Unlocking the secrets of card networks

Unlocking the secrets of card networks: Visa, Mastercard, and local schemes explained

20 May 2024 in Blog,PayDecoding

by Ludovic Plisson

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Understanding card networks

Understanding card networks, such as Visa and Mastercard, is crucial in global financial transactions. These networks connect issuing banks (the cardholder’s bank) and acquiring banks (the merchant’s bank), enabling smooth communication and data transfer for payments. This understanding helps businesses optimize payment processes and reduce costs.

The role of card networks in payments

The Payment Process: Step-by-Step

When a customer makes a payment, several steps ensure the transaction is secure and successful. Here’s a simplified explanation:

  1. Payment initiation: The customer or merchant starts the transaction. This could be swiping a card, entering card details online, or tapping a mobile payment app.
  2. Authorization request: The merchant’s bank (acquirer) sends the transaction details to the card network (e.g., Visa, Mastercard). The network then forwards these details to the customer’s bank (issuer).
  3. Issuer decision: The issuing bank checks if the customer has enough funds or credit and verifies the transaction details for security. The bank then decides to approve or decline the transaction.
  4. Decision communication: The issuer’s decision is sent back through the card network to the acquirer. This communication happens almost instantly.
  5. Customer notification: The customer is informed of the transaction status. If approved, they see a confirmation; if declined, they receive an error message.
  6. Clearing and settlement: If the transaction is approved, the amount is temporarily held by the issuing bank. Later, the actual transfer of funds happens between the banks, ensuring the merchant gets paid. This final step may take a few days.

Example scenario

Imagine Jane wants to buy a book online. Here’s what happens:

  • Jane enters her card details and clicks “pay”.
  • The online store’s bank sends Jane’s payment info to Visa.
  • Visa sends the info to Jane’s bank.
  • Jane’s bank checks her account and approves the payment.
  • Visa tells the online store’s bank the payment is approved.
  • Jane sees a “payment successful” message.
  • The money is held by Jane’s bank and later transferred to the online store’s bank.

This entire process ensures secure and efficient transactions, providing a smooth experience for both customers and merchants.

How card networks operate

Card networks operate under two main models:

  • Three-Party Model (Closed Loop): A single entity acts as issuer and acquirer, handling all aspects of the transaction. American Express is a prime example of this model.
  • Four-Party Model (Open Loop): Separate entities act as issuers and acquirers. Visa and Mastercard operate under this model, where the network acts as a mediator between the banks.


Why different card networks exist

Competition in the financial industry drives innovation and efficiency. Each network has unique business models, strengths, and priorities.

For example, Visa and Mastercard focus on global reach and technological advancements, while networks like American Express emphasize customer service and rewards.

This diversity allows businesses to choose the network that best suits their needs.

Local card schemes

Local card schemes offer national alternatives to international networks, reducing dependency on global brands and optimizing costs. These schemes are often backed by domestic government agencies, promoting competition, lowering transaction fees, and supporting national economic policies. Additionally, they provide more regulatory control. There are more than 90 domestic-market-only brands worldwide.

In 2024, domestic card schemes are projected to handle a significant portion of global transactions, with 12% of all payment cards worldwide being branded solely with domestic schemes​.

Local card schemes are frequently co-badged with Visa and Mastercard, allowing cardholders to use them internationally while enjoying the benefits of local schemes domestically. This dual functionality ensures that users have broad acceptance while retaining the cost benefits and regulatory advantages of local schemes.

Examples of local card schemes :


  1. Cartes Bancaires (France): Used widely for domestic transactions, supplementing Visa/Mastercard.
  2. Dankort (Denmark): Offers cost-effective domestic payment solutions.
  3. Bancontact (Belgium): Popular for domestic payments, enhancing transaction security and efficiency.
  4. SIBS (Portugal): Manages daily banking transactions within Portugal.
  5. B-Card (Bulgaria): Offers competitive fees and improved transaction speeds.
  6. ServiRed (Spain): Widely accepted within Spain, now part of the broader Euro 6000 network.
  7. Nets (Norway): Provides comprehensive payment solutions across the Nordic countries.
  8. Bankaxept (Norway): Norway’s domestic debit card system, offering secure payments.


  1. MIR (Russia): Created to ensure financial sovereignty and reduce reliance on Western networks.
  2. RuPay (India): Government-supported to enhance financial inclusion and reduce transaction fees.
  3. UnionPay (China): Dominates domestic transactions, expanding globally.
  4. JCB (Japan): Local alternative with international acceptance.
  5. BC Card (South Korea): Dominates the South Korean market with comprehensive payment solutions.
  6. HUMO (Uzbekistan): National payment system ensuring secure and efficient transactions.
  7. Shetab (Iran): Iran’s national payment system connecting various banks for seamless transactions.
  8. Domestic Card Scheme (Malaysia): Enhances financial accessibility and reduces transaction fees.

North America

  1. Interac (Canada): Widely adopted for everyday payments.
  2. PROSA (Mexico): Facilitates efficient and secure domestic transactions.

South America

  1. ELO (Brazil): A growing local scheme aiming to reduce dependence on international brands.
  2. Redcompra (Chile): Dominates Chile’s electronic payment market, used widely for debit transactions.
  3. Cabal (Argentina): A cooperative card network providing financial inclusion and supporting local economies.


  1. EFTPOS (Australia): Prioritizes low-cost local transactions.

MENA (Middle East and North Africa)

  1. MADA (Saudi Arabia): A national payment network supporting the Kingdom’s Vision 2030.
  2. TROY (Turkey): Developed for national financial independence.
  3. Shetab (Iran): Iran’s national payment system connecting various banks for seamless transactions.
  4. NAPS (Qatar): National ATM and point-of-sale network offering secure transactions.


  1. Zimswitch (Zimbabwe): Enhances financial inclusion and reduces transaction costs.
  2. Verve (Nigeria): Widely accepted across Nigeria, promoting financial inclusion and domestic transactions.
  3. GH-Link (Ghana): Facilitates interbank transactions and enhances financial inclusion.
  4. eTranzact (Nigeria): Provides mobile banking and payment solutions across Africa.

These examples illustrate how local card schemes serve specific needs and preferences of their respective regions, often providing more affordable and tailored services than their international counterparts.


Comparison with Visa and Mastercard

Local schemes often provide reduced fees and better national integration than Visa and Mastercard. However, Visa and Mastercard offer extensive global acceptance and robust infrastructure, crucial for international transactions. Businesses must weigh these factors when choosing which networks to support.

Payment processing fees

Understanding the various fees involved in payment processing is essential for businesses:

  • Interchange Fees: A percentage paid by the merchant to the issuing bank.
  • Transaction Fees: A fixed amount charged by the card network.
  • Network Access Fees: Annual fees for using the card network.

These fees can impact a business’s bottom line, making it essential to understand and optimize payment processing strategies.



Understanding card networks and their models helps merchants optimize costs and enhance customer experiences. Local schemes play a significant role by offering cost-effective, efficient alternatives to international networks. By leveraging the strengths of various card networks, businesses can make informed decisions that benefit both their operations and their customers.

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