Thread by @AmazingCreditC

🧵 How Banks & Card Networks Make Money Every Time You Swipe Your Debit/Credit Card in India 💳

Ever wondered where your money really goes when you use a Visa credit card or an RuPay debit card?

Here’s the complete breakdown👇

1️⃣ Who Are the Players?

•👤 Customer – cardholder

•🏪 Merchant – the shop/website

•🏦 Issuing Bank – your bank (HDFC, SBI, ICICI, Kotak, etc.)

•🏦 Acquiring Bank – merchant’s bank (Axis, SBI, HDFC, etc.)

•🌐 Card Networks – Visa, Mastercard, RuPay, Diners Club

•🔐 Payment Gateway/Processor – Razorpay, PayU, Paytm, CCAvenue

Everyone has a role, and everyone earns a piece of the pie 🍰

2️⃣ What Happens When You Pay ₹1,000?

1.🏪 Merchant’s POS/gateway encrypts your card details.

2.🏦 Acquiring Bank forwards it through Visa/Mastercard/RuPay/Diners Club etc

3.🏦 Issuing Bank checks funds/credit limit → approves/declines.

4.✅ If approved → money flows Issuer → Network → Acquirer → Merchant.

But the merchant doesn’t get full ₹1,000.

3️⃣ MDR: Merchant Discount Rate
The MDR is the fee merchants pay for card acceptance.

•💳 Credit cards: ~2–4% in India

•🏦 Debit cards: ~0.3–1%

•💳 RuPay Credit Cards: MDR applies above ₹2,000

👉 On a ₹1,000 credit card txn @ 3% MDR → merchant gets only ₹970.

🚨MDR varies by card type, network, industry, and transaction amount. Merchants may also negotiate lower rates with processors.

4️⃣ Who Takes the ₹30? (Example of 2% MDR on ₹1,000)

•🏦 Issuer (HDFC) – ~₹21 as Interchange Fee

•🌐 Card Network (Visa/Mastercard/RuPay/Diners) – ~₹3 as Network Fee

•🏦 Acquirer (SBI) – ~₹3–6 as Acquirer Margin

•🔐 Processor/Gateway (Razorpay/PayU/Paytm) – ~₹1–2, mostly over and above the MDR; charged from the merchants revenue.

The merchant only sees “MDR” but it’s split across all these parties.

5️⃣Issuers = Biggest Winners

Banks like HDFC, ICICI, SBI Card earn:

•Bulk of MDR via interchange (70%+ of the fee)

•Credit card interest, late fees, annual charges

•Cross-sell revenue from card customers

6️⃣Networks = Small Cut, Massive Volume

•Visa/Mastercard: Earn just a few paise per ₹100 transaction

•RuPay (NPCI): Domestic, low-cost, with Govt-backed push

•Diners/Amex: Charge higher MDR → targeted at high-spend customers

🚀They rely on global scale to make billions.

7️⃣Acquirers & Gateways

•Acquirers (Axis, SBI, HDFC) set up merchant accounts & POS machines.

•Gateways (Razorpay, PayU, Paytm) provide secure online/offline transaction processing.

✨ That’s how SBI, HDFC, ICICI, Visa, Mastercard, RuPay, Diners, Razorpay & others make money every time you swipe a card.

💬 Did you find this breakdown useful?

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