What is issuing bank

The funds must then be moved from the issuing bank to the acquiring bank, a process known as settlement. This is a separate step from authorization, and it is usually handled later in batches with other transactions. Similar to the way that an acquirer is responsible for the activities of a merchant within the payments system, the issuer bears financial responsibility for the activities of the cardholder. For example, if a consumer uses a credit card to make a purchase, the issuing bank after authorizing the transaction will direct the funds to be settled to the merchant.

In Latin America, for example, is no different, each country has its own specificity. Here is how the entire transaction process happens in Brazil and Mexico from the perspective of the Acquiring and Issuing Bank. The acquirer sends the payment request to the card brand, who will in turn forward it to the issuing bank for approval. The issuing bank makes a risk analysis, checks if the customer has enough funds to pay for the transaction and if there are any temporary holds that will be released any time soon.

If the customer needs to dispute a charge or report a fraud, it is the issuer who decides whether to proceed with a refund or not. This approval request travels first to the acquirer. After being approved by the acquirer the approval request passes through a Switch. The Switch is responsible to send the approval request directly to the issuing bank. The Switch then passes this approval code to the acquirer, that passes the approval code on to the merchant. If the customer needs to dispute a charge or report a fraud, the customer reports the case to the issuer and it starts a process with the acquirer and the merchant, after a review the case is solved according to local payments regulation.

There are different players involved in a credit card transaction process and without them, the process can't be conducted.

To facilitate the transaction process it is possible to involve another player, the Payment Processor that already has connections with acquiring and issuing banks besides of knowing the market regulatory environment, this way you can make card transactions without worries. With card schemes, your customers can make purchases and pay bills, online or in-store, without the need for cash or cheques.

Learn about card schemes. On the back side of the card, you can find additional information concerning the location of the bank and how it can be contacted. Sometimes, merchants might be inclined to contact an Issuer for a further payment verification or as a result from fraud suspicions. For more information, get in touch with one of our professionals today. Standing at either end of the transaction are two critical players — the acquiring bank and the issuing bank.

What is the difference between the two? The terms acquiring and issuing refer not to specific banks, but to where those banks are in the transaction flow. Banks can and commonly do hold both roles.