Issuing Bank

Updated on June 13, 2024
Article byAswathi Jayachandran
Edited byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

Issuing Bank Meaning

Issuing banks are banks that offer payment cards through card associations or networks to consumers directly. These cards include credit cards, debit cards, prepaid cards, contactless devices, etc. The issuer acts as a bridge between the customer and these associations. Its aim is to provide credit and other financial services to customers, while managing risks and generating profits for the bank.

Issuing Bank

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These banks are responsible for authorizing transactions. Their first step is to ensure that the cardholder has enough funds or credits to make the purchases. Thus, they make sure the account is verified and has passed the regulations set forth by the banking policies. In addition, the bank bears financial responsibility for the cardholder’s actions.

Key Takeaways

  • Issuing banks offer payment cards through card associations or networks to consumers directly.
  • One of its primary responsibilities is to assume responsibility for the payment of debts the cardholders incur. It typically splits the credit liability with the acquiring bank by the card network rules if the customer does not have enough money to complete the transaction.
  • The final decision on whether or not a transaction is accepted or declined by issuers will be revealed by the transaction’s outcome.
  • These banks generate revenue through credit card interest, account, and transaction fees.

Issuing Bank Explained

An issuing bank issues credit or debit cards for consumers and looks into the settlements and transactions done by them. They are known as “issuers” and are similar to acquiring banks that are members of card networks (MasterCard, Visa, American Express, etc.). In a payment transaction, this bank is on the other side of the merchant.

A transaction begins when a customer purchases at a store, restaurant, or other business. The customer then uses their credit or debit card to start the transaction. The acquirer sends this data to the card network, which decides whether to approve or decline the transaction. In other words, it moves from the merchant via an acquiring bank, through the relevant card network, and finally to the issuer.

The issuing bank must then approve these transactions. This mostly entails ensuring the customer has the credit or money available for the purchases. It also includes checking account information and subjecting the transaction to rigorous checks of standards and regulations. Usually, it will authorize the transaction and transmit its approval to the acquiring bank, completing the payment. This involves transferring the cash from the card-issuing bank to the acquiring bank, assuming the consumer has enough money to cover the purchase cost and has stayed within their daily or monthly limit.

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The issuer also provides financial support for transactions done with the relevant card. Therefore, one of its primary responsibilities is to assume responsibility for the payment of debts incurred by cardholders.

The card issuing and acquiring banks typically split the credit liability by the card network rules if the customer does not have enough money to complete the transaction. Because of this, card issuers typically charge a fee for each card transaction to cover the costs involved with their part of the transactions. As a result, these banks generate revenue through credit card interest, account fees, and transaction fees. The charges or fees also safeguard against potential fraud or risk.

In addition to it, the application and approval procedure, card distribution, determining conditions and benefits (such as yearly fees and rewards), collecting payments from cardholders, and many other aspects of payment cards are all managed by issuers. Consequently, card issuers decide how much credit to give customers. The final decision on whether or not a transaction is accepted or declined by the issuer will be revealed by the transaction’s outcome.


Check out these examples to get a better idea:

Example #1

Nathan is a curious kid. He went to a Ramsey restaurant with his family and saw his dad pay the bill with his Anywhere Visa credit card. Nathan wanted to know how a plastic card could pay for the meal. Thus, he decides to Google the deal.

Consequently, he discovers that it’s not mere plastic, and there is involvement for four parties. The consumer (his father), Ramsey Resort (the merchant), Visa (the card network), and Citi (the credit card issuer) are those four. At checkout, one swipe inserts or taps the card. Visa receives the transaction from the restaurant, and Citi receives the transaction from Visa. After reviewing the transaction and approving or rejecting it, Citi will notify Visa of its decision. Lastly, the Visa sends it to the restaurant, deciding whether to approve or reject the transaction.

Example #2

In 2019, Apple and Goldman Sachs launched a credit card called the “Apple card” for Apple users. Apple Inc. is an American multinational technology company, and Goldman Sachs is an American multinational investment bank. Here, the card’s issuer, Goldman Sachs, controls all aspects of regulatory compliance through Goldman Sachs Bank USA. Its duties involve underwriting, customer service, underlying platform, and usual regulatory compliance.

Difference Between Issuing Bank And Acquiring Bank

Here are the key differences between issuing bank and acquiring bank:

Key points Issuing bank 
Acquiring bank
Meaning The cardholder’s lender or bank is an issuing bank, often known as an issuer.Financial institutions that provide merchant accounts to companies are called acquiring banks. Other names for acquiring banks include merchant banks and acquirers. Merchant accounts are required for merchants to receive payments directly. In short, they are the merchant’s bank working on their behalf of them.
FunctionIt manages their accounts and issues payment cards.It tracks the merchant’s account.
Responsibility Credit is made available to customers by these institutions through credit card networks. It receives payments on behalf of the merchant through the payment processor and credit network.

Issuing Bank vs Advising bank

Here are the key differences between issuing banks and advising banks:

Key pointsIssuing bankAdvising bank 
DefinitionThe bank that advises the letter of credit toward a beneficiary is known as the advising bank.On the other hand, an issuing bank is a bank that issues a letter of credit on its behalf or at the request of an applicant.
Drafting of letter of credit and issue.Letters of credit are drafted and issued by issuing banks.Advising banks do not issue but send beneficiaries letters of credit that have already been issued.
Choices in the letter of creditThe issuing banks choose the role of each bank in letters of credit.On the other hand, advising banks can only decide whether to function as an advising bank to send the letter of credit to the beneficiary, or else they can decide not to operate in that capacity and promptly notify the issuing bank of their decision.
Degree of responsibility Issuing banks must examine documents to confirm that presentations adhere to regulations.Banks are not required to scrutinize documents while advising. Even if they review documents, they do so for money and without taking any accountability for their actions.

Frequently Asked Questions (FAQs)

How to find the issuing bank?

The initial string of four to six numbers on credit cards is known as the “Bank Identification Number,” or BIN code. This number is used to find the bank or other financial organization that issued the card. This connects an issuer to each card it issues.

Can one cash a cashier’s check at the issuing bank?

One can cash a cashier’s check at the issuing bank. It does not matter how much it is written for or whether one possesses an account there.

What is an issuing bank letter of credit?

The bank issues a letter of credit on behalf of the buyer guaranteeing the timely payment of money. The bank issues the letter of credit and agrees to pay the amount upon receipt of the documents from the supplier (the beneficiary). A beneficiary is one of the principal participants in a letter of credit.

This article has been a guide to Issuing Bank and its meaning. Here, we compare it with advising banks & acquiring banks and explain it with its examples. You may also find some useful articles here –

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