The Myth of Funds uploaded to the Cloud of Visa, Mastercard, and other Payment Networks

Understanding the Reality

In the world of financial transactions, there is a persistent myth surrounding companies like Visa, Mastercard, American Express, and others—that they somehow "store" funds in their cloud or servers, and individuals can access vast amounts of money by tapping into these networks directly. This misconception is rooted in a misunderstanding of the roles these companies play within the financial ecosystem. It’s crucial to clarify that Visa, Mastercard, American Express, Diners, Union Pay, Discover, and similar entities do not hold or manage funds themselves, but instead, function as essential conduits within the payment process.

The myth of card “protocols” such as "101.1 to 101.4" and "201.1 to 201.4" often connected with physical or cloud POS operations is a prime example of misinformation circulating within certain financial circles, often invoking a sense of exclusivity and secretive insider knowledge. These so-called protocols, purported to control or unlock special transaction privileges or hidden functionalities within payment networks like Visa, Mastercard, and American Express, are entirely fictitious. No manual or documentation from any legitimate financial institution or card issuer references these protocols, nor do they exist within any standard operating procedures for card transactions. In reality, the terminology of "101," purportedly originating from a clandestine protocol for copying cards without a chip, and "201," associated with duplicating chip-enabled cards.

These myths are frequently propagated by fraudsters aiming to exploit the lack of understanding around payment systems, presenting nonexistent codes as a gateway to financial manipulation or hidden wealth. In reality, payment networks operate based on universally recognized standards and security measures, all of which are transparently documented and accessible through proper regulatory channels.

What Exactly Do Visa, Mastercard, and Other Payment Networks Do?

Visa, Mastercard, American Express, and their counterparts operate as payment networks, facilitating the smooth and secure transmission of transaction information between consumers, merchants, and banks. When you swipe a credit or debit card, or enter your card details online, these companies are responsible for routing the payment information from the merchant to the card issuer (typically your bank) and ensuring the transaction is properly authorized, cleared, and settled.

To break it down:

  • Visa, Mastercard, and Union Pay are primarily payment networks. They do not issue credit or debit cards directly; instead, they partner with financial institutions like banks that issue cards under their network’s brand. When you use a Visa or Mastercard card, the bank that issued the card is the one authorizing and handling the payment—not Visa or Mastercard themselves. These companies simply ensure that the payment is processed securely and efficiently.
  • American Express and Discover play a dual role. Unlike Visa and Mastercard, they are both payment networks *and* card issuers. This means that, in addition to providing the infrastructure to facilitate transactions, they also issue their own cards and handle the payment authorization themselves for those cards.

Do These Networks Hold Your Funds?

No. It’s a common misunderstanding to think that the funds linked to your card are somehow stored in a "cloud" managed by Visa, Mastercard, or American Express. In reality, the funds in your bank account (for debit cards) or the credit available to you (for credit cards) are managed entirely by the financial institution that issued your card. These funds are securely held by your bank, not by the payment networks themselves.

Visa, Mastercard, and similar companies merely provide the infrastructure through which the transaction data is transmitted. They help ensure that when you make a purchase, the request to move money from your account (or credit line) to the merchant’s account is processed efficiently and securely. At no point do these networks hold the actual funds.

Clearing, Authorization, and Settlement: The Real Process

Here’s how a typical transaction works when you use a payment card:

  1. Authorization: When you make a purchase, the merchant sends the payment details to their bank (called the acquiring bank). The acquiring bank then contacts the payment network (e.g., Visa or Mastercard), which routes the transaction request to your card’s issuing bank (your bank). Your bank checks whether you have sufficient funds or credit and approves or denies the transaction. Visa or Mastercard do not make this decision—they simply pass the request along.
  2. Clearing: Once the transaction is authorized, the acquiring bank (the merchant's bank) sends the payment details to the issuing bank (your bank), specifying the exact amount owed. Again, this process is facilitated by the payment network, but the movement of money involves only the banks.
  3. Settlement: Finally, the issuing bank transfers the money to the acquiring bank, which then credits the merchant’s account. The payment network oversees the routing of the information, but it never holds or transfers the actual funds.


Setting Standards: The Role of Payment Networks Beyond Transactions

Visa, Mastercard, American Express, Diners, and Union Pay also play a crucial role in establishing standards for how transactions should be processed. They set guidelines for merchants, payment facilitators, and marketplaces, ensuring that transactions are secure and compliant with global financial regulations. These standards protect consumers from fraud and ensure the reliability of the payment system as a whole.

However, even in this regulatory capacity, these companies do not hold or manage the funds themselves. Their role is limited to ensuring that the process of moving funds between banks is seamless and secure. The myth that funds are somehow stored or controlled by these entities is simply a misinterpretation of their actual function.

The Special Case of Cryptocurrency and Digital Wallets

With the rise of digital wallets and cryptocurrency, the myth of "funds stored in the cloud" has gained more traction, but it remains just that—a myth. Even with digital payment services like Apple Pay, Google Pay, or cryptocurrency wallets, the underlying funds are still held by financial institutions or blockchain-based wallets—not by Visa, Mastercard, or any other payment networks. These companies may provide the technology to facilitate faster or more convenient payments, but they still do not hold any actual funds.

In Summary: Payment Networks Are Not Banks

To dispel the myth once and for all: Visa, Mastercard, Diners, Union Pay, American Express, and other similar networks do not store funds in any form. They act as intermediaries, providing the technology and infrastructure necessary to process payments between consumers, merchants, and banks. The actual movement of money happens between the banks that issue and acquire payments, and in the case of American Express and Discover, between their own issuing and acquiring systems. 

Understanding this distinction is critical to appreciating the sophisticated yet transparent nature of modern financial transactions. Rather than holding funds, these networks ensure that your money moves securely and efficiently through the system, connecting consumers and merchants around the world.

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