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How do payment networks make money?

Answer by Anonymous:

1. What are payment networks?

A payment network is a system that allows people to exchange value (e.g. Quora makes it possible for you give me an upvote so I will want to give you more answers about payments).

Every modern payment network is centralized, i.e. they require everyone who wants to make payments through the network to agree to the rules establishd by the payment network operator.

2. What are payment network operators?

Since people need a way to exchange value, and to be sure that they are agreeing to the same rules about how to exchange value, payment networks are managed by payment network operators.

Examples of operators and their networks include the US Government (dollars), Visa (credit cards), PayPal (digital wallets), Quora (Quora Credits), etc.

3. Why do you care about #1 and #2? Fees.

Because you probably want to be able to exchange value with other people, and doing so requires using a payment network, which is controlled by payment network operators, which are interested in getting paid for providing this service.

Ever heard of a 'network fee'? This is what PayPal and Visa get paid when their networks are used.

Ever heard of a tax or inflation? This is what the US government gets paid when its network gets used.

Payment network operators charge people money for using their networks.

Boom: answered.

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