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The Four Party Model is an academic term used to describe the credit card business model created by the banks and card association networks consisting of banks, cardholders, merchants, and networks. Most all electronic card payments are constructed on the back of the Four Party Model. The system that Visa and MasterCard run are considered Four Party models.
What are card schemes
There are two main types of card schemes: a three-party scheme and a four-party scheme. A four-party scheme is essentially the Four Party Model. The three-party scheme is commonly referred to as a closed scheme while the four-party scheme is commonly referred to as an open scheme.
As you can probably tell by the name, a three-party scheme consists of just three parties. The issuer in this model has a relationship directly with the cardholder while the acquirer has a relationship with the entity. Therefore, there is typically no charges between the acquirer and the issuer.
How the four party model works
Visa and MasterCard can be used to pay for just about anything at the vast majority of retailers in just about every country in the world. The Four Party Model is the reason this is possible. Both Visa and MasterCard permit all participating retailers, consumers, acquirers, and issuers to conduct business with one another. Essentially, the Four Party Model serves to keep the entire system together. This ensures that all parties involved, especially retailers and consumers, can enjoy secure and convenient payments that don’t involve cash.
In spite of its name, other entities have been joining the four parties of the Four Party Model. Some of these entities include technology vendors, mobile network operators, and device manufacturers. All of these entities work to provide services to one or more of the four parties of the Four Party Model. In some cases, these entities form partnerships with any of the four parties of the Four Party Model.
Steps that describe how the Four Party Model works:
The consumer receives a Visa or MasterCard account from the issuer. The account could be credit, debit, or prepaid. The account can operate via the Internet, a physical card, or mobile devices.
The consumer chooses the goods and services they wish to purchase with the Visa or MasterCard account.
The acquirer receives the transaction from the retailer.
The transaction is submitted from the acquirer to the issuer.
The issuer must approve of the transaction and tells the acquirer the retail price.
The retailer is paid by the acquirer. The merchant service charge is negotiated between the retailer and the acquirer.
The account of the consumer is debited with a retail price. This retail price appears on the statement of the merchant.
The Four Party Model is an academic term used to describe the credit card business model created by the banks and card association networks consisting of banks, cardholders, merchants, and networks. Most all electronic card payments are constructed on the back of the Four Party Model. The system that Visa and MasterCard run are considered Four Party models.
What are card schemes
There are two main types of card schemes: a three-party scheme and a four-party scheme. A four-party scheme is essentially the Four Party Model. The three-party scheme is commonly referred to as a closed scheme while the four-party scheme is commonly referred to as an open scheme.
As you can probably tell by the name, a three-party scheme consists of just three parties. The issuer in this model has a relationship directly with the cardholder while the acquirer has a relationship with the entity. Therefore, there is typically no charges between the acquirer and the issuer.
How the four party model works
Visa and MasterCard can be used to pay for just about anything at the vast majority of retailers in just about every country in the world. The Four Party Model is the reason this is possible. Both Visa and MasterCard permit all participating retailers, consumers, acquirers, and issuers to conduct business with one another. Essentially, the Four Party Model serves to keep the entire system together. This ensures that all parties involved, especially retailers and consumers, can enjoy secure and convenient payments that don’t involve cash.
In spite of its name, other entities have been joining the four parties of the Four Party Model. Some of these entities include technology vendors, mobile network operators, and device manufacturers. All of these entities work to provide services to one or more of the four parties of the Four Party Model. In some cases, these entities form partnerships with any of the four parties of the Four Party Model.
Steps that describe how the Four Party Model works:
The consumer receives a Visa or MasterCard account from the issuer. The account could be credit, debit, or prepaid. The account can operate via the Internet, a physical card, or mobile devices.
The consumer chooses the goods and services they wish to purchase with the Visa or MasterCard account.
The acquirer receives the transaction from the retailer.
The transaction is submitted from the acquirer to the issuer.
The issuer must approve of the transaction and tells the acquirer the retail price.
The retailer is paid by the acquirer. The merchant service charge is negotiated between the retailer and the acquirer.
The account of the consumer is debited with a retail price. This retail price appears on the statement of the merchant.
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