American Express Card – 3 Three-party scheme

The payment card industry (PCI) denotes the debit, credit, prepaid, e-purse/e-wallet, ATM, and POS cards and associated businesses.

Card Schemes:

The card schemes come in two main varieties – a three-party scheme (or closed scheme) or a four-party scheme (or open scheme).

Three-party scheme

A three-party scheme consists of three main parties 

In this model, the issuerIssuer issuer A bank or financial institution that issues payment cards to consumers. Responsible for authorizations and chargebacks. (having the relationship with the cardholderCardholder cardholder The person or business to whom a payment card is issued.) and the acquirerAcquirer acquirer A financial institution or payment processor that manages the merchant account, enabling businesses to accept card payments. Acquirers receive all transactions from the merchant and route them to the appropriate issuing bank. (having the relationship with the MerchantMerchant merchant An individual or business that accepts payments in exchange for goods or services.) is the same entity. This means that there is no need for any charges between the issuer and the acquirer.

Since it is a franchise setup, there is only one franchisee in each market, which is the incentive in this model. There is no competition within the brand; rather you compete with other brands.

Examples of this setup are Diners Club, Discovery Card, American ExpressAmerican Express american-express A global financial services corporation offering credit cards, charge cards, travel-related services, and merchant acquiring. and other closed loop system like Restaurant Checks.

Four-party scheme

In a four-party scheme, the issuer and acquirer are different entities, and this scheme is open for other members of the scheme to join in the competition. This signifies card schemes such as VISAVisa visa A leading global payment technology company connecting consumers, businesses, and banks. and MastercardMasterCard mastercard A global payments network enabling electronic transactions between banks, merchants, and cardholders.. There is no limitations as to who may join the scheme, as long as the requirements of the scheme are met.