Card Scheme

Card schemes are the rule-setters and infrastructure operators at the center of the global card payment ecosystem. Every card transaction — whether in-store, online, or contactless — flows through the scheme's rules and systems. Understanding how schemes operate is foundational to understanding payment economics and compliance obligations.

Four-Party vs. Three-Party Schemes

Four-party schemes (open loop): Visa and Mastercard are the dominant examples. The four parties are:

1. The cardholder
2. The issuing bank (issues the card to the cardholder)
3. The acquiring bank (holds the merchant account)
4. The merchant

The scheme operates the network between issuer and acquirer but does not hold funds or directly issue cards. Revenue comes from scheme fees charged to issuers and acquirers on each transaction.

Three-party schemes (closed loop): American Express and Diners Club historically issued their own cards and acquired merchants directly — collapsing the four-party model into three. This gave them direct control over the cardholder and merchant relationship but limited scale. AmEx has since moved toward a hybrid model, allowing third-party bank issuers in many markets while retaining network ownership.

Domestic schemes: Many markets have domestic card schemes alongside the global networks. Examples include RuPay (India), UnionPay (China), Elo (Brazil), Cartes Bancaires (France), NETS (Singapore), and BancNet (Philippines). These schemes typically have different interchange economics, scheme fee structures, and technical standards than Visa/Mastercard.

Scheme Rules and Compliance

Card schemes publish detailed operating rules — Visa's core rules and Mastercard's rules documents run to thousands of pages. These rules govern everything from merchant category code assignment to chargeback procedures, authentication requirements, and data security standards.

Compliance with scheme rules is enforced through:

• Fines and assessments: Schemes can levy fines on issuers and acquirers for rules violations (excessive chargeback rates, PCI non-compliance, MCC misuse)
• Registration requirements: Merchants above certain volumes, payment facilitators, and other intermediaries must be registered with schemes
• Network participation: Non-compliant members risk suspension of network access

Scheme Fees

Scheme fees are distinct from interchange and are charged directly by the card network. They include:

• Assessment fees: Basis points on gross transaction volume
• Authorization fees: Per-transaction fees for authorization messages
• Cross-border fees: Additional fees when the issuer and acquirer are in different countries
• Integrity fees: Applied when transaction data quality fails network standards

Scheme fees are typically 0.1–0.3% of transaction value and are generally non-negotiable for most merchants and PSPs. Large acquirers with significant volume may negotiate scheme fee rebates, but these are not publicly disclosed.

Regional Scheme Landscape

While Visa and Mastercard dominate globally, most major markets have significant domestic scheme activity:

Europe: Cartes Bancaires (France) is co-badged on ~95% of French cards and controls domestic interchange. Girocard (Germany) dominates domestic debit. Bancomat (Italy) and Bancontact (Belgium) hold similar positions. These domestic schemes typically carry lower interchange than international Visa/Mastercard equivalents.

South Asia: RuPay (India, NPCI) has grown to over 700 million cards and is mandatory acceptance in India. The government's zero-MDR mandate on RuPay debit transactions has made it the dominant domestic payment instrument.

East Asia: UnionPay (China) is the world's largest card scheme by volume. JCB (Japan) has issuing and acceptance presence across Asia-Pacific. Both operate closed-loop and open-loop variants.

Americas: Elo (Brazil) and Carnet (Mexico) are the primary domestic card schemes. PIX (Brazil) and SPEI (Mexico) are real-time rails that increasingly substitute for card payments in domestic transactions.

Middle East and Africa: Mada (Saudi Arabia) is mandatory acceptance; Meeza (Egypt) and Troy (Turkey) serve similar domestic roles.

For PSPs acquiring across multiple markets, supporting domestic schemes alongside Visa/Mastercard is typically required for competitive acceptance rates. Domestic real-time payment rails (PIX, UPI, PayNow, PromptPay) operate outside the card scheme model entirely and carry materially lower fees.