The Incentive Line Is the Real CompetitionNarrow moat

Client incentives were $15.8 billion in fiscal 2025, up 14%, against gross revenue of $55.8 billion — more than twenty-eight cents of every gross dollar¹. They are paid to financial institutions, sellers and partners to grow payments volume, increase acceptance and drive usage.

This is where Visa and Mastercard genuinely compete, and it is an auction rather than a price war. A large issuer's portfolio comes up for renewal, both networks bid, and the winner pays for the privilege of processing it. The merchant fee never enters the conversation. The cardholder is not consulted. The renewal calendar is set by the banks, not by the networks, so the timing of Visa's largest commercial decisions is outside its control.

The trend matters more than the level. Incentives have grown faster than net revenue in most of the past decade, which means the share of the network's economics retained by the network has been slowly falling even as the network itself got larger and more essential. A moat that requires an ever-larger payment to its own distribution channel is a moat with a co-owner.

There is a reading in which this is fine — incentives buy volume, volume is worth more than the incentive, and the arrangement is simply how a two-sided network shares its surplus. That reading is probably right today. It stops being right the moment issuer economics are compressed enough that the banks need a larger share to stay interested, which is exactly what interchange regulation produces.