Individual collateral
Assets in an individual wallet or contract secure a credit obligation. A hold reduces spending power before the final charge posts. Withdrawal restrictions and enforcement depend on the agreement.
One tap.
You balled out in coffee, matcha lattes, and avocado toasts.
Where does the $100 go?
Scroll to follow the moneyCardholder → terminal → merchant processor → network → issuer → approval returns. These are messages, not a settled payment.
The Capital
Stack.
Your money. The banks. The loan behind the scenes.
One purchase connects them all. Follow the $100 note from approval to the cafe, then back to the lender.
or
Alternative networks, one route per purchase. Logos illustrate roles, not a partner list. The note represents value, including USDC.
Start the journey ↓First, approval.
Then, the loan.
Scroll. The message travels first. The money follows.
Your USDC backs the purchase. The program borrows money to pay before it collects from you.
The program draws its loan
A lender advances $98 to the program. This is the program’s debt, separate from your card bill.
The bill represents value, including USDC. Amounts and loan terms are illustrative.
What backs the borrowing?
Customer collateral$100.00 USDCSecurity for the obligation. Not a second purchase.
Settlement funding$98.00 borrowedA short loan bridges settlement and collection.
Reserve & company equitySeparate capitalThe reserve covers agreed losses. Equity funds the business. Neither automatically guarantees the lender.
Collection repays principal and interest.
Example: collect 3 days after settlement at 10% APR. Funding cost: $0.081.
Lender → program / issuer: $98 loan. Issuer → network settlement: $98. You → issuer: $100. Program → lender: $98 principal + $0.081 interest. Collateral, reserves and equity are separate.
All the way
to the cafe.
Keep scrolling to pay the cafe and repay the lender.
The issuer checks that you can spend $100. The cafe gets an approval. The money moves later.
The cafe asks your issuer to approve $100. Messages travel through the acquirer and Visa. No money has settled yet.
ApprovalThe terminal sends a request through the processor and card network. The issuer approves it and puts $100 on hold.
SettlementThe cafe confirms the final bill. The system calculates what each institution owes.
What the cafe receivesThe issuer sends $98 in USDC through the network settlement system. The acquirer funds the merchant $97.50 in dollars.
Expand to see processing and payout partners.
A processor moves payment data; it does not necessarily hold the settlement money. The arrows isolate one purchase. Networks normally settle net batches. Merchant payout timing is a separate agreement.
Issuer → network settlement → payout partner (USDC converted to USD in this synthetic route) → acquirer → merchant. Default: $98 network settlement; $97.50 merchant payout; $0.50 merchant-side network and acquiring fees.
Who keeps
the fee?
In this example, the cafe pays $2.50 to accept the card. That fee is shared.
Purchase$100.00
Merchant receives$97.50
Merchant fee$2.50
Interchange · issuing side$2.00
Network fees$0.15
Acquiring & processing$0.35
All splits are synthetic. The merchant fee changes with the interchange scenario. Interchange is not company profit.
$100 purchase = $97.50 to the merchant + $2 interchange + $0.15 network fees + $0.35 acquiring and processing fees.
What changes
with USDC?
You can hold USDC while the cafe receives dollars. The card network still connects the two sides.
Moving funds faster can help. The program still has to handle refunds, fraud, repayments and enough cash to pay on time.
Now explore the economicsStablecoin: USDC collateral and USDC or USD settlement. Fiat debit: deposit-funded USD settlement. Fiat credit: issuer financing before later USD collection.
1 / 6
First, two
different questions.
Debit and credit describe how you pay.
USD and USDC describe the asset behind it.
Debit: spend money you already have.
Credit: the issuer pays and you owe a bill. That debt can be secured by collateral or unsecured.
ExampleBefore the purchaseWhen you spend
USD debitYou have dollars in a bank account.The purchase uses your balance.
USD creditThe issuer gives you a credit limit.You owe dollars and repay later.
USDC-backed credit
Our starting exampleYour USDC secures a credit limit.A hold reduces your spending power. The debt is paid later.
Our starting exampleYour USDC secures a credit limit.A hold reduces your spending power. The debt is paid later.
USDC-funded debit / prepaidYou make USDC available in advance.The purchase uses that value. Conversion and card classification depend on the program.
“Stablecoin card” is an umbrella term. It can describe either structure. A credit card can feel like debit when every purchase is fully backed and repaid automatically. Check the card agreement, not just the app balance.
CFPB: debit, credit and prepaid · The program’s settlement loan is separate from any interest the cardholder pays. Watch the loan move →
Same tap.
Different economics.
The US and EU set different limits on interchange. Stablecoins change the funding asset, not these rules.
United States
Credit and debit follow different rules. For debit, issuer size and transaction exemptions matter.
Consumer credit · illustrative2.00%Our $2 example is an assumption, not a universal credit-card rate or cap.
Exempt debit · illustrative1.20%Small-issuer exemption generally applies below $10 billion in assets, including affiliates. Actual rates vary.
Covered debit · $100 purchase$0.27$0.21 + 0.05% of value + $0.01 if eligible for the fraud-prevention adjustment.
European Union
The EU caps interchange on covered consumer cards to reduce merchants’ acceptance costs.
Consumer credit · cap0.30%€0.30 on a €100 purchase within the regulation’s scope.
Consumer debit · general cap0.20%€0.20 on €100 under the general percentage cap. National debit options can apply.
Less interchange leaves less room for rewards and program costs. A real business can change pricing, rewards, subscriptions or other revenue.
These are interchange figures, not the whole merchant fee. Scope depends on the card, issuer and acquirer locations and transaction type: not simply where the cardholder lives. Commercial cards and out-of-scope international transactions can differ. The UK is outside the EU. A stablecoin-backed card can be classified as credit or debit; holding a stablecoin does not decide its interchange regime.
Why cap the fee?
The EU wanted to lower the cost of accepting cards and make those fees more consistent across the market. The fee is paid between institutions, but merchants bear it through their card-processing bill. Lower acceptance costs can benefit shoppers; a lower shop price is not guaranteed.
Does that mean more cashback?
Usually, it leaves less interchange to fund rewards. A 0.3% interchange cap means at most €0.30 on an in-scope €100 credit purchase. €1 cashback already costs more than that, before processing or fraud costs.
Rewards can still come from subscriptions, merchant offers, lending income or a marketing budget. A high reward rate does not tell you where the money comes from.
Less interchange. Different rewards.
A smaller fee leaves less room to fund cashback from each purchase. It does not ban rewards. A provider may also charge for a subscription, arrange merchant-funded offers, or earn lending income where its model permits.
Paid plansA recurring fee helps pay for benefits.
Merchant offersA merchant can fund a discount or reward.
Credit incomeInterest can support the wider business. Borrowing still costs the customer.
Points are not automatically cash. Their value depends on how you redeem them.
What’s left
from the fee?
Start with the interchange. Pay the costs. Share what’s left.
Change the inputs to see the result.
Illustrative economics per $100. Independent funding and interchange controls.
Conversion spreads and chain fees are not modeled. Prefunding removes this loan, not liquidity needs.
Follow the interchange
Interchange revenue$2.00
Issuer processing−$0.15
Issuer / sponsor services−$0.10
Variable operations & loss allowance−$0.10
Cardholder rewards−$0.50
Settlement financing−$0.081
Left after these costs$1.07
Brand share−$0.75
Platform keeps before overhead$0.3232.1 basis points of purchase volume
At this spending per year$38,500
Average amount borrowed$96,658
Before fixed overhead and tax. Not company profit or a forecast. All issuer-side cost assumptions are synthetic.
If there’s
a shortfall.
Four different jobs: secure the purchase, pay on time, cover losses, fund the business.
Customer collateral
Secures what the customer owes. It stays separate from the loan proceeds.
Settlement loan
Provides cash when settlement is due. It has to be repaid.
Designated reserve
Covers only the losses assigned to it in the agreement.
Company equity
Funds operations and growth. It is not an unlimited guarantee.
Try a shortfall. The loan is $98. Recover $90, use a $5 reserve, and $3 is still unpaid. In this example, the lender takes that loss. Actual contracts set the order.
Principal only; interest and enforcement costs excluded. No implied legal priority for an actual provider.
Loan principal$98.00
Collateral applied$90.00
Designated reserve applied$5.00
Remaining lender loss$3.00
Illustrative contractual waterfall
Who’s involved?
The payment chain has several jobs.
One company may do more than one.
- Issuer / issuing bank
- Your card’s side. Issues the card, approves spending and funds its settlement obligations.
- Acquirer / acquiring bank
- The cafe’s side. Handles card acceptance and arranges payment to the cafe.
These are role names; the legal institution depends on the country and program. One business can fill several roles. Issuer and acquirer explained.
All roles and example companies
One company can do several jobs.
Processors and acquirers · Issuer processing and program management · Wallet infrastructure and custody
Is American Express a network? Yes. American Express also acts as issuer and acquirer in parts of its business and works with partners. Its structure can combine jobs that this Visa/Mastercard example separates. American Express explains its network.
Visa or Mastercard? They are alternative networks in this example, not two consecutive stops. A bank can issue cards on both. Some debit cards support more than one network; routing rules determine which is used. A network usually does not lend you the purchase amount.
And the stablecoin issuer?
It may earn income on reserve assets while tokens remain outstanding. That income accrues over time, separately from interchange. Holding USDC does not itself entitle the holder to reserve interest. Read the issuer’s terms
Who needs
permission?
There is no single “card licence.”
Permissions follow the activity and the country.
A brand can work with authorised partners instead of becoming a bank. That does not transfer a partner’s licence to the brand or remove its own obligations.
ActivityWho does it?Permission to check
Issue cards or acquire merchantsThe issuer and acquirer
Relevant banking or payment-services authority, plus network membership or sponsorship. A Visa or Mastercard agreement is separate from a government licence.
Hold deposits or issue e-moneyA bank or authorised e-money provider
A bank charter for deposit-taking; in the EU, an electronic money institution authorisation for e-money. A payment institution authorisation does not by itself allow bank deposits.
Move money or provide paymentsThe entity actually providing the service
In the US, FinCEN registration and state money-transmitter licensing may apply, subject to the activity and exemptions. In the EU, bank, payment-institution or e-money permissions may cover the activity.
Custody or exchange cryptoA custodian, exchange or wallet-service provider
EU crypto services may require MiCA authorisation or a permitted route for an existing financial entity. Certain e-money-token payment services also fall under PSD2. US requirements depend on activity and state.
Issue the stablecoin itselfThe token issuer, separate from the card issuer
Token-issuance authority and reserve obligations are a separate layer. In the EU, issuing e-money tokens generally requires a credit institution or e-money institution under MiCA.
Provide creditThe card lender or settlement financier
Banking or lending permissions and consumer-credit rules depend on location and product. A loan to a program is different from a loan to its customer.
Supply software or processingA processor, gateway or program manager
Pure technical services may not require a standalone financial licence. Handling funds or providing regulated services can change that. Network registration, security standards and contractual approval may still apply.
How many licences? Count the activities, entities and countries first. A sponsored brand, an issuer and an acquirer may each carry different permissions. Operating directly across more countries can require more authorisations. There is no accurate universal number.
Sources: Visa licensing · EBA payments register · FinCEN registration and state licensing · EBA: MiCA and PSD2 · MiCA
The useful fine print.
Enough detail to keep the picture honest.
“Stablecoin card” can mean different things
Ask two separate questions: who owns the assets before a purchase, and how does the issuer meet settlement? The answer cannot be inferred from the card’s appearance or the speed of its blockchain.
Pooled program reserve
A program maintains aggregate backing while its customer ledger tracks individual balances and holds. The reserve and each customer’s legal entitlement are separate questions.
Platform payment claim
Tokens may transfer to a platform in exchange for a contractual payment claim. An app balance is not necessarily a bank deposit or continued ownership of those tokens.
Each architecture may use different conversion and repayment arrangements. None establishes a universal three-day loan. Our default is a synthetic collateral-backed example; prefunding is available in the calculator.
A pending hold and a posted charge are two states of the same purchase. Moving $100 from pending to posted should not deduct another $100. Refunds, offline purchases and changed capture amounts require a ledger beyond the blockchain transfer history.
What a licence does, and doesn’t, tell you
Card-network membership is a contractual network status. Banking authority, money transmission, custody, and issuer processing are separate questions. A principal network member is not necessarily a deposit-taking bank, and a US program may still use a partner issuer.
A national trust charter concerns permitted fiduciary and related activities, subject to its charter, applicable law and regulatory conditions. It does not automatically grant an unrestricted commercial banking business or replace every other permission.
This guide makes no company-specific licence or charter claims. OCC chartering resources
Why faster settlement doesn’t always mean less borrowing
Two clocks matter: when settlement is due, and when customer money becomes available. Shorter funding delays can reduce idle prefunding. But settling earlier while customer collection stays unchanged can lengthen the borrowing gap. Our calculator measures the collection gap after settlement, not total merchant payout time.
The average outstanding estimate assumes even daily volume and a constant funding gap. Real facilities also have headroom, reserves, fees, eligibility rules and uneven utilization.
Why the fee changes when you switch card scenarios
For clarity, this model uses interchange plus a fixed $0.50 of merchant-side network and acquiring fees. It does not hold the merchant’s $2.50 fee constant while interchange changes. Issuer-side processing is a separate service from merchant acquiring.
The legal caps are conditional, not universal market prices. We hold rewards and other synthetic costs constant to make their effects visible; a real program would design its pricing and rewards differently.
Glossary: the people, the promises, the money
- Issuer
- The institution responsible for the card and its settlement obligations under the program and network rules.
- Network
- The system connecting issuing and acquiring participants, such as Visa or Mastercard.
- Acquirer
- The institution serving the merchant and arranging card acceptance and settlement.
- Processor
- The technology that routes requests, maintains records and handles card events. Issuer and merchant processors serve different sides.
- Program manager / brand
- The business managing a card experience. Contractual responsibilities vary and may overlap with platform services.
- Authorization
- An approval and normally a hold. It is not the final settlement transfer.
- Interchange
- A fee paid from the acquiring side to the issuing side, generally through net settlement.
- Collateral
- Assets securing an obligation. They are not the same as a loan’s proceeds.
- Float / funding gap
- The time between paying a settlement obligation and receiving the funds used to repay it.
- Basis point
- 0.01 percentage points. One basis point of a $100 purchase is $0.01.
Sources and model assumptions
Use the static diagram view. This view also loads automatically when reduced motion is requested or WebGL is unavailable.
Public sources checked 16 October 2026. This is a synthetic educational model, not a reconstruction of any provider’s books. The separate research audit is not included in this website.
Default: $100 purchase; 2% illustrative interchange; $0.15 network and $0.35 acquiring fees; $98 settlement loan; three-day collection gap; 10% APR. No FX spread, chain fee, fixed overhead or tax is modeled.