The Critical Role of the Issuer: Definitions

The Issuing Bank’s Role in the Card Payment Lifecycle

In a continuation from our previous post, let’s explore the critical role of the issuer. This is the first of a two-part piece on issuing where we will review the role(s) that issuers play and their engagement with each key player of the card payment lifecycle.

The card payment lifecycle begins and ends with the issuing bank. At the beginning, an issuing bank acts as the financial institution that provides the line of credit—for themselves or others—behind a customer’s credit card, holds the bank account for a customer’s debit card, or supports prepaid cards (gift or reloadable (e.g. payroll)). All of this is on behalf of the card brands.

The issuer’s role at the end of the journey illustrates the interactions they have throughout the lifecycle and how they’re one of the most significant functions:

  • They are responsible for authorizing or denying payments for the cardholder, done by carrying out a variety of checks and analysis (e.g. verifying sufficient funds, preventing fraud).
  • They’re also responsible for processing card payment disputes (chargebacks) and the assessment of interchange.

As represented below, the issuing bank has an interaction and/or impact at each stage of the card payment lifecycle and therefore with the cardholder, merchant, processor, and card brand(s). Let’s define each of these other roles.

The Cardholder

The cardholder is the owner—or account holder—of the card used for the purchase; it may or may not be the customer. The customer is the individual choosing to purchase the good or service; they may or may not be the cardholder. 

The Merchant

The merchant is the business or individual that sells in-store or online goods and services to customers.

The Processor

In Pagos’ references we will refer to any payment gateway, acquiring bank, payment processor, or payment service provider (PSP) as processor. It’s important to note that if appropriately certified as per the relevant regulatory requirements, any of these providers could perform the services of one or more of these specific key players. 

The Card Brands

These are payment networks (e.g. Visa, Mastercard) linked to payment cards such as debit, prepaid, or credit cards of which a bank or any other eligible financial institution can become a member. Transactions are managed according to a set of procedures, regulations/rules, and arrangements set by the card brands that allow cardholders to use their cards with third parties (i.e. retailers and service providers).

Valuable data exists in the exchanges between these relationships with the issuer, and that can be used by all players in the value chain to grow revenue, save costs, and exceed customer expectations. I’ll share more on that in the next post where we will dive into the critical data attributes of/from the issuer which merchants should pay attention to as they interact with other players in the card payment lifecycle. We’ll also discuss key considerations in the associated data analysis.

Pagos aims high to achieve our mission of providing awareness, advice, and actionable insights through our products and services. As we further this discussion on the critical role of the issuer, we will point out more specifically how Parrot, Peacock, and Canary can take your business to the next level.

Please join me as we continue the journey!

Cyndi Hoddinott

Cyndi Hoddinott

Cyndi Hoddinott is the Head of Payment Strategy & Growth at Pagos. She started her 18+ year payment adventure as the Director of Global Payments for Expedia, followed by roles as the Director of Global Payments & Risk at ACN, SurveyMonkey, and Dropbox. Most recently she was at as the Vice President for Financial Partnerships. Cyndi has been a member of the MRC her entire payments career, having served as an inaugural co-chair of the Payments Committee, in numerous speaking capacities, and most recently served on the Americas Advisory Board and was Chair of the Education Committee. Cyndi lives in Washington state and when she is not championing payments, she enjoys golfing, the Seahawks and spending time with her husband and 3 children.

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