Visa's moat is threatened less by traditional competitors and more by sovereign payment systems. Government-backed networks like India's UPI and Brazil's Pix facilitate direct bank-to-bank transfers, bypassing Visa's rails. In China, state control and super apps like Alipay have effectively blocked Visa from the market.

To counter the rise of free, government-backed account-to-account (A2A) payment systems, Visa is building its own A2A network. It then monetizes these flows by adding value-added services like real-time fraud detection and global interoperability—features that basic, local bank-transfer systems cannot match, turning a commodity threat into a premium offering.

To maintain a competitive edge, Mastercard's CEO personally uses rival products like Visa or AmEx. He frames this as "testing out" the competition to understand their user experience firsthand and provide direct feedback to his own product teams.

Major tech and fintech players, including Apple, Google, and Stripe, have opted to integrate with Visa's network rather than build a competing one from scratch. This dynamic turns potential disruptors into partners, reinforcing Visa's deep moat and demonstrating the prohibitively high cost of replicating its global infrastructure.

While many investors hunt for pure monopolies, most tech markets naturally support a handful of large players in an oligopoly structure. Markets like payments (Stripe, Adyen, PayPal) demonstrate that multiple large, successful companies can coexist, a crucial distinction for market analysis and investment strategy.

Amex's "closed-loop" model intentionally targets affluent consumers, using high merchant fees to fund premium rewards. This creates a virtuous cycle, positioning Amex as a status symbol for high spenders. This contrasts sharply with Visa's "open-loop" system, which scales as a low-cost, high-volume utility for the global mass market.

Unlike tech companies that replan weekly, Mastercard's strategy isn't driven by short-term economic data. Instead, they focus on fundamental, multi-year shifts in consumer payment preferences, like "Buy Now, Pay Later," and re-architect their network accordingly.

Cross-border transactions are a critical, high-margin driver for Visa. Due to increased complexity and currency exchange, these international payments carry fees roughly three times higher than domestic ones. Consequently, they contribute over a third of Visa's revenue despite representing only a tenth of its total payment volume.

The system of charging retailers an interchange fee (around 1.8%) that is then passed to consumers as rewards (around 1.57%) creates a strong network effect. Consumers are incentivized to use rewards cards, and retailers cannot easily offer discounts for other payment methods, locking both parties into the ecosystem.