How Card Networks Work: Visa, Mastercard, Amex, RuPay and JCB
What a card network actually does, how the four-party and three-party models differ, why regional networks exist, and what it would take for a new one to matter.
In short
A card network routes authorisations, sets the rules everyone follows, and resolves disputes. Understanding the four-party model — and why Amex is different — explains most of what happens when a card is used.
Card networks are unusually invisible for something so consequential. Almost everyone uses one several times a day and almost nobody could say what it does. It is worth knowing, because the answer explains why launching a new one is so difficult and why the existing ones are so profitable.
What a network actually does
Three things, and only the first is technical.
- Routing. It carries the authorisation request from the merchant's side to the issuer, and the answer back, in a few hundred milliseconds.
- Rule-setting. It writes the rules every participant follows: what a card looks like, how disputes work, what interchange is, who may participate and on what terms.
- Dispute resolution. When a cardholder says a charge was wrong, it decides who bears the loss.
The second and third are the real business. Routing is a solved engineering problem; being the body whose rules everyone accepts is not something you can simply build.
The four-party model
Visa, Mastercard, RuPay and JCB mostly work this way. Four parties, and the network is not one of them:
| Party | Role |
|---|---|
| Cardholder | Holds the card and makes the payment |
| Issuer | The bank or institution that issued the card and pays the merchant's bank |
| Merchant | Accepts the card |
| Acquirer | The merchant's bank or processor, which pays the merchant |
The network sits between issuer and acquirer, moving messages and money and enforcing the rules. It does not hold the cardholder relationship or the merchant relationship — banks do. That is why Visa is not your bank and why a card problem gets referred back to whoever issued it.
Money flows the other way from the goods: the issuer pays the acquirer, minus interchange — a fee that compensates the issuer for the risk and cost of extending the payment. Interchange is the reason card programmes can be profitable and the reason regulators keep capping it.
The three-party model
American Express traditionally works differently: it is both the issuer and the acquirer. It issues cards to consumers and signs merchants directly, so there is no separate bank on either side.
This has consequences you can observe as a customer. Amex historically charges merchants more, because it is not constrained by interchange caps in the same way and captures the whole economics. It is also accepted in fewer places, for exactly the same reason. Tighter control, narrower reach — the same trade every closed system makes.
Why regional networks exist
RuPay in India, JCB in Japan, UnionPay in China, Elo in Brazil — these exist for reasons that are mostly not commercial.
- Cost. Domestic transactions routed through a domestic network do not pay international scheme fees. At national scale that is a large number.
- Sovereignty. A country whose payments depend entirely on foreign networks has a dependency it cannot control, which becomes salient when sanctions or geopolitics are involved.
- Policy. Financial inclusion targets are easier to hit with a network whose rules a government can influence.
They are worth studying by anyone interested in new networks, because they are the closest thing to a repeatable playbook: they succeeded by owning a domestic corridor first rather than by competing globally on day one.
What it takes for a new network to matter
The barriers are not technological.
- Acceptance. A card nobody takes is not a card. This is the barrier, and it is circular: merchants join for cardholders, cardholders join for merchants.
- Trust in settlement. Merchants must be certain they will be paid. That certainty is currently provided by regulated institutions with balance sheets.
- Dispute machinery. Consumers expect recourse. A network without a credible dispute process is not competitive regardless of its economics.
- Regulatory standing. Payments are regulated everywhere. A network must have an answer in every jurisdiction it operates in.
Every successful new network has crossed the acceptance barrier by starting narrow — one country, one corridor, one category — rather than by launching globally. That is a strategic lesson, not a technical one, and it applies as much to a decentralized network as to a national one.
Where ON5 sits
Two things, at two stages, and they should not be confused.
ON5.com issues on Visa and Mastercard today. It is a platform that lets any business become a card issuer without assembling its own licence, sponsor and processor — using the acceptance those networks already have.
ON5.org is a decentralized card network in development and testing. Its aim is that issuing and acceptance both become permissionless: anyone can issue a card, anyone can become a merchant, without a central authority deciding. It is not live, and nothing can be issued on it yet.
Read against the barriers above, the sequencing makes sense. Building the issuing platform first produces real issuers, real cardholders and real operational experience — which is a substantially better position from which to attack the acceptance problem than a launch announcement.
Frequently asked questions
What does a card network actually do?
Three things: it routes authorisation messages between the merchant's side and the issuer, it sets the rules all participants follow, and it resolves disputes over who bears a loss. The rule-setting and dispute functions are the real business.
What is the four-party model?
Cardholder, issuer, merchant and acquirer, with the network sitting between issuer and acquirer moving messages and money. Visa, Mastercard, RuPay and JCB largely work this way; the network does not hold the cardholder or merchant relationship directly.
Why is American Express different?
Amex traditionally operates a three-party model, acting as both issuer and acquirer. That gives it tighter control and better economics per transaction, at the cost of narrower merchant acceptance.
Why do countries build their own card networks?
To avoid international scheme fees on domestic transactions, to reduce dependence on foreign networks for sovereignty reasons, and to pursue domestic policy goals such as financial inclusion.
What is the hardest part of launching a new card network?
Merchant acceptance. It is circular — merchants join for cardholders and cardholders join for merchants — and every successful new network has crossed it by starting with one country, corridor or category rather than launching globally.
Issue your first card on ON5
Fund an account with USDT or USDC and issue a branded Visa or Mastercard virtual card. The minimum is $5.
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