The numbers I've seen over time have been, gosh, 30-40% profit margins. Where, to give you a sense, in the retail industry, profit margins tend to be in the 2, 3, maybe 4% range. So as a business, the reason it's so profitable is because it's a primarily fixed cost business. Once you've got that infrastructure all in place, each incremental transaction that's flowing through that ecosystem comes in at extremely high incremental margins because it's just this massive capacity network.
06:29
And so as Visa has scaled, their profitability has gone up dramatically for that reason. So how exactly does Visa make money? Contrary to popular belief, Visa doesn't make any profit from credit card interest fees. Instead, those fees are charged by the card issuer. In most cases, banks, allowing Visa to face none of the risks that come with lending money.

So Visa does not have direct relationships with individual consumers. The banks do. The banks issue the cards. And so you may get your card or I may get my card from Bank of America or Wells Fargo or Citibank or any number of these other banks, including local banks.
07:16
But while many people think of those as Visa cards, they're really not. They're the bank's cards that happen to have visa on them. And Visa is the network on those cards. Visa's business model relies heavily on what is known as the four party model. When you use a Visa card to make a purchase, there are usually four entities that come into play.