What is a card network?

What is a card network?

Card networks also known as card schemes, connect issuing banks and acquiring banks so they can communicate and pass data back and forth to facilitate global transactions.
Card networks allow consumers to use (and merchants to accept) cards issued by any bank anywhere in the world, and have the same experience.

What role does a card network play in the payment lifecycle?

While online payments seem instantaneous, there are a lot of factors that go into making them happen. Here’s how card networks fit into the payment process:

Payment initiation: A customer initiates a payment or a merchant starts a transaction using stored card details.‍
Authorization request: Transaction details are sent to the merchant’s acquirer—the financial institution partnering with the businesses to process credit and debit card transactions—and forwarded to the card network, which contacts the customer’s issuing bank.
Issuer decision: The issuer receives the request and sends an authorization code to approve the transaction or a decline/error code for declined payments.‍
Decision communication: The card scheme sends the issuer’s decision to the merchant’s acquirer, which then communicates it to the payment gateway.‍
Notification to the customer: The merchant’s gateway tells the customer whether the transaction is authorized or declined.‍‍
Hold and settlement: If approved, a temporary hold is placed on the customer’s account until funds are transferred from the customer’s bank to the merchant’s account.

Why are there different card networks?

The reason different card networks exist—such as Visa, Mastercard, American Express, and Discover—is because of the competition within the financial services industry. Each network wants to be the most innovative and the most efficient to entice customers. And each card network has different business models, strengths, weaknesses, and priorities.

How do card networks work?

All card networks act the same during the card payment lifecycle, but some networks operate a three-party model and others utilize a four-party model.
The three-party (closed) scheme: In this model, a single entity acts as the credit card issuer and acquirer. Discover Card and American Express are examples of financial institutions that are both issuers and acquirers.
Four-party (open) scheme: Issuers and acquirers are separate, meaning there is a fourth corner. Visa and Mastercard operate under this scheme. Any eligible institution can join and issue cards on these card networks.

What are examples of card schemes?

The following cards are all card schemes with a specific network that processes global card payments:

• Visa
• Mastercard
• American Express (AmEx)

Card networks in India

There are currently five authorized card networks in India:

1. RuPay
2. Visa
3. MasterCard
4. American Express
5. Diners Club

The largest issuer of credit cards in India is HDFC Bank, which is not only one of the largest private banks in India and a major market share in terms of credit card offerings. One of the most widely-used cards in India is MasterCard.