Card scheme: Difference between revisions

Revision as of 11:58, 1 September 2022

Revision as of 13:42, 5 September 2022

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{{Short description|Payment networks linked to payment cards}}

{{refimprovemore citations needed|date=July 2021}}

'''Card schemes''' are payment networks linked to [[payment cards]], such as debit or [[Creditcredit card|credit cards]]s, of which a [[bank]] or any other eligible [[financial institution]] can become a member. By becoming a member of the scheme, the member then gets the possibility to issue cards or [[Acquiring bank|acquire]] merchants operating on the network of that card scheme.<ref name="4CornersmodelRupp">{{cite web |last1=Rupp |first1=Martin |title=Cardholder, Merchant, Issuer & Acquirer - The Four Corners Model for Payment Security and Key Management |url=https://www.cryptomathic.com/news-events/blog/cardholder-merchant-issuer-acquirer-the-four-corners-model-for-payment-security-and-key-management |publisher=Cryptomathic |date=April 22, 2021}}</ref><ref name="Fédération Bancaire Française">{{cite web |last1=Études et activités bancaires et financières |title=An interbank payment card system for the benefit of all |url=http://www.fbf.fr/en/files/94VLEX/Interbank-payment-card-system-24012013.pdf |publisher=Fédération Bancaire Française |date=January 2013}}</ref>

[[UnionPay]], [[Visa Inc.|Visa]] and [[Mastercard|MasterCard]] are three of the largest global brands, known as card schemes, or card brands. Billions of transactions<ref name="Number of purchase transactions 2020">{{cite web |last1=de Best |first1=Raynor |title=Number of purchase transactions on global general purpose card brands |url=https://www.statista.com/statistics/261327/number-of-per-card-credit-card-transactions-worldwide-by-brand-as-of-2011/ |publisher=Statista |date=July 2021}}</ref> go through their cards on a yearly basis.

==Types==

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[[File:card schemes4.jpg|thumb|left]]

In a four-party scheme (also referred to as [[Four Corners Model for Payment Security|Four Corners Model]], the issuer and acquirer are different entities, and this type of scheme is open for other institutions to join and issue their own cards. This is the type of card scheme used by [[Brand|brandsbrand]]s such as [[Visa Inc.|Visa]], [[Mastercard]], [[Verve Card]], [[UnionPay]] and [[RuPay]]. There are no limitations as to who may join the scheme, as long as the requirements of the scheme are met.

==Processes==

The card scheme utilizes the respective [[Guideline|guidelinesguideline]]s<ref name="Mastercard Rules">{{cite web |last1=Summary of changes 2020 |title=Mastercard card scheme - Rules and guidelines |url=https://www.mastercard.us/content/dam/mccom/global/documents/mastercard-rules.pdf |publisher=Mastercard |date=December 2020}}</ref><ref name="Visa Rules">{{cite web |last1=Visa core rules 2021 |title=Visa card scheme - Product and service rules |url=https://sr.visa.com/content/dam/VCOM/download/about-visa/visa-rules-public.pdf |publisher=Visa |date=April 2021}}</ref> to process the card exchange data from the acquiring to the [[issuing bank]], and vice- versa, until the [[payment]]<ref name="Payments industry ecosystem 2021">{{cite web |title=The payment industry’sindustry's biggest trends in 2021 |url=https://www.insiderintelligence.com/insights/payments-ecosystem-report/ |publisher=Insider Intelligence |date=July 2021}}</ref> is fully completed (or denied). Credit and [[Debitdebit card|debit cards]]s work with four-party scheme, completing an open-circle framework that permits consistent flow of transactions; thus, allowing the banks to handle the whole process.

Card schemes aim to make the transaction convenient and automated for all parties involved in the loop, with the core belief that [[Customer|clients]] end up spending more than intended when the payment process is simple.

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===Payment gateway===

A [[payment gateway]] is a key party, responsible for [[online transactions]], passing card data from consumer to merchant, and a to a relevant bank through the card scheme. The process usually takes place at [[POS terminal|POS terminals]]s in retail locations, or by means of [[Online payment|online payment services]] for [[Website|websiteswebsite]]s. A payment gateway imparts whether the charge has been processed by the cardholder's bank and moves it further for settlement.

==Fees==

Card scheme [[Fee|feesfee]]s are the expenses that are paid by acquiring banks, which, on the other hand, charge merchants through [[Transactiontransaction fee|transaction fees]]s. Card scheme fees are not openly uncovered, and no outside parties knows the genuine figure.

Those fees might incorporate quite a few charges, some of which are - fixed or transaction fees, unrelated to the individual payment. Factors, such as the card type, [[payment method]], and geographic area might influence the variable fees.

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===Interchange fees===

[[Interchange fee|Interchange fees]]s<ref name="Interchange fees between the UK and EEA">{{cite web |title=Mastercard and Visa - revisions to interchange rates between the UK and the EEA |url=https://www.bambora.com/news/mastercard-and-visa-announce-changes-to-interchange-fees-between-the-uk-and-the-eea/ |publisher=Bambora |date=May 2021}}</ref> (or trade fees) are transaction charges that the acquiring bank pays when a payment is being processed via debit or credit card. The expenses are paid to issuing bank and cover costs, such as processing fees, [[bad debt]], and charges due to risk and potential [[Fraud|fraudulent activities]].

== References ==