charged on.

Ask this first in a case

Which country, and which rails do people use there: cards, real-time transfers, mobile money or cash?

Words used above (3)

Acquirer:: The company that signs up the merchant, accepts its card payments and pays it.
Card scheme:: The network that sets the rules and connects issuers and acquirers, such as Visa or RuPay.
Total payment volume (TPV):: The value of all payments processed.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Merchant fees (the merchant discount rate), shared between the issuer (interchange), the scheme (scheme fees) and the acquirer (what is left).
Scheme fees per transaction and per unit of value, plus extra fees on cross-border payments.
Foreign exchange (FX) margins on cross-border payments and remittances: the gap between the market rate and the rate given to the customer.
Interest and fees on credit: credit card balances, buy now pay later, and loans to users and merchants.
Software, devices and services sold to merchants, and interest on customer balances held in wallets.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One USD 100 credit card payment in the US, seen by the acquirer (the merchant's payment company). Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Merchant fee at a 2.5 percent merchant discount rate	USD 2.50	100%
Minus Interchange paid to the card issuer (1.8 percent)	USD 1.80	72%
Minus Scheme fees paid to the card network (0.15 percent)	USD 0.15	6%
Minus Processing, fraud checks and support	USD 0.20	8%
What is left (contribution)	USD 0.35	14%

Check: USD 2.50 minus USD 2.15 of costs leaves USD 0.35.

So what: The merchant pays USD 2.50 but the acquirer keeps only USD 0.55 of net revenue and USD 0.35 after its own costs, because most of the fee passes to the issuer. The price it can charge the merchant is the lever that moves it most: large merchants negotiate hard, which is why Adyen, serving many large merchants, kept about 0.17 percent of the volume it processed in 2025 (its net revenue divided by its volume, calculated).

Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Total payment volume (TPV)
The value of all payments processed in a period; the base that fees are charged on.
Typical: About USD 1.79 trillion at PayPal and about EUR 1.39 trillion at Adyen in 2025[1]
Take rate
Revenue divided by payment volume, usually in basis points (1 basis point is 0.01 percent): the share of each payment the company keeps. Glossary: Take rate
Typical: About 17 basis points at Adyen (net revenue, after interchange) and about 1.85 percent at PayPal (total revenue, before paying card and bank fees) in 2025, both calculated as revenue divided by volume[2]
Net revenue
Fees earned minus the fees passed on to others (interchange and scheme fees): what the company really keeps.
Transaction count
The number of payments; many costs are per transaction, not per unit of value.
Typical: Visa processed about 258 billion transactions in its 2025 fiscal year; UPI handled about 24.5 billion in August 2026 alone[3]
Interchange rate
The fee the merchant's side pays the card issuer on each card payment, as a share of the sale.
Typical: Capped at 0.2 percent (debit) and 0.3 percent (credit) for EU consumer cards; not capped on US credit cards, where Visa's published rates are mostly about 1.2 to 2.7 percent plus a few cents (see the benchmarks)[9]
Authorisation rate
The share of attempted payments that are approved; every failed payment is a lost sale for the merchant.
Fraud and loss rate
Money lost to fraud, chargebacks (payments reversed after a dispute) and bad loans, as a share of volume.
Typical: About 0.1 percent of payment volume at PayPal in 2025 (its transaction and credit losses divided by its volume)[1]
Cost per transaction
Processing, support and fraud cost for one payment; volume pushes it down.
Active users
People who made at least one payment in the period, for wallets and apps.

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Which country, and which rails do people use there: cards, real-time transfers, mobile money or cash?
Where in the chain is the client: issuer, scheme, acquirer, wallet, or a lender on top?
Is the revenue number gross (before interchange and scheme fees) or net?
What is the take rate, and how does it differ by merchant size and payment type?
Who sets the fees here: a regulator cap, a national system, or the market?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: The customer chooses how to pay (card, wallet, bank transfer, buy now pay later)
Margin varies
Wallets and apps such as Apple Pay, Google Pay, PayPal, PhonePe, Alipay, GrabPay and M-Pesa
A wallet that only holds a card passes the card economics through; one that holds money or lends earns more.
Step 2: The issuer approves the payment and takes the credit risk
Medium margin
The cardholder's bank (the issuer), such as JPMorgan Chase, HDFC Bank or Emirates NBD
Earns interchange, which is large on US credit cards and capped in the EU; pays for rewards and fraud from it.
Step 3: The scheme or national system carries the message and sets the rules
Fat margin
Card schemes (Visa, Mastercard, UnionPay, RuPay, mada, Jaywan) and real-time systems (UPI, Pix, PayNow, FedNow, SEPA Instant, Aani)
A network used by billions of cards and millions of shops is very hard to copy, so card schemes earn very high margins; public real-time systems charge little or nothing.
Step 4: The acquirer and processor sign up the merchant and pay it
Medium margin
Adyen, Stripe, Worldpay, Fiserv, Checkout.com, Network International, Razorpay
Keeps what is left of the merchant fee after interchange and scheme fees; large merchants push this down hard.
Step 5: Fraud checks, disputes and settlement
Thin margin
Acquirers, issuers and specialist fraud and identity companies
A cost of doing business: every fraud or chargeback eats the tiny fee on many good payments.
Step 6: Services built on top: lending, BNPL, cross-border transfers, merchant software
Margin varies
Klarna, Affirm, Tabby and Tamara (BNPL); Wise, Remitly and exchange houses (remittances); payment apps lending to users
Where payment apps with zero-fee payments actually make their money.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

The fattest profit sits with the networks, because a scheme used by billions of cards and millions of shops is almost impossible to copy. Issuers earn well where interchange is not capped, as on US credit cards. Acquirers and processors compete hard on price for large merchants, and national real-time systems such as UPI and Pix push fees on everyday payments toward zero, moving profit to lending and other services built on top.

Cost structure(6)

The main costs, each as a share of revenue (the money from sales).

Transaction expense: fees paid to card networks, banks and other processors (PayPal, 2025, shares of revenue calculated from its income statement): About 48 percent of revenue[1]
Transaction and credit losses: fraud, chargebacks and bad loans: About 5 percent of revenue[1]
Technology and development: About 9 percent of revenue[1]
Customer support, sales and marketing: About 12 percent of revenue[1]
General and administrative, restructuring and other costs: About 7 percent of revenue[1]
Operating profit (what is left): About 18 percent of revenue[1]

Benchmarks(8)

Typical figures for the industry, to check a client's numbers against.

Operating margin of a card scheme (Visa, fiscal 2025): About 60 percent of net revenue of USD 40.0 billion[3]Networks are among the most profitable businesses in the world.
EBITDA margin of an acquirer (Adyen, 2025): About 53 percent of net revenue of EUR 2.36 billion[2]
Operating margin of a wallet and processor (PayPal, 2025): About 18 percent of revenue of USD 33.2 billion[1]Lower because PayPal reports revenue before paying card and bank fees.
EU consumer card interchange caps: 0.2 percent of the sale for debit, 0.3 percent for credit[9]
US consumer credit card interchange, Visa published rates, April 2026: Mostly about 1.2 to 2.7 percent of the sale plus a fixed 5 to 10 cents; up to 3.15 percent for payments that do not qualify for the standard rates[4]Rates depend on the card type (premium rewards cards pay more) and the kind of merchant, such as supermarket, restaurant or travel.
Merchant fee on UPI and RuPay debit payments in India: Zero for most payments since January 2020[19]
Global average cost of sending USD 200 abroad: About 6.5 percent in early 2025, more than twice the 3 percent UN target[14]
M-Pesa revenue at Safaricom, year to March 2026: About KES 183 billion, about 46 percent of Safaricom Kenya's service revenue of about KES 401 billion (calculated)[18]

Typical cases(7)

Case prompts you might hear in this industry.

Our acquiring business is losing profit even though volume is growing. Why?
Should a bank launch a rewards credit card?
UPI (or Pix) is taking volume from our cards. How should our bank respond?
Should we launch a remittance app from the Gulf to South Asia?
Should an online retailer offer buy now pay later at checkout?
Size the market for a new mobile wallet in an African country.
A free payment app has 100 million users. How can it make money?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Treating payment volume as revenue. A company keeps only its take rate, often a fraction of 1 percent.
Forgetting that interchange goes to the issuer, not to the acquirer or the scheme.
Assuming every payment app earns a fee on each payment. Many, such as most UPI apps, earn nothing on the payment itself and make money from lending and other services.
Ignoring fraud and chargebacks, which can wipe out the fee on hundreds of good payments.
Forgetting the FX margin in remittances: a "zero fee" transfer can cost more than one with a fee and a fair rate.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Real-time payments keep surging: UPI processed a record of about 24.5 billion transactions worth about INR 29.8 trillion in August 2026, and Brazil's Pix handled about 5.4 billion in September 2025 alone.[6]
Europe made instant transfers standard: euro area payment providers had to send instant payments, with a free check of the payee's name, from 9 October 2025, and the bank-owned Wero wallet moved into online shopping.[8]
The Gulf is building its own rails: the UAE is widening the use of Aani (instant payments) and Jaywan (its domestic card scheme), including for government fees.[16]
Buy now pay later grew up: Klarna listed in New York in September 2025, and in the UK BNPL became regulated by the FCA from 15 July 2026, with affordability checks.[12]
US debit fees are in court: in August 2025 a district court vacated the Federal Reserve's debit interchange cap but paused its ruling during appeal, so the cap still applied. Check the current status.[11]
Remittances stay huge: India received about USD 150.7 billion in 2025, the most of any country (IFAD estimate), while the World Bank put the global average cost of sending USD 200 at about 6.5 percent in early 2025.[15]

Players by region(9)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Visa, Mastercard (card schemes)
American Express (three-party network)
PayPal
Stripe
Adyen
Europe: Adyen (Netherlands)
Worldpay, Checkout.com (UK)
Klarna (Sweden, BNPL)
Wise (UK, transfers)
Wero (bank-owned wallet)
SEPA Instant (euro area real-time system)
Middle East: Network International (UAE, acquirer)
mada (Saudi Arabia) and Jaywan (UAE) card schemes
Aani (UAE real-time payments)
Tabby, Tamara (BNPL)
Al Ansari Exchange, Lulu Exchange (remittances)
India: NPCI (runs UPI and RuPay)
PhonePe, Google Pay, Paytm (UPI apps)
Razorpay (payment gateway)
Southeast Asia: PayNow (Singapore real-time system)
GrabPay
GCash (Philippines)
United States: Visa, Mastercard, American Express
Fiserv, Stripe
Block (owns Afterpay), Affirm
FedNow (real-time system)
China: UnionPay
Alipay, WeChat Pay
Africa: M-Pesa (Kenya, mobile money)
Latin America: Pix (Brazil, run by the central bank)
Mercado Pago
Stone
Elo (Brazil card scheme)

Words to know(12)

Linked words have a fuller entry in the glossary.

Issuer (glossary entry): The cardholder's bank, which gives out the card and approves payments.
Acquirer (glossary entry): The company that signs up the merchant, accepts its card payments and pays it.
Card scheme (glossary entry): The network that sets the rules and connects issuers and acquirers, such as Visa or RuPay.
Interchange (glossary entry): The fee paid to the issuer on each card payment.
Merchant discount rate (MDR) (glossary entry): The total fee a shop pays on a card payment, as a share of the sale.
Take rate (glossary entry): Revenue as a share of payment volume.
Total payment volume (TPV): The value of all payments processed.
Real-time payments (glossary entry): Transfers between bank accounts that arrive in seconds, day and night, such as UPI or Pix.
Chargeback: A card payment reversed after the cardholder disputes it.
Buy now pay later (BNPL) (glossary entry): Splitting a purchase into a few instalments, usually interest free for the shopper, with the merchant paying the fee.
FX margin: The gap between the market exchange rate and the rate a provider gives the customer.
Basis point: One hundredth of a percentage point.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(19)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

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Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.