Cross-border is where the network earns its keep

A card network earns a little on every domestic transaction and considerably more when the card crosses a border. Cross-border volume is a minority of the total and a disproportionate share of the profit.

Why the border matters

A foreign transaction involves currency conversion, extra processing and a pricing structure that customers rarely compare. The network is paid for the complexity, and travellers pay it without much thought because the alternative is carrying cash.

That makes cross-border volume sensitive to travel, and relatively insensitive to the price competition that squeezes domestic fees.

What I'm watching

• International travel trends, which lead cross-border volume
• Card-not-present cross-border commerce, the online version of the same fee
• Regulatory attention on foreign exchange fees

Where I stand

Long. The network's economics are strongest where it is least substitutable, and cross-border is the clearest example.

What would change my mind

Regulation that caps cross-border and currency fees in a major market. That is the most profitable corner of the network, and it would be the most expensive place to lose pricing.