An issuer, or issuing bank, is the financial institution that provides payment cards such as credit or debit cards to consumers or businesses. This is the cardholder’s bank, responsible for approving transactions, funding purchases, and managing the cardholder’s account.

‍

In a typical card transaction, the issuer plays a critical role on the buyer’s side:

• It receives the authorization request from the card network when a purchase is initiated
  
• It performs fraud checks, assesses available credit or funds, and approves or declines the transaction
  
• Upon approval, it releases the funds to the acquirer, who then settles with the merchant
  
• In the case of a dispute, the issuer initiates chargebacks and investigates the cardholder’s claim

‍

Although the issuer is not the merchant’s bank, merchants interact indirectly with issuers through the payment flow and during the chargeback process.

‍

Key Functions of an Issuer:

• Card issuance: Distributes and manages credit and debit cards for consumers
  
• Authorization: Approves or denies transaction requests based on account status, fraud signals, and available funds
  
• Fraud detection: Flags suspicious activity and may block or step up verification for certain transactions (e.g., with 3D Secure)
  
• Chargeback processing: Investigates disputes initiated by cardholders and pushes chargebacks through to the acquirer
  
• Cardholder servicing: Sets credit limits, billing cycles, and card usage policies

‍

Understanding issuer behavior is valuable for merchant risk management. For example, certain issuers may have a lower tolerance for disputes, stricter fraud filters, or higher chargeback tendencies under specific reason codes.

In summary, the issuer is the cardholder’s bank, and while merchants don’t interact with issuers directly, the issuer plays a crucial role in approving payments, funding transactions, and initiating chargebacks making it a key stakeholder in the payment ecosystem.

‍