An issuing bank is a

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...

that offers card association branded payment cards directly to

consumer A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...

s, such as credit cards, debit cards, contactless devices such as key fobs as well as prepaid cards. The name is derived from the practice of issuing cards to a consumer.

Details

An issuing bank (also called an issuer) is part of the 4-party model of payments. It is the bank of the consumer (also called a cardholder) and is responsible for paying the merchant's bank (called an Acquiring Bank or Acquirer) for the goods and services the consumer purchases. It issues the payment card and holds the account with the consumer (such as a credit card account or checking account for a debit card). The parties in the 4-party model are: # Consumer (also called a cardholder): Makes purchases and promises to pay the Issuing Bank for them. # Issuing Bank (also called an Issuer): The consumer's bank. Transfers money for purchases to the Acquiring Bank. Is liable for purchases made by the consumer if the consumer does not pay. # Acquiring Bank (also called an Acquirer): The merchant's bank. Accepts money for purchases. Is liable for charges made by the merchant if it does not provide goods or services purchased. # Merchant: Sells goods and services and accepts credit, debit or prepaid cards as promise for payment. The issuing bank assumes the primary liability for the consumer's capacity to pay off debts they incur with their card. In the case of credit cards, this includes extending credit to make these purchases. In the case of debit cards, this includes debiting funds from bank accounts, such as checking accounts. In the case of

credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

s, the issuing bank extends a

line of credit A line of credit is a credit facility extended by a bank or other financial institution to a government, business or individual customer that enables the customer to draw on the facility when the customer needs funds. A line of credit takes se ...

to the consumer. Liability for non-payment is then shared by the issuing bank and the acquiring bank, according to rules established by the card association brand.

Key types of risk for issuing banks

There are a few main