Issuing Bank

Issuing Bank 

The issuing bank in credit card processing refers to the banking institution that issued the credit or debit card to the customer. These issuing banks are members of the card networks and play a role in the payment processing sequence. 

Issuing banks are responsible for ultimately authorizing the transfer of funds between the issuing bank and acquiring bank over the authorization network. 

An acquiring bank is the bank that holds the merchant (business) account. 

The process might look something like this: 

• Customer presents credit or debit card during a purchase
• The transaction information is transmitted to the acquiring bank and then on to the card network (Visa, Mastercard, etc.)
• The credit card network then passes the information to the issuing bank 
• The issuing bank, after confirming available funds and customer information, will either authorize or decline the transaction
• This is then sent back through the chain, ending back at the business

At a predetermined time, usually at the end of each business day, a process known as settlement occurs. 

This is when the funds, minus transaction fees to all parties in the authorization network, are released by the issuing bank and transferred to the merchant account. 

At this point, it will be up to the issuing bank to collect payment for the purchase from their customer. 

Occasionally, a customer may dispute a charge with the credit card company. This can happen for several reasons including fraud, dissatisfaction with the product or service, or some other dispute. 

This differs from a traditional refund where the customer would directly approach the business and request a refund. 

If the issuing bank investigates the claim and sides with the cardholder, they will initiate a chargeback. 

The business will then be responsible for providing a refund of the transaction amount and will also be assessed a chargeback fee.