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Comment by fredophile | Hacker News Reader

I'm not convinced the margins are as big as you might think. My understanding is that the margins are thin but they make it up in massive volume.

Stripe charges 2.9% plus $0.30 per transaction. If you have an average transaction size of $100 you're paying $3.20 in fees (3.2%). There are several no annual fee credit cards that give the consumer 2% cash back. That leaves 1.2%. This 1.2% isn't pure profit. Things like fraud protection will cut into this. There are also several groups that need to split whatever is left of that 1.2%. Stripe needs to make money, Visa/MC need to make money, the bank offering the card needs to make money.

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Visa and Mastercard are both publicly traded. You can go look at their financials. I believe Visa still holds the crown for the highest gross margin and price-to-sales ratio of any stock in the S&P 500. Mastercard isn't far behind. These are not marginally profitable businesses. They are money printers that rely on tightfisted control over merchants and the payment clearing infrastructure.

I took your advice and looked at some financials. The total revenue/cost of revenue for Visa in their most recent info was 5.5. That does seem like a more than healthy profit margin.

For context, here is the same ratio for the FAANG companies and a few telecoms. I would've included some banks as well but they report their income differently so I didn't see an easy way to calculate the same ratio. Facebook 5.5 Amazon 1.3 Apple 1.6 Netflix 1.6 Google 2.2 AT&T 2.2 Verizon 2.4 Comcast 3.2

Out of all these companies the only one with a better ratio was Facebook. However, if you look at total revenue Visa was by far the smallest of the companies I've listed. Based on this info I can agree that Visa could reduce their fees and still have healthy profit margins. If you want to use this as evidence they charge too much and need some form of government intervention you might want to look at Facebook first and keep an eye on the cable companies.

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