How Fintech Companies Work With Payment Networks and Card Schemes

When you swipe a card or tap your phone to pay for coffee, you’re not just paying the café-you’re using a hidden infrastructure built by payment networks. Fintech companies don’t issue cards themselves. They don’t own the rails that move money. But they ride them-hard. And if they understand how these networks work, they can turn a simple payment into a profitable business.

What Are Payment Networks and Card Schemes?

Payment networks, also called card schemes, are the invisible highways that connect your bank to the store’s terminal. They’re not banks. They’re not processors. They’re the rules, the technology, and the trust layer that makes sure money moves securely from one place to another. The big four are Visa, Mastercard, American Express, and Discover. Together, they handle over 95% of all card transactions in the U.S.

Visa and Mastercard are open-loop networks. That means they don’t issue cards or approve loans. They let hundreds of banks-like Chase, Bank of America, or even neobanks like Chime-issue cards under their brand. Then they connect those cards to millions of merchants. American Express and Discover are closed-loop. They do both: issue cards and process payments. That gives them more control, but fewer places accept their cards-though that gap is closing fast.

These networks don’t just move money. They enforce rules. They set security standards. They decide who gets paid what. And most importantly, they collect interchange fees-the hidden cost built into every swipe.

How a Payment Actually Works: Authorization, Clearing, Settlement

Here’s what happens when you pay with a fintech-issued debit card at a grocery store:

1. Authorization: The store’s terminal sends a request to the payment network (say, Visa). Visa forwards it to your bank-the issuer-to check if you have money and if the card is active. That check happens in under a second.
2. Clearing: After approval, the network calculates who owes whom. The merchant’s bank (acquirer) gets a claim for the purchase amount minus fees. Your bank (issuer) gets charged that same amount.
3. Settlement: One to three days later, the actual money moves. Your bank sends the funds to Visa, who sends it to the merchant’s bank. The merchant gets paid. The network takes its cut.

Security is baked into every step. EMV chips, tokenization, and end-to-end encryption are mandatory. Between 2015 and 2021, these measures cut counterfeit fraud by 76% globally, according to Visa’s own reports.

Interchange Fees: The Real Money Maker for Fintechs

Interchange fees are the heartbeat of fintech card programs. These are the fees paid by the merchant’s bank to your bank every time you use a card. They’re not set by the fintech. They’re set by the network-Visa, Mastercard, etc.-but fintechs can optimize around them.

In the U.S., interchange fees typically range from 1.15% + $0.05 to 2.40% + $0.10 per transaction, depending on the card type, merchant category, and transaction method. For example, a business credit card transaction might carry a higher fee than a standard debit purchase.

Here’s the kicker: fintechs that issue cards earn a big chunk of these fees. TreasuryPrime’s 2023 survey of 150 fintechs found that 60-80% of their revenue came from interchange income. Brex, the corporate card startup, made $90 million in interchange fees in 2021 alone-just by getting the fee structure right.

But it’s not just about volume. It’s about smart routing. Some fintechs use different card types (debit vs. credit), different merchant categories (B2B vs. retail), or even different networks to maximize fees. A well-tuned program can double or triple revenue per user compared to a generic setup.

Open-Loop vs. Closed-Loop: Why It Matters

Choosing between Visa/Mastercard and Amex/Discover isn’t just about brand recognition. It’s about business model.

Visa and Mastercard give you access to 70+ million merchants worldwide. Almost every store, online shop, and ATM accepts them. That’s huge for users. But you’re stuck in a three-party system: you (fintech), the issuing bank, and the network. You share the fee pie.

American Express and Discover are different. They’re the issuer and the acquirer in one. That means no interchange fees-because there’s no third party. Instead, they charge merchants higher fees and keep more of the profit. For fintechs, that means less direct revenue from interchange, but sometimes better margins if you’re partnered directly with Amex.

Here’s the trade-off: Amex has lower merchant acceptance than Visa/Mastercard-about 90% vs. 99%. That gap has shrunk, but it still matters for small businesses or travelers. Discover is simpler to integrate for U.S.-only fintechs, but has almost no international reach.

The Fintech Roadmap: How to Get on the Network

Want to launch a card program? It’s not as simple as signing up for Stripe. Here’s the real path:

1. Find a sponsoring bank: You can’t issue cards without a bank. This takes 3-6 months. The bank takes on regulatory risk, so they’re picky.
2. Choose a payment processor: Companies like Stripe, Adyen, or TreasuryPrime act as middlemen between your app and the card networks. They handle API integration, compliance, and fraud tools.
3. Get certified by the network: Visa and Mastercard have brutal certification processes. You need to pass dozens of technical tests, security audits, and compliance checks. Visa’s full certification can take 12-18 months. That’s why most fintechs use FastTrack or Start Path programs-Visa’s and Mastercard’s accelerated onboarding tracks for startups.

Many fintechs skip the long haul by using platforms like Spreedly or Synapse. These are payment orchestration tools that handle multiple networks under one API. 78% of scaling fintechs now use them, according to Spreedly’s 2023 survey.

Why Most Fintechs Fail at This

It’s not the tech. It’s the rules.

A Nuvei study found that 43% of new fintech card programs get delayed because they don’t understand network compliance. For example:

• The “honor all cards” rule: If you accept Visa credit, you must accept all Visa credit cards-even the high-fee ones.
• EMV requirements: If you’re in Europe, you need chip-and-PIN, not just swipe. Miss that, and you’re non-compliant.
• Regional rules: PSD2 in Europe demands strong customer authentication. The U.S. doesn’t enforce it the same way.

One European neobank in 2021 delayed its launch by six months because they didn’t know Mastercard required specific encryption protocols for card data. They thought their developer could hack it together. They couldn’t.

The Future: Faster Rails, New Players

Card networks aren’t standing still. Visa Direct lets you send money in real time to any Visa cardholder in 200+ countries. Mastercard’s Send platform does the same. FedNow, launched in July 2023, lets banks transfer money instantly over the U.S. payment rail-no card needed.

That’s a threat. And an opportunity. Fintechs that build on FedNow or The Clearing House’s RTP network can offer instant payouts without relying on Visa or Mastercard. But those rails don’t support credit, rewards, or global merchant acceptance yet.

Central bank digital currencies (CBDCs) are coming. 86% of central banks are exploring them, according to the Bank for International Settlements. But CBDCs won’t replace card networks overnight. They’ll coexist. And fintechs that understand both will win.

What You Need to Know Right Now

If you’re building a fintech product that touches payments:

• Interchange fees are your profit engine-optimize them, don’t ignore them.
• Visa and Mastercard are still king for reach. Amex is better for high-value users.
• Don’t try to certify directly unless you have legal and engineering teams ready.
• Use orchestration platforms early. They save time, money, and headaches.
• Compliance isn’t optional. It’s the price of entry.

The networks aren’t going away. They’re just getting smarter. Fintechs that treat them as partners-not obstacles-will build the next generation of financial tools. The rest will keep asking why their card doesn’t work at certain stores.