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Understanding card schemes: A comprehensive guide for businesses

Processes that make our everyday transactions easier operate quietly in the background. Unseen yet indispensable: card schemes. Card schemes play an important role, acting as the backbone of payment processing systems. For businesses, understanding these card schemes is not only beneficial – it’s essential for making informed decisions that impact their business growth.

Apr 5, 2024 3 min
Contactless payment with card

What is a card scheme?

At its core, a card scheme is a network that sets the rules and standards for card-based payments, including credit, debit, and prepaid transactions. These networks ensure that payments are processed safely and efficiently. In addition, it connects merchants, banks, and payment processors to each other. Major players in this are companies such as Visa and Mastercard, but there are also more regional schemes that focus on specific markets.  

How do card schemes work?

A card transaction begins when a customer makes a payment using their card, via a card machine or a contactless payment method. The merchant’s terminal then sends transaction details to their bank (the acquirer), which forwards it via the card scheme to the cardholder’s bank (the issuer) for authorization. Once approved, the transaction is completed, transferring the money from the issuer to the acquirer. This process supports the trust and reliability that card schemes bring to the financial landscape. 

Benefits of card schemes for businesses

Implementing a card scheme offers many advantages for businesses. Firstly, it broadens the payment options available to customers, what increases satisfaction and potentially boosts sales. Additionally, card schemes integrate strict security measures, such as encryption and fraud monitoring. This protects both merchants and customers. These features, combined with the global acceptance of major card networks, can significantly expand a business’s reach and reputation in the market.  

Types of card schemes

Understanding the different types of card schemes is important to make sure you can select the one that aligns best with your business needs.


1. Three-party card schemes are known as closed loop models. For example, cards like American Express, consist of the cardholder, the merchant, and the issuer/acquirer as one. In this closed loop model, all businesses must exclusively use a specific payment card from a single network. Only one card type can be used at the time. This card scheme provides streamlined operations, but limits flexibility in card acceptance and therefore may impact sales for customers who prefer alternative cards. However, it is an ideal method for companies seeking market dominance without direct brand competition.

2. Four-party card schemes, also known as open systems, like Visa and Mastercard, involve an additional entity: the acquiring bank. This creates a more inclusive environment, as it enables a wider range of payment cards and services. This will result in having a broader market acceptance and thus more flexibility. It is a suitable method for businesses looking for extensive customer reach and innovation in payment solutions.


Each method has its advantages and considerations, impacting businesses in their choices based on their goals and customer preferences. This emphasizes the dynamic nature of the payment card industry.


Card schemes is a varied industry, and it shows the complexity but also the conveniences of our modern financial world. For businesses, it represents not only facilitating transactions, but it is about making connections, building trust, and creating new opportunities. By carefully considering the benefits and types of card schemes available, businesses can choose a payment processing solution that not only meet their needs but also supports their growth ambitions.