Payments Glossary

Card Network (Scheme)

Card networks, often referred to as card schemes outside the US, are the rule-setting organizations that operate the infrastructure enabling card payments. Visa and Mastercard are the dominant global networks, defining interchange structures, network fee assessments, compliance requirements, monitoring programs, and technical standards that issuers, acquirers, merchants, and partners must follow.

Fee Pass-Through

Fee pass-through refers to the process by which acquirers, ISOs, or BIN sponsors recover network (scheme) and other card-related fees from their clients or merchants. Pass-through is complex because some fees are shared, some vary with activity, and many billing systems lack granular allocation capabilities. Incomplete pass-through leads to margin leakage over time.

Honor-All-Cards Rule

The honor-all-cards rule is a card network policy that requires a merchant accepting a card brand to accept all card types within that brand. While limited exceptions may apply, such as accepting debit but not credit in certain markets, merchants generally cannot selectively decline higher-cost card types of the same brand. As a result, acceptance costs are driven by overall card mix rather than merchant-level card selection.

Interchange

Interchange is a transaction-level fee paid by the acquiring bank (a fee) to the issuing bank (as revenue) when a card payment is processed. It is set by the card networks and varies based on card type, transaction method, data quality, and risk characteristics, such as fraud exposure and dispute likelihood. Interchange is distinct from network (scheme) fees and often represents the largest revenue component for issuers.

Interchange Yield

Interchange yield represents the effective interchange revenue earned on processed payment volume for a portfolio or segment. Yield is influenced by product mix, transaction quality, downgrade rates, card type penetration, and incentive structures. Changes in yield often signal underlying operational or structural issues.

Merchant Pricing Model

A merchant pricing model defines how payment acceptance costs and revenues are structured, including blended pricing, interchange-plus pricing, and other variants. These models incorporate interchange, network (scheme) fees, and margin assumptions to determine merchant pricing and profitability.

Monitoring Programs (e.g., VAMP, VIMP)

Monitoring programs are network-defined performance frameworks that measure issuer and acquirer behavior against thresholds related to fraud, disputes, or abuse. Exceeding thresholds can trigger remediation requirements, financial assessments, or heightened oversight, with direct operational and financial impact.

Network (Scheme) Compliance

Network (scheme) compliance is the ongoing process of interpreting, implementing, tracking, and validating card network rule changes, fee updates, and technical requirements. Effective compliance supports operational planning, risk mitigation, and cross-team coordination, and reduces the likelihood of penalties or unexpected cost increases.

Network (Scheme) Cost Allocation

Network (scheme) cost allocation refers to the process of assigning card network fees and related costs to clients, merchants, or issuing programs in a consistent and transparent way. Without a detailed understanding of how network fees are generated and what drives them, it is difficult to accurately allocate costs or recover them in full.

A structured approach to cost allocation uses defined allocation rules and transaction-level data to improve visibility into cost drivers, support defensible pricing, and reduce manual intervention. Effective cost allocation is a prerequisite for consistent cost recovery and avoiding long-term margin leakage.

Network (Scheme) Fee

Network (scheme) fees are charges assessed by card networks for use of their infrastructure and services. These fees are separate from interchange and can include assessments, processing fees, digital enablement charges, reporting services, and program-level fees. Many network fees are optional and can be reduced or eliminated when properly reviewed and governed.

Also see our detailed Card Network (Scheme) Fee explainer.

Network (Scheme) Fee Optimization

Network (scheme ) fee optimization is the process of examining network invoices, fee structures, and optional services to identify discrepancies, unnecessary costs, and potential errors. Many issuers and acquirers are able to materially reduce network fees following a structured review, as it surfaces misapplied charges, avoidable fee drivers, and services that no longer align with the business.

Network (Scheme) Incentive Agreement

A network incentive agreement is a contractual arrangement between a card network and an issuer or acquirer that provides financial incentives in exchange for meeting specific volume, growth, product, or behavioral commitments. Incentives may be tied to transaction volume, portfolio mix, geographic expansion, or adoption of specific network programs.

While incentives can materially offset network fees or improve economics, they often include conditions that affect flexibility, product strategy, and long-term cost structure. Evaluating the net impact requires considering both the incentive payments and the associated network fees and obligations.

Optional Network (Scheme) Services

Optional network (scheme) services are fee-based services offered by card networks that are not required for basic transaction processing. These may include specialized reports, enhanced analytics, monitoring services, or program add-ons. Because they can be enabled by default or remain active without review, they are a common source of avoidable cost.