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The Tea BreakDown: how do issuer processors work?

Not sure how an issuer processor works? Want to know who authorises transactions? Our expert is on hand to help.

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The Thredd team

October 09, 2023

In the second instalment of our Tea BreakDown challenge, Jonathan Vaux, Head of Proposition and Partnerships at Thredd, explains how issuer processors work.



How do issuer processors work? 

Issuer processors – the vital connector between an issuer and payment networks like Visa and MasterCard – work by facilitating debit, prepaid and credit transaction through several steps. These include:  

  • Card issuers: Regulated organisations – such as financial institutions, will provide or ‘issue’ prepaid, debit and credit cards to consumers and businesses. An issuer processor offers its services to enable these organisations to process these payment transactions.
  • Authorising or declining transactions: When a cardholder makes a transaction, the issuer processor will authorise or decline it based on several factors, including the cardholder’s available funds and reputation of the merchant. 
  • Manage cardholder data: An issuer processor will maintain key data of a cardholder, such as name, address, and account number, in order to verify transactions and prevent fraud. 
  • Clearing: Issuer processors also clear transactions, which involves transferring funds from the cardholder’s account to that of the merchant. 
  • Settlement: Finally, the issuer processor will update the balance of both the cardholder and merchant’s accounts once the transaction is complete. 

The cards issued by the issuer processor can be adjusted to offer a variety of features and functionalities, such as controls, tokenisation for digital wallets, or fraud management services. 

In our first episode of the Tea BreakDown challenge, Jonathan Vaux explains what an issuer processor is. You can view the episode and read the definition here 

Thredd is the issuer processing partner of choice for the world’s most ambitious businesses. We’re trusted to manage billions of transactions across 44 countries by the world’s leading fintech's, digital banks, and embedded finance providers. 

Find out more about what Thredd can do for your business.

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