In a previous article, we covered some useful information about internet acquiring, what an acquiring bank is, and its role in the transaction process. Today, we will explain what an issuing bank is, its role for customers and e-merchants, and how it differs from an acquiring bank.
From the customer’s standpoint, an issuing bank plays a significant role in the transaction process. It is a financial institution that issues credit and debit cards to its clients and allows them to make purchases with these cards. In this regard, an issuing bank is also referred to as a card-issuing bank or an issuer. If you want to know the name of your issuing bank, you can find it on your credit or debit card (usually the bank’s logo is on the front; on the back of the card, there is additional information about the bank’s location and its contact details). Some of the largest issuing banks include major players such as HSBC Holdings plc, BNP Paribas S.A., and Bank of America.
Looking at the transaction process in detail, an issuing bank acts as a mediator in “customer – card scheme (Visa, American Express, MasterCard, etc.)” communications, and it is responsible for the actual financial security of the cards. When a customer buys an item, their card information is sent to a payment processor that transfers it to the issuing bank. During the transaction, the issuer checks the card account’s activity, availability of the requested funds in the account and either authorizes or declines the customer’s purchase. After the decision is made, the status of a purchase is sent back to the payment processor, which submits it to the customer.
The primary responsibility of card-issuing banks is to undertake obligations to settle cardholders’ debts. If a customer’s funds are insufficient to complete a payment, both banks (issuing and acquiring) will usually split the credit obligations according to the card network rules. In addition, a card-issuing bank provides the following services:
An acquiring bank works with clients by providing merchant accounts and collecting money owed to merchants by card-issuing banks. In turn, an issuing bank is responsible for issuing credit and debit cards to consumers. In other words, the banks are fulfilling different aspects of the transactions: the acquiring bank is responsible for the merchant’s side, and the issuer handles the customer’s.
An issuing bank is an essential link in the chain of a transaction, and the service it provides to clients is hard to overestimate. At PurePay, we strongly believe that by partnering with card-issuer banks and offering our online credit card processing solutions, we can play an important role in enabling your electronic business to pick up steam. If you are looking for a reliable online processing solutions provider or just want to know more about banking, please don’t hesitate to get in touch with us for assistance.