Visa and Mastercard Lead Credit Card Industry Growth

The credit card business is often viewed as a single industry category, but it's actually composed of distinct layers, each with its own unique business model. One such layer is the payment network operators, which include companies like Visa and Mastercard.

These networks handle transactions between merchants and lenders, keeping track of who owes what to whom. In return, they take a small fraction of every dollar processed through their networks. Payment network operators have experienced consistent growth over the years, with no decline in 12-month revenue or earnings before interest, taxes, depreciation, and amortization (EBITDA) in the past decade.

This stability makes them attractive to investors seeking long-term investments. Their duopoly-like control of the payment-middleman portion of the credit card market also gives them room to expand into new profit centers, such as customer engagement and loyalty tools.