The Issuing Bank4 Methods That Issuers Use to Mitigate Fraud & Protect Cardholders

What is a Card Issuer? Who are the Leading Issuers in the US Market?

There are a lot of moving parts in the payments landscape. It can be hard to tell one institution from the next. It just so happens that one of the most important — the issuing bank — is also one of the most frequently mislabeled or misunderstood. 

For the sake of clarity, we’ve put together a detailed overview of the issuing bank, as a concept. We’ll also look at the integral role issuers play in daily payment transactions across the globe.

What is an Issuing Bank?

Issuing Bank

[noun]/iSH • o͞o • iNG • baNGk/

An issuing bank — sometimes called a “card issuer” or simply “issuer” — is a member of a card network that issues credit cards to consumers. They provide banking services to customers, allowing individuals to initiate purchases using payment cards.

Essentially, issuing banks are financial institutions that issue credit and debit cards to consumers.

The credit card issuer acts as the middle-man between the consumer and card networks like Visa and Mastercard. The card networks have ultimate control over cards that bear their logo, but the issuing banks do a lot of the legwork. They also take on much of the liability.

There is an entire complex process going on behind the scenes of every card swipe. Multiple parties get involved in every transaction. Besides the issuer, there is also:

The issuing bank is responsible for assigning credit and debit cards to approved cardholders. That is to say, the issuing bank is a consumer’s credit or debit card issuer and manager.

There are other third-party service providers used by card-not-present merchants. These may supply web hosting, SSL certificates, shopping carts, payment gateways, and more. However, the parties outlined above are the primary movers in the transaction process.

Lookup your Bank Identification Number

The Role of the Issuing Bank

A typical transaction starts when the cardholder uses a payment card for a purchase. After the customer submit his or her transaction:

• Card information is sent from the merchant to the payment processor.
• The processor submits the request through the card scheme, then on to the card issuer.
• Issuing bank checks whether the card account is active, whether the requested amount is available to the account, and more.
• The transaction is either authorized or denied, with the decision being transmitted back the way it came, from card scheme, to acquirer, to merchant.
• The merchant sends batches of authorized transactions to the processor, and eventually funds are transferred from the cardholders’ accounts to the merchant account.

As we mentioned, this is a typical transaction. There are numerous points along the road at which the process can deviate from the norm.

When a card issuer provides a customer with a payment card, for instance, they’re extending a line of credit to that consumer. The bank provides financial backing for any transactions made with the card. In other words, the bank is assuming responsibility for the cardholder’s ability to pay off any debt accrued by use of the card.

Also, when a bank wants to issue a credit card to their customers, representatives start by working closely with the network to craft a co-branded card. This includes building a rewards program that incentivizes consumers to use the new card over any others they may have.

Additional Services Provided by the Issuing Bank

Part of the network’s job is to provide customer service while making sure cardholders are able to use their cards as universally as possible. The issuing bank, on the other hand, handles individual authorizations, and also provides ongoing services to the account. These include:

• Sending card renewals
• Setting or raising individual card limits
• Resolving disputes
• Activating new cards
• Suspending accounts
• Blocking charges when necessary

Most importantly, it’s the credit card issuer’s job to protect the consumer’s personal information, financial data, and account access. This includes maintaining high levels of security for stored data and transaction connections, but it can also involve account monitoring.

For example, banks may monitor purchases by type, location, or the transaction total. Any dramatic variation from the norm in these areas could be indicative of fraud.

Card Networks vs. Card Issuers: What’s the Difference?

As mentioned above, there are multiple players involved in every card transaction. For banks to process their own card transactions, each would need to build out its own network and establish relationships with other institutions to facilitate interbank transactions.

A few issuers have done this. Amex is a card issuer, for example, but they also manage the American Express network, and allow other banks to issue Amex-branded cards. The same applies for Discover.

This is very uncommon, though. Serving as an issuer and as a credit card network can be incredibly complicated, and requires them to invest in substantial infrastructure. For most issuers, it’s just easier and more efficient to work with a preexisting interbank card network (Visa, Mastercard, etc.).

Card networks fulfill a crucial function of connecting otherwise unconnected banks. Rather than requiring every issuer to transact with another bank on a per-transaction basis, member institutions all use the card network as a universal, impartial middleman. While an issuing bank manages and issues new credit cards, the card network is the party that facilitates transactions between different banks.

Who are the Top Issuing Banks in the US Market?

There are thousands of issuing banks operating globally. Some are international institutions, while others are small-scale, local institutions. Some banks even operate entirely online; Chime is one popular example here.

Below, we’ve listed out some of the most recognizable issuers operating in the US, as ranked by number of active accounts. We’ve also outlined the card brand associated with the institution, and the transaction fees assessed to merchants:

	Active Accounts	Affiliated Credit Card Networks	Credit Card Transaction Fees
American Express	Appx. 100 Million	American Express	3.03% + $0.10 per transaction. Prepaid cards – 1.68% + $0.15 per transaction. Corporate purchasing cards – 3.01% + $0.10 per transaction.
Citibank	Appx. 95 million	Mastercard	0-3% domestic and foreign transactions depending on the card
Chase	Appx. 83 million	Mostly Visa, some Mastercard	0-3% domestic and foreign transactions depending on the card
Capital One	Appx. 62 million	Mastercard	1 to 4% of original transaction price
Bank of America	Appx. 60 Million	Visa and Mastercard	Visa, 1.15% + $0.05 to 3.15% Mastercard: 1.5% - 2.6%
Discover	Appx. 57 million	Discover	1.56% to 2.40% + $0.10
Wells Fargo	Appx. 23 million	Visa	No fees are charged for Direct Pay payments made to Wells Fargo personal bank accounts. Direct Pay payments to non-Wells Fargo personal bank accounts cost $0.50 per payment. All Direct Pay payments to business bank accounts cost $3 each
Synchrony Bank	Appx. 37 million	Mastercard	0-3% domestic and foreign transactions depending on the card
Barclays	Appx. 16 million	Visa and Mastercard	0-3% domestic and foreign transactions depending on the card
U.S. Bank	Appx. 14 million	Visa and Mastercard	0-3% domestic and foreign transactions depending on the card

Why Would a Card Issuer Decline a Transaction?

There’s always the risk that a cardholder could accidentally try to debit more than is available in their account at that moment. They may even end up defaulting on their credit card balance. If that happens, the banks which underwrote the cardholder’s account will be on the hook for the money, and it’s up to them to try and recoup the costs from the customer.

Furthermore, banks have certain legal obligations to their customers regarding fraud and other abuse. If an issuer fails to conduct due diligence, and a cardholder becomes a victim of fraud as a result, the bank would be held liable for the losses.

It makes sense that, whenever cardholders dispute fraudulent or unfamiliar charges, the issuing bank has the incentive to proceed with a chargeback. The issuer could even file a bank chargeback without the cardholder's knowledge in the event of an authorization error.

Banks don't want to file too many chargebacks, though. If they submit an excessive number of invalid disputes, they may end up in an issuer monitoring program.

All told, banks do a lot of work and accept a lot of risk to issue payment cards. That’s why issuers charge a fee for every card transaction. It’s also why, if an issuing bank determines that a customer lacks the income, credit score, or ability to pay down any funds advanced to them, they may be denied an account. 

How Issuers Mitigate Fraud & Protect Cardholders

You might say the payment card industry is on the front lines when it comes to fraud.

Issuers are the institutions responsible for facilitating several forms of consumer payments across the globe. As such, issuers are required to innovate and implement solutions, analyze and tabulate fraud statistics, and lead merchants and consumers toward the safest and most effective payment trends. 

Here is a general overview of the fraud mitigation practices used by issuing banks:

Need Help?

Does all of this sound a little confusing? Don’t worry: you’re not alone.

Like we said, there are many moving parts to the transaction process. Each player represents a plethora of systems, decisions, and controls. For this reason, the role of the issuing bank is often misunderstood.

This isn’t as much of a concern for cardholders. For merchants, though, complex payment industry rules and processes can be a real nightmare.

Luckily, we can help. Not only do we offer a turnkey solution that handles dispute processes from beginning to end, we also make sure merchants are kept informed of what’s happening along the way.