Visa and Mastercard: The Networks That Set the FloorNarrow moat
American Express (AXP) — moat facet
Visa and Mastercard rarely take a merchant away from American Express; they simply make its premium look larger every time a regulator cuts their price.
Visa and Mastercard compete with American Express for the merchant's acceptance and for the cardholder's wallet, but their most important effect on Amex is on its price. They are larger: Amex says it believes "Visa and Mastercard are larger than we are in most countries based on purchase volume"1, and ranks its own network fourth globally, behind Visa, China UnionPay and Mastercard2.
Their size sets the merchant's point of comparison. When regulators cap the interchange that banks earn on Visa and Mastercard cards, a merchant's cost of taking those cards falls, and the premium for taking Amex looks larger. Amex describes "downward pressure on our merchant discount rates from decreases in competitor pricing in connection with caps on interchange fees"3. In 2017 it named "regulatory-mandated reductions to competitors' pricing"4.
That is an odd kind of rivalry. Amex does not have to lose a single merchant to Visa to be hurt by Visa; it only has to be compared with Visa at a lower price. The merchant rate fell from an average of 2.51% in 20135 to discount revenue of 2.24% of billed business in 20256.
The relationship runs the other way too. Through Global Merchant and Network Services Amex manages "partnership relationships with third-party card issuers, merchant acquirers"7, licensing its brand to banks that issue Amex-branded cards on its network, the same way banks issue Visa cards. On that business Amex behaves like an open network itself.
This app's Visa page, American Express: The Rival That Chose Economics Over Reach, and its Mastercard page, American Express and Discover: The Closed Loops, set out the trade from the open networks' side: a closed loop keeps more of each transaction on a much smaller network. Across the four general-purpose networks, cards issued in the United States generated $11.463 trillion of purchase volume in 2025, up 6.4%8.
The test of this rivalry is whether Amex's volume keeps pace. Billed business grew 9% in the second quarter of 2026 and discount revenue 9%9; a year in which discount revenue grew two points or more slower than billed business would mean the open networks' lower price was pulling Amex's down faster than volume could make up.
Discount revenue and billed business both +9% in Q2 2026; rate 2.24% in 2025.
Whether the price is holding as volume grows; discount revenue two points slower than billed business for a year would mean the open networks were setting the price.
Source: American Express Q2 2026 earnings release ↗- ReportedThey are larger: Amex says it believes "Visa and Mastercard are larger than we are in most countries based on purchase volume", and ranks its own network fourth globally, behind Visa, China UnionPay and Mastercard.American Express Form 10-K for fiscal 2025 - Item 1A risk factors, competition and regulation. — FY2025 · publ. 6 February 2026 · source ↗
- ReportedThey are larger: Amex says it believes "Visa and Mastercard are larger than we are in most countries based on purchase volume", and ranks its own network fourth globally, behind Visa, China UnionPay and Mastercard.American Express Form 10-K for fiscal 2025 - income statement, business description and management. — FY2025 · publ. 6 February 2026 · source ↗
- ReportedAmex describes "downward pressure on our merchant discount rates from decreases in competitor pricing in connection with caps on interchange fees".American Express Form 10-K for fiscal 2025 - Item 1A risk factors, competition and regulation. — FY2025 · publ. 6 February 2026 · source ↗
- ReportedIn 2017 it named "regulatory-mandated reductions to competitors' pricing".American Express Form 10-K for fiscal 2017 - the $2.6 billion Tax Act charge and pressure on the merchant discount rate. — FY2017 · publ. February 2018 · source ↗
- ReportedThe merchant rate fell from an average of 2.51% in 2013 to discount revenue of 2.24% of billed business in 2025.American Express Form 10-K for fiscal 2015 - the end of the Costco relationship and its share of billed business, loans and cards; the three-party network; average discount rates 2013-2015. — FY2015 · publ. February 2016 · source ↗
- ReportedThe merchant rate fell from an average of 2.51% in 2013 to discount revenue of 2.24% of billed business in 2025.American Express Form 10-K for fiscal 2025 - card metrics: billed business, spending per card, cards-in-force, fees per card and network volumes. — FY2025 · publ. 6 February 2026 · source ↗
- ReportedThrough Global Merchant and Network Services Amex manages "partnership relationships with third-party card issuers, merchant acquirers", licensing its brand to banks that issue Amex-branded cards on its network, the same way banks issue Visa cards.American Express Form 10-K for fiscal 2025 - reportable segments (Note 23) and revenue and pretax income by region. — FY2025 · publ. 6 February 2026 · source ↗
- Third-party estimateAcross the four general-purpose networks, cards issued in the United States generated $11.463 trillion of purchase volume in 2025, up 6.4%.Nilson Report, Global Brand Cards in the US - 2025: purchase volume of the four general-purpose networks. — 2025 · publ. 2026 · source ↗
- ReportedBilled business grew 9% in the second quarter of 2026 and discount revenue 9%; a year in which discount revenue grew two points or more slower than billed business would mean the open networks' lower price was pulling Amex's down faster than volume could make up.American Express second-quarter 2026 earnings release, Form 8-K exhibit 99.1. — Q2 2026 · publ. 24 July 2026 · source ↗