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BIN Sponsorship: What Fintechs Should Know When Choosing or Changing Sponsor Banks

August 28, 2023

Obtaining a BIN (bank identification number) sponsorship is a complex, time-consuming process and most startups and early stage fintechs use a program manager to help them get access to a shared BIN so they can get to market faster and start earning revenue sooner. 

But as fintechs grow into established businesses, they often find that a program manager is limiting their growth and profitability potential. That’s when many fintechs become their own program manager, building or expanding relationships with an issuer processor of their choice, and choosing or changing their sponsor bank.

One of the essential first steps in managing your own program is securing BIN sponsorship as the direct Program Manager Let’s look at the various roles, responsibilities and considerations:

What is a BIN Sponsor?  

As a refresher, a BIN sponsor, also known as the sponsor bank, is the financial institution (a chartered bank or credit union in the US) that serves as the intermediary between your company and the card network. BIN sponsors must approve a fintech’s card or payments program and then they will issue a dedicated BIN or a BIN range on a shared BIN for your program. 

A sponsor bank is the issuer of the payments account, and they have very specific goals and requirements for each fintech they sponsor. This starts by aligning their risk tolerance and revenue goals with that of the prospective fintech partner.

Once a BIN sponsorship is approved, the bank will maintain requirements pertaining to many aspects of your program – from marketing to customer service and more – and they will require review and approval of all public-facing elements of your program.

Sponsor banks will also require regular ongoing reporting on all program metrics that demonstrate regulatory compliance.

What is an Issuer Processor?

The issuer processor is responsible for managing the complex processes involved in the authorization, clearing, and settlement of electronic payment transactions on behalf of financial institutions that issue payment cards to their customers. Issuer processors ensure smooth and secure processing of electronic payments transactions while also maintaining compliance with regulations.

Issuer processors manage transaction activity on behalf of the issuing bank (i.e., the Issuer) as part of the transaction flow. The processor enables clients to access and use those payment accounts through payment card transactions. 

They may also support many technological, implementation and compliance requirements, serving as a crucial link between fintechs and bank BIN sponsors. Among other responsibilities, they are essential for: 

  • Managing the authorization, clearing and settlement of electronic transactions between the bank and the card network, and enabling feature functionality of the account/card.    

  • Supporting back-office functions such as fraud, card management, reporting and analytics, or dispute and chargeback management, through APIs. Some processors may offer back office functions as a value-added service..

What does a Program Manager do?

If you’re working with one already, you know that a program manager identifies, sources and manages program partners including the issuing (sponsor) bank, issuer processor (if applicable), card network, card production and personalization vendor, marketing and distribution and other service providers. They are responsible for:

  • Managing all program parameters, goals, objective, cardholder operations, marketing, legal, compliance and program liability.

  • Ensuring compliance with the sponsoring/issuing bank’s and payments networks’ exacting rules and standards, which touch almost every part of your program.

A program manager can either be the fintech or a third party that specializes in program management services. Some issuer-processors also provide program management services.

What Fintechs Need to Know: FAQs About Switching BIN Sponsors  

Whether you’re working with a third-party program manager, or acting as your own program manager, it's important to understand the complexities of switching sponsor banks, and how to minimize program disruption. The following FAQs are helpful when determining if, why and how you can switch a BIN sponsorship. 

Do I have to switch BINs if I'm changing sponsor banks or processors? 

In the US, BINS are only issued by a bank or credit union, so fintechs and program managers will have to change BINs if switching sponsor banks, unless the current sponsor bank is willing to transfer the BIN to a new bank. However, if you’re switching processors (and not banks), you don’t have to switch BINs, as long as the processor you’re switching to already has a relationship with that bank/BIN sponsor. In that case, you can do a BIN migration  Or start with a new BIN and perform a card replacement.

How long does it take to switch BINs? 

Switching BINs depends on if you are program managing yourself, or if you are enlisting a third-party program manager to help. Done alone, obtaining BIN sponsorship can be a lengthy process (6+ months). This process can be navigated more quickly and easily with a market-tested partner that’s already integrated into the issuing processors financial services ecosystem, and can take as little as 2 months.

How hard is it to switch a BIN sponsor bank? 

Without the right processing partner, taking on the responsibility to switch BIN sponsor banks can be a complex process because it involves regulatory compliance, technical integration, data migration, processing agreements, testing, and stakeholder management. The level of difficulty varies depending on the fintech's size, type of card programs, and the specific requirements of the new sponsor bank.

What should I know before I switch sponsor banks?

There are a number of steps you should be prepared to navigate before switching sponsor banks. Your issuer processor should help you navigate this process in greater detail, but you should be prepared to:

  • Provide documentation demonstrating your existing regulatory compliance and risk policies, and be prepared to modify these to meet the new bank’s requirements.

  • Agree on new transaction limits and fraud rules

  • Demonstrate that your existing customers have passed KYC or be prepared to re-establish KYC for all customers.

  • Establish and fund new accounts as outlined in your agreement.

What is a BIN migration? 

BIN migration refers to the process of transferring or transitioning a set of BINs from one payment processor or service provider to another. The migration involves moving the BINs and associated cardholder accounts, transaction data, and processing capabilities from the existing system to the new system. 

This process is no small task, but with the partnership and expertise of a highly-qualified partner, it can be a well-organized and efficient process. A good processor will have a deep understanding of the entire process, so they can anticipate issues and opportunities and help you navigate every step.

What is a BIN transition? 

A BIN transition is any change or transition related to BINs associated with a payment card. This includes reassigning BIN ranges, updating BIN data or rules, or making adjustments to BIN-related processes and systems. A BIN transition can happen due to changes in business requirements, expansion into new markets, compliance reasons, network changes, or system/technological upgrades or advancements. As a key intermediary in the payment ecosystem, the issuer processor plays a critical role in managing the complex processes involved in authorization, clearing, and settlement of transactions made with those payment cards.

How long does it take to switch issuer processors? 

Switching issuer processors depends on the program complexity, the number of partners already involved, and the expertise of your new partner. Having an issuing processor partner that understands the many layers of payment processing complexity and maintains relationships with a variety of payment partners can help you navigate the issuer-processing environment.

What should I consider before switching issuer processors?

There are a number of considerations when choosing an issuer processor, starting with transaction volume, processing speed, fraud detection and prevention, security features, support for multiple payment types and networks, and cost. 

If you’re becoming your own program manager, switching processors or sponsor banks, it’s critical to understand what kind of transition support your processor can provide to keep the project moving and minimize cardholder disruption.

And, you’ll want to find a long-term partner that can support your growth. Look for deep payments expertise, along with the technical ability to support a steady stream of new product applications – from BNPL and rewards, to credit and real-time payments. You may also want to determine if your issuer processor is Visa ready certified or Payment Gateway Certified with MasterCard.

Is my program manager or processor responsible for notifying me if my sponsor bank will no longer be available?

Yes, whoever has received your BIN sponsorship and is maintaining the relationship with the sponsor bank is typically expected to notify all programs and impacted parties if the sponsor bank will no longer be available. The timeline and other terms are typically outlined in SLAs and are part of a good partnership. A good working relationship with your issuing processor and the sponsor bank is important to ensuring there are no negative impacts on your program.

What are the benefits of the right processing platform and partner? 

From connections to sponsor banks and other key players in the financial ecosystem, to helping brands scale operations while maintaining compliance, the right processing partner is key to achieving your program goals. Benefits like the ability to be your own program manager using any BIN classification or having a deep industry expertise to support growth, Galileo gives you the freedom, flexibility and reliability to launch, scale and grow the payments program that’s right for you and your customers.  

Ready to learn more? Connect with our program management experts today. For more insights on the benefits and challenges of being an in-house payments program manager, get your copy of our latest resource: The Essential Guide to Program Management.

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