What Are Card Schemes?

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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 30 August 2019
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In finance, a card scheme could refer to a fraudulent activity involving credit cards, or to a system used to provide membership benefits to businesses and other entities that buy into a branded payment program. The intended meaning is usually clear from the context where the term is used. In the first sense, a card scheme can involve considerable compromise of private data and substantial financial losses. Card schemes in the second sense provide a mechanism for sending and receiving payments, along with benefits, all over the world.

The card scheme creates an easy method for moving money between buyers and sellers, and for building brand loyalty. In a card payment program, the card scheme allows a company to issue credit or benefits cards branded with a recognizable logo. Consumers can carry the cards to pay for goods and services and access benefits like card rewards. Card schemes are available for credit cards, hotel benefits cards, and a variety of other services. There are several different structural frameworks available.


Two common frameworks are the three- and four-party card schemes. In the three-party scheme, the same company issues and acquires the card, contracting directly with cardholders and parties that will accept the card. Four-party schemes separate the issuer and the acquirer, adding another entity to the mix. In this case, there are added fees, as these two parties exchange fees for the right to use the card's branding and the right to access cardholders. Banks commonly take advantage of four-party schemes to issue cards to their members; instead of handling credit directly, they contract it out to another party.

The card scheme market has room for a number of companies of various sizes. Some are very small and locally based. They focus on providing services to a limited number of companies or people. Other card schemes are multinational in scope and allow people to travel with their cards and make payments as needed, including in foreign currencies if necessary.

With fraudulent activity, a card scheme involves illegally acquiring cardholder information and using it to run transactions, or illegally applying for cards with false information and using those cards to make purchases. The fraud may involve reselling goods or engaging in activities like exchanging them for cash credit with the use of forged receipts. These card schemes are for the fraudulent generation of income. In such schemes, a number of parties may be involved in locating and prosecuting the perpetrators of the fraud.


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