Fintech expert Felipe Izquierdo, a recognized authority in venture capital, corporate strategy, and financial technology, shares insights on the challenges facing card networks. With extensive experience in startup strategy, investment, and venture capital, Izquierdo brings deep expertise to the discussion. As a senior strategy manager at Remitly, he offers a nuanced understanding of the market challenges within fintech and beyond.
Visa and Mastercard have long stood as the backbone of global payments. Their networks power trillions in transactions and are embedded into nearly every merchant-consumer interaction on the planet. For decades, they flourished by riding structural trends: the global rise in card adoption, financial inclusion, bankarization, and the network effects of scale.
But the future looks different. Growth no longer comes from expanding into new markets but from keeping up with ones that are evolving faster than ever. Felipe Izquierdo argues that the next era of payments will reward those who can experiment, integrate new products quickly, and scale software-driven services, not just those who can process transactions reliably. For companies built for stability and scale, becoming adaptive and limber is not just unfamiliar, it’s uncomfortable. And that’s the real challenge card networks now face.
An Industry Under Transformation
The traditional model, collecting fees for facilitating card payments, is under pressure.
In Brazil, the government-backed Pix system now reaches 72% of the population and has overtaken cards as the most-used payment method. It accounts for 34% of person-to-business payments and is projected to represent 50% of Brazil’s e-commerce value by 2027, growing at a 27% CAGR.
In the U.S., FedNow, launched in 2023, offers real-time, 24/7 direct bank transfers. While adoption has been gradual, especially on the consumer and small-business fronts, it sets new infrastructure expectations and holds promise for broader regulatory and C2B use cases in the future.
Meanwhile, embedded finance is allowing platforms like Amazon, Shopify, and Uber to integrate payments directly into their user experiences, often without touching the card networks. Stablecoin-based payment rails are also emerging as credible alternatives for cross-border and remittance use cases. For example, Félix, a fintech operating in the U.S.–LatAm corridor, recently acquired a stablecoin infrastructure provider, signaling where the market may be headed.
The throughline? These alternatives don’t just compete with card networks, they increasingly bypass them.
Regulatory Pressure Meets Merchant Friction
Regulators are now targeting one of Visa and Mastercard’s most durable advantages: interchange economics.
In 2024, the networks settled a major antitrust case requiring them to reduce swipe fees by 0.04 percentage points for three years, and by an average of 0.07 over five years, a projected $1.15 billion annual revenue impact. More significantly, the settlement bars them from offsetting the loss through other merchant fee increases.
This follows years of pressure: while interchange fees in the EU are capped at 0.2–0.3%, U.S. merchants regularly pay 1.5–3%. In contrast, real-time systems like Pix charge merchants less than 0.5%, and in some cases, nothing at all.
As these alternatives mature, merchants are asking a simple question: why pay more for slower payments? If Visa and Mastercard can’t evolve their value proposition beyond processing, fee compression will only intensify.
Vertical Integration: The Toast Playbook
“One way to evolve? Move up the stack — own more of the customer or merchant relationship. But this shift is difficult for companies that have never needed to build product muscle,” explains Izquierdo. “Toast is an example of what that transition looks like. Founded in 2011, it began with point-of-sale and payment processing, but expanded year-by-year into a full-service restaurant operating system.”
Toast’s expansion looked like this:
- 2013–2014: POS, gift cards, online ordering
- 2015–2016: Inventory, multi-location management, kiosks
- 2017–2019: Menu tools, marketing, payroll, capital
- 2020: Toast Now, delivery, Order & Pay, Toast Go 2
That expansion fueled explosive growth, from 1,000 restaurant locations in 2016 to 40,000 by 2020. Today, subscription services account for $706 million, about 15% of Toast’s revenue, while a large and growing portion comes from value-added services. Payments still contribute meaningfully, but increasingly as part of a broader platform monetization strategy.
The takeaway isn’t that it’s hard to run a SaaS business, it’s that you can’t just sell payments anymore. Success comes from building verticalized, high-retention platforms. For Visa and Mastercard, that’s unfamiliar territory.
M&A and Innovation: Extensions, Not Reinventions
Visa and Mastercard have made moves to modernize:
- Visa acquired Tink (open banking) and Currencycloud (FX).
- Mastercard bought Finicity (data), Ethoca (fraud), and Aiia (bank connections).
These are logical extensions, but we haven’t yet seen a fundamental business model shift. These initiatives appear to be in the early stages of rollout, with the potential to reshape how these companies operate over time.
They’ve also invested in fintech-facing accelerators like Mastercard Start Path and Visa Fintech Fast Track, which help source partnerships and enable experimentation. While these are primarily externally focused, it will be important to see how they translate into internal change and lasting shifts in product strategy.
Other financial institutions have shown additional promise. JPMorgan has built its own digital products, acquired companies like WePay, and actively launched new internal initiatives. Firms like Square (Block) are defining vertical ecosystems from the ground up.
Visa and Mastercard don’t need to become software companies, but they do need to operate like companies that can adapt quickly, build internally, and own more of the customer experience.
Conclusion
In Felipe Izquierdo’s view, Visa and Mastercard are still essential to the global economy. But the forces that got them here — market expansion, financial inclusion, scale — aren’t the ones that will define the next chapter.
That chapter will be shaped by the ability to build, test, and scale faster than ever before. It will reward those who can create vertical solutions, not just process payments. And it will favor firms that are nimble, not merely large.
Card networks have the infrastructure. But the question is: can they develop the strategic agility and product depth required to lead in a world where the rails are open, cheap, and constantly evolving?
They mastered the last era of payments. Leading the next transformational wave will require implementing skills that differ from their historical core competencies.
Spencer Hulse is the Editorial Director at Grit Daily. He is responsible for overseeing other editors and writers, day-to-day operations, and covering breaking news.
