What is a card network/ card scheme?
By Mariana Almeida Marques
We have all heard of companies like Visa, Mastercard or American Express. They are all card payment networks and play an integral part in payment processing. In this article, we explore what are card networks and their role in payment processing.
What is a card network?
A card network or card scheme is a system that links merchants to card issuers and facilitates the transaction. The card network creates a virtual infrastructure through which both issuing and acquiring banks can communicate. Whilst they aren’t responsible for actually processing the payment (the payment processor or PSP does that), they are the connector that links all the payment players and allows for the transaction to happen. Card transactions can’t happen without a card network.
Card networks make money by charging their own interchange fees to issuing and acquiring banks. Rather than charging a set fee per transaction, however, they charge a percentage of the total volume of transactions. They also charge the merchant (payee) for merchant services fees. In 2015, the EU set a limit of 0.30% for service charges for both debit and credit cards. Merchants may not accept all of the card networks available. It is common for smaller businesses not to accept American Express, for instance, due to its higher service fees.
Card network vs card issuer
Card issuers are issuing banks that deliver the credit or debit physical card that corresponds to each customer’s bank account. Every time customers opens a bank account, they will receive a physical card linked to that account that they can use for any purchase. Card issuers are only responsible for issuing the physical card, not processing the payment.
Most banks are card issuers. Think of, for example, Santander, HSBC, Barclays, Metro Bank, Citi Bank. Card networks like Mastercard or Visa don’t actually issue any physical card, they simply help to process the payment. However, there are a few exceptions. American Express and Discover, for instance, is both card networks and card issuers/banks. In your physical card, you are able to see both the name of your bank/card issuer, and the name of card network that your bank uses. Usually, the card network logo is displayed at the bottom left of your card.
Some examples of card networks
Visa is the most used card network in the world. Just like Mastercard, it is solely a card network, not responsible for issuing cards. Visa’s most known products are credit, debit and prepaid cards, though it also operates an electronic funds transfer division called Interlink. In 2020, Visa generated $21.8 billion in net revenue and reported a payments volume of $8.8 trillion. The American company is based in Foster City, California. Both Visa and Mastercard are also publicly traded.
Headquartered in New York, United States, Mastercard is the second largest card network in the world. It is very similar to Visa in terms of the products it offers, though fees vary between the two card networks. In the 2nd quarter of 2021, Mastercard had over 1 billion cards in circulation across the globe. Both Visa and Mastercard dominate the card network market (Statista report).
Also headquartered in New York, American Express is both a credit card issuer and card network. It offers credit cards to individuals, small businesses and corporations. It has a wide variety of credit cards to choose from, including cashback cards, British Airways cards and Amazon cards. American Express is the 5th most popular credit card company in the world, with 63 million cardholders. It serves mainly high-income customers with high credit scores in over 160 countries.
Just like Amex, Discover is also both a credit card issuer and card network. Headquartered in Illinois, U.S., Discover Bank offers current and savings accounts, various types of loans and credit cards. Compared to Visa, Mastercard and Amex, Discover isn’t as widely accepted both in the US and in the rest of the world. Much like Amex, the resistance likely comes from smaller merchants who find its interchange fees too high.
Headquartered in Shanghai, China, UnionPay is the largest card payment network in China. It covers 176 countries and regions, including 90% of Europe. UnionPay also has an app that enables its over 200 million users to make mobile payments. Like Amex and Discover, UnionPay issues its own debit or credit cards. Its range of cards also include travel cards that offer benefits such as access to airport lounges and access to tourist attractions.
How Imburse can help
Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.
In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.
Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.