Visa and MasterCard make most of their money that way, but they don't by and large underwrite the debt -- various banks do[0]. That's why you don't get credit card offers directly from Visa or MasterCard, you get them directly from banks. Visa and MasterCard only care that debtors default insofar as it affects the market as a whole.

[0]-American Express and Discover have somewhat different business models, and do underwrite most of the debt themselves. I don't know about foreign systems, but I'm given to understand they are mostly not credit based.

Visa and Mastercard are payment networks, not banks. They don’t own the debt at all.

Yeah isn't this because visa and mastercard are the issuers, and the banks handle taking on the debt?

The exception to this is Amex who is the issuer and lender.

Discover is also.

Discover is pretty much unheard of in Europe, amex has grown a lot in the last 10 or so years, it’s almost as common as visa/Mastercard for acceptance.

But my inference from futurama is very few outlets take discover even in the US?

I would not say very few. All big businesses or franchises accept it.

Visa/Mastercard don't lend money. Banks do.

That seems unlikely. Settling accounts instantly in that kind of system is almost impossible. Unless the money is going directly from payer to the payee there must be some slack in the system somewhere, and that means debt. I will admit though I could have an incorrect understanding of how these accounts are settled.

Yes the settlement happens almost instantly even for international transactions. It’s the bank that allows the transaction or not; not the payment network.

This is not the usage of the word "settlement" which prevails in the financial industry, which tends to use it to describe the transfer of funds to give effect to a promised transaction. It is factually not the case that credit card payments generally settle instantly. It depends on many factors but typical timelines are a few days to about a month, largely dependent on which network is at play and where the business getting paid is. (For complex reasons, prevailing settlement times in some countries are long compared to most HNers expectations.)

I think you misunderstood the GP: there is debt, but it's owned by banks, not by VISA and MasterCard. They just provide the payment network.

Do the banks directly transfer to one another? I'm genuinely naive on this topic. I don't even get the value add of visa at that point.

Not an expert either. As I understand it, credit card networks provide the infrastructure that lets entities settle payments: providing cards and authentication, routing payments from consumer's bank to seller's bank, handling clawbacks, etc. At world scale it's got to be a huge engineering problem.

Yes, banks do net settlement with each other. They tally up all the debits and credits on both sides and then make a single transfer to settle between each other. Say Bank A owes Bank B $200, and Bank B owes Bank A $150. Bank A will send Bank B $50, as that is the net amount after subtracting 150 from 200.

https://en.m.wikipedia.org/wiki/Net_settlement

They're not settled instantly, but broadly, this is one of the reasons the credit card networks are a massive accomplishment; they settle deterministically enough that a commanding majority of financial institutions will trust the networks sufficiently to transact with them. Yes, this is accomplished by absolutely massive amounts of (mostly offsetting) debts carried between various parties every day of the last several decades.

I should probably write more about this subject at some point, but the GP is of course correct; the credit card networks (except for Amex) generally do not put up money at any point. Each entity in a chain about 5 links long makes simultaneous and very quick agreements about offsetting transactions between themselves, with probabilistic assurance of eventual settlement to the business being "very, very quick" and physical settlement happening in a few days to about a month later. Typically an important step is the issuing bank settling with an intermediary (not the network) who will settle with the merchant bank or payment processor who will settle with the business.