What is an Issuing Bank?
What is issuing bank on credit cards? Merchants mainly deal with accepting payments, so they are familiar with acquiring banks. But in the process of card transactions, there is another important participant, the issuing bank.
The issuing bank is the bank that issued the credit or debit card to the consumer. Issuers are also members of card networks (for example, Visa or Mastercard), and in some situations, they can act in 2 roles at once.
When processing a payment transaction, the card-issuer bank is at the opposite end from the seller. When a buyer initiates a transaction by making a purchase on the site, the transaction is sent from the merchant through the acquiring bank to the issuing bank through the card network for approval.
The issuing bank authorizes the card transactions. To do this, it checks whether there are enough funds on the user's account (or available credit limit) to make a purchase and also checks the specified payment data and compliance with AML rules.
If everything is OK with the requested transaction, the bank sends permission to complete the approved transaction through the card network back to the acquiring bank. After that, the funds must be transferred from the issuing bank to the acquiring bank. This process is called settlement and is separate from authorization. As a rule, all settlements are processed later, along with other transactions for the day.