How a card scheme works
A scheme licenses banks and payment institutions as members. Issuers give cards to cardholders, acquirers sign up merchants, and the scheme's rules say how the two sides authorise, clear and settle payments with each other and how disputes are decided.
The scheme also owns the brand on the card, sets default interchange rates, charges its members scheme fees, and can fine a member or end its licence. Most schemes run a processing network as well, and Article 7 of the EU regulation requires the scheme and the processing entity to be independent in accounting, organisation and decision-making.
Four-party and three-party card schemes
The EU regulation distinguishes two models in Article 2. In a four-party scheme, a payment passes from the payer to the payee through the scheme, an issuer and an acquirer. In a three-party scheme, the scheme itself provides the issuing and the acquiring.
A three-party scheme that licenses other providers to issue or acquire, or that issues with a co-branding partner or through an agent, is considered a four-party scheme. The regulation's interchange caps do not apply to cards issued by three-party schemes (Article 1).
Why the card scheme matters at launch
A company reaches a scheme through a member: a card programme through its issuer or BIN sponsor, a payment facilitator through its acquirer. The scheme's rules still bind the company by contract, and they decide which merchants can be accepted, how a card is branded and when a dispute is lost.
Domestic schemes exist beside the international ones, and a card can carry two. The EU regulation prohibits scheme rules that prevent an issuer from co-badging two or more payment brands on one card (Article 8).
Card scheme, card network or processor?
- Card network
- Often used for the same thing. Strictly, the network is the switching infrastructure that carries the messages, and the scheme is the rulebook and the body behind it.
- Processor
- A company that handles authorisation and clearing messages for an issuer or an acquirer. A processor follows the scheme's rules and does not set them.
Where a card scheme shows up in a platform
Modules that do the work
- Card issuingVirtual and physical cards, wallets and controls, on the issuer processor you choose.
- Card acquiringCard acceptance on the phone, in store and online, through the acquirer you choose.
Platforms that need it
Guides that go deeper
- How to become a PSP or a payment facilitatorGateway, acquirer, payment facilitator or payment institution: where the licence line falls, how the card schemes register payment facilitators, what merchant KYB demands, and the UK and UAE rules.
- BIN sponsorship: how to launch a card programmeWho does what in a sponsored card programme, what the BIN sponsor, Visa and Mastercard ask of a programme manager, the rules for crypto-linked cards, and where an EMI licence fits.
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.