What distinguishes a direct participant in a payment scheme from an indirect participant?

Direct participants in a payment scheme are characterized by their ability to have direct connectivity to the payment system, allowing them to interact with the payment infrastructure directly. This means they can initiate, process, and settle transactions without having to go through an intermediary. The direct connectivity often allows for faster processing times and more control over the transaction flow.

On the other hand, indirect participants do not have direct access to the payment system. Instead, they rely on a direct participant to facilitate their transactions. This structure provides indirect participants access to the payment system, but at the cost of added layers in transaction processing.

The other options do not accurately capture what distinguishes direct participants from indirect participants. Direct participants are not limited to just operating account regulations, nor can they set their own rules in all circumstances, as they must still operate within the framework of the payment scheme. Moreover, while banks often serve as direct participants, they are not the only entities that can fulfill this role; various payment service providers can also act as direct participants.