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Modulr glossary

Cards / Card Networks

Card networks or Schemes such as Visa, Mastercard, and American Express facilitate the authorisation, clearing, and settlement of card transactions between merchants and banks. These networks set interchange fees, security standards, and global acceptance policies. Card scheme fees are the fees paid by acquirers to be members of the schemes when taking card payments. Acquirers pass these costs on to their merchants. The merchant discount fee, called more correctly the merchant service fee, is the total fee a merchant pays per card transaction to accept a card payment. A cut taken rather than discount given, it is usually expressed as a percentage of the transaction amount, and it covers the cost of processing card payments through the card networks (such as Visa or Mastercard). Fees differ significantly between card-present (CP) and card-not-present (CNP) transactions, due to the perceived higher risk and lower authentication strength in CNP, as well as additional operational costs around tokenisation, risk scoring and anti-fraud measures.

Applications

E-commerce:

Reduces fraud in online card payments by verifying the cardholder's identity

Banking and fintech:

Helps issuers and payment providers comply with Strong Customer Authentication (SCA) requirements.

Advantages

  • Enhanced security: Reduces unauthorised transactions by verifying that the genuine account holder is authorising the payment
  • Fraud prevention: Helps reduce chargebacks related to fraud.

Challenges

  • User Experience: Additional authentication steps can cause friction and increase checkout abandonment
  • Implementation complexity: Requires integration with card schemes and issuer systems.

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