Does the debit card company get paid every time I use my card?

Brendan Burgess

Brendan Burgess

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What is the chain of events when I use my Revolut debit card?

I pay €20 to Tescos
The €20 and just €20 comes out of my Revolut account
Tescos has no direct connection with Revolut
So the must combine all the different debit cards together and their bank, say, AIB, lodges them all including my €20 to Tesco's bank account.
Then AIB charges €20 to Revolut.

Who pays for all this?
I am not paying any charges for using my debit card.
Do Tescos pay a fee or commission to AIB? (Some shops have a minimum spend on debit card so I presume that there is a fixed charge.)
Does AIB split that commission with Revolut?

Where do the likes of Evalon come in?

Brendan
 
It costs the Merchant x% or a set fee depending on what system they use to take payment via card. Also depends on how big they are, bigger merchants have more leverage to get a better deal.

Revolut dont charge you for using your debit card, but most banks do. Revolut just eat that charge, and dont pass it on—a small price to pay for customer acquisition.

In general, the payment processing is done/verified by the big two MasterCard or Visa they own most of the infrastructure. But there are loads of payment processors, and there are loads of middlemen along the way who take a cut for supplying the machine you use or software it runs on or processing payments for somethings that the card issuers dont do, like phone top-ups or whatever.

In general what happnes is
Someone installs a terminal you tap your card. A payment processor verifies the card then takes the money from your account. Holds it. A clearinghouse makes sure its all above board. Transfers the money to Tescos bank. You pay for using your card, the merchant pays for you using the card terminal and they pay again for using their bank account.

From reading a lot of 10-ks and 10qs it is bit of a black box as to if the banks are paid by MasterCard or Visa to issue card with their logo thus using there systems. Some banks get payed by MasterCard for using there cards other banks have to pay to use MasterCard cards.

That is a very general over view of the system. Payment processing is a huge industry and there is so much variation within it but that should give you a general idea of how it all works.
 
Brendan Burgess said:
Where do the likes of Evalon come in?

Brendan
Click to expand...

First you have the cards / payments infrastructure card issuing companies - Visa and MasterCard are the big ones. The banks (i.e. the ones with the customer relationship - in your case) will use one of card issuing companies usually. BoI use Visa for credit and MasterCard for Debit cards

On the other end of the transaction you have the retailers and the card reading infrastructure - this is where Merchant Services firms (Evalon in your question) come in. They provide the card readers and infrastructure for the merchants.

Usually a retailer pays the Merchant Service firm for the hardware. They also pay a haircut on card sales. I'm not sure what the rates are (the EU put restrictions on what could be charged). For example say 0.5% of amount. I'm not sure if the Merchant Service firm get a share of that or whether it all goes to the card issuer. Evalon can also earn on the Fx transaction if it is done with them

It means that you don't need to have card issuer specific hardware i.e. you don't have a Visa card reader and a MasterCard card reader in each shop. The banks used to be involved in the readers - I'm not sure if that has changed now with the likes of Evalon, Strype etc providing hardware. They may still be providing them.

Just FYI - Evalon is owned by US Bank.
 
Silverfield said:
Revolut dont charge you for using your debit card, but most banks do. Revolut just eat that charge, and dont pass it on—a small price to pay for customer acquisition.
Click to expand...
There is no charge to Revolut. They're the card issuer. They earn interchange fee income on every transaction.

Brendan Burgess said:
Not really

Does Revolut get paid every time I use their card?

Brendan
Click to expand...
Yes. But it's tiny. Interchange fees are now capped in Europe, so they get a max of between 0.2% and 0.3%, but have to pay for all their processing out of that.
 
RedOnion said:
Yes. But it's tiny. Interchange fees are now capped in Europe, so they get a max of between 0.2% and 0.3%, but have to pay for all their processing out of that.
Click to expand...

Thanks Red

That was what I was looking for.

So if I spend €20, they get about 4 cents.

I know it's tiny, but their volume must be huge.

Brendan
 
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