Issuing processors are the critical infrastructure that connects financial institutions and fintechs to card networks. They manage transaction authorization flows, enable real-time decision-making, and provide the flexibility needed to launch differentiated card programs across use cases from cross-border payments to health benefits. For organizations building payment products, understanding how issuing processors work—and maintaining control over authorization decisions—directly impacts program performance, customer experience, and competitive positioning.

Key Takeaways

• Issuing processors bridge your systems to card networks, managing authorization requests and responses while maintaining your control over transaction decisions

• Modern processing enables specialized use cases including cross-border transactions, savings accounts, wealth management, BaaS platforms, and benefits administration

• Processing architecture determines program flexibility, affecting your ability to customize authorization logic, integrate with specialized systems, and scale across multiple products

• Real-time connectivity and low latency are critical, as processing performance directly impacts authorization approval rates, customer experience, and program economics

How do Card Programs Connect to Payment Networks?

An issuing processor is the infrastructure component that enables your organization to process electronic transactions made via your payment tools. It acts as the essential bridge or gateway between your internal systems—ledgers, transaction management platforms, and specialized services—and the card networks (Visa, Mastercard, etc.).

An issuing processor receives authorization requests from the card networks, routes them to your decisioning systems, and returns your approval or decline response. This infrastructure is fundamental to any card program, whether you're launching a neobank, building a corporate expense platform, offering cross-border payment solutions, or enabling specialized financial products like health savings accounts or investment-linked cards.

The Critical Concept: Standing in the Authorization Decision

A key differentiator among issuing processor arrangements is who "stands in" the authorization decision—meaning who has control over approving or declining transactions.

Client stands in the decision: Your organization retains full control over authorization logic. The processor routes requests to your systems, you apply your business rules and risk parameters, and you return the authorization decision. This model provides maximum flexibility and control.

Processor stands in the decision: The processor makes authorization decisions on your behalf based on predefined rules. While this reduces your operational burden, it also limits your ability to customize decisioning logic and can create dependency on the processor's capabilities.

For organizations building differentiated payment products or serving specialized use cases, maintaining control over authorization decisions is often essential to competitive advantage.

How Do Issuing Processors Connect to Payment Networks?

Understanding the transaction flow helps clarify the processor’s role in your card program infrastructure.

Authorization Request Flow

Step 1: Cardholder initiates transaction Your customer uses their card at a merchant point-of-sale terminal, online checkout, or ATM.

Step 2: Merchant acquirer contacts card network The merchant's acquiring bank sends the authorization request to the appropriate card network.

Step 3: Card network routes to issuing processor The network identifies your organization as the issuer and routes the request to your processor.

Step 4: Processor forwards to your systems The processor translates the network message and routes it to your authorization systems—your ledger, fraud detection platform, or specialized decision engine.

Step 5: Your system makes the decision Your business logic evaluates the transaction based on available balance, fraud signals, spending controls, and any custom rules specific to your use case.

Step 6: Processor returns response to network The processor receives your approval or decline decision, translates it to the network's required format, and sends the response back through the chain.

Step 7: Network informs merchant The card network delivers the authorization result to the merchant's system, completing the transaction.

This entire flow typically completes in under two seconds. The processor’s efficiency in message translation and routing directly impacts your authorization approval rates and customer experience.

Settlement and Clearing

Beyond authorization, the processor also manages settlement and clearing processes:

• Clearing: Receiving final transaction details from the network after the transaction posts

• Settlement: Facilitating the movement of funds between the card network and your settlement account

• Reconciliation: Providing transaction data in formats compatible with your financial systems

What it Takes to Connect to Card Networks Effectively

Your processor choice can affect your card program’s performance, operational flexibility, and competitive positioning in ways that compound over time.

Control Over Authorization Logic

When you stand in the authorization decision, you can implement sophisticated business logic that differentiates your product:

Custom spending controls: Enable customers to set category-specific limits, merchant blocks, or geographic restrictions that align with your product positioning.

Dynamic risk assessment: Integrate real-time fraud detection models, behavioral analytics, or external data sources into your authorization flow.

Balance management across products: Make authorization decisions based on combined balances across multiple accounts, investment holdings, or credit lines.

Use case-specific rules: Implement specialized logic for healthcare benefits (checking FSA eligibility), travel cards (dynamic currency conversion), or corporate expense management (policy enforcement at point-of-sale).

This level of control is only possible when the processing architecture allows your systems to make the authorization decision rather than delegating it to the processor.

Enabling Specialized Use Cases

Modern issuing processors must support diverse card program types beyond traditional checking account-based debit cards.

Cross-border transactions: Process multi-currency authorizations, apply real-time exchange rates, and manage international settlement with reduced friction.

Savings and investment accounts: Link card spending to savings balances, investment portfolios, or round-up programs that move funds between accounts based on transaction activity.

Wealth management products: Enable high-net-worth clients to spend against securities portfolios with real-time collateral calculations informing authorization decisions.

Banking-as-a-Service platforms: Support multiple end-customer programs through a single integration, with tenant isolation and customizable authorization logic per program.

Health benefits administration: Validate FSA, HSA, or HRA eligibility at point-of-sale, declining ineligible merchant categories while approving qualified healthcare expenses.

Embedded finance applications: Power card programs for vertical SaaS platforms, marketplaces, or non-financial brands entering payments.

Each use case requires specific processing capabilities—from specialized data fields in authorization messages to integrations with non-traditional ledger systems.

Program Performance and Economics

Processing architecture directly impacts the metrics that determine your program's success:

Authorization approval rates: Real-time fraud scoring and risk engines for higher approval rates. Balancing fraud prevention with customer experience to achieve high approval rates for legitimate transactions.

Transaction latency: Faster authorization response times improve customer experience and reduce cart abandonment in ecommerce contexts. Even small amounts of latency can impact conversion rates.

Interchange maximization: The card is presented to the network in a way that qualifies for the highest possible interchange fee (e.g., premium card tiers, correct routing).

Operational costs: Processing fee structures (per-transaction, monthly platform fees, or revenue share models) can significantly impact unit economics, especially for high-volume programs.

Speed to Market and Scalability

How easily your processor integrates with your systems and scales with your growth determines program velocity:

Integration flexibility: Modern processors offer RESTful APIs, webhook notifications, and real-time data feeds that accelerate development cycles.

Multi-product support: Launch multiple card programs (consumer, commercial, virtual cards) through a single processing integration rather than building separate connections.

Geographic expansion: Add support for new regions, currencies, and local card networks without rebuilding core infrastructure.

Volume scalability: Handle transaction volume growth from hundreds to millions of authorizations monthly without performance degradation or infrastructure changes.

What Capabilities Matter When Connecting to Card Networks?

Not all issuing processors offer equivalent functionality. Your organization should evaluate potential providers across these dimensions:

Network Connectivity and Certification

Your processor must maintain direct connectivity to card networks and keep certifications current:

Network coverage: Direct connections to Visa, Mastercard, and relevant regional networks (UnionPay, JCB, etc.) based on your target markets.

Certification maintenance: Ongoing compliance with network mandates and specifications as they evolve, handling protocol changes without requiring updates to your systems.

Redundancy and failover: Multiple network connection points with automatic failover to ensure authorization availability even during network or infrastructure issues.

Network settlement: Efficient settlement processes that minimize float and reduce reconciliation complexity.

Authorization Routing and Decisioning

The processor’s authorization capabilities determine the amount of control and flexibility your program offers, Look for these features: 

Real-time routing: Sub-second message translation and routing to your decisioning systems with minimal latency.

Stand-in processing options: Configurable stand-in logic that makes decisions when your systems are unavailable, with controls over approved transaction types and limits.

Webhook-based decisioning: Real-time callbacks to your services for authorization decisions, enabling cloud-native architectures without persistent connections.

Custom data fields: Support for enhanced authorization data beyond standard ISO 8583 fields, enabling sophisticated business logic.

Multiple decisioning endpoints: Route different transaction types or card programs to different decisioning systems based on your architecture.

Security and Compliance

Card issuing involves rigorous security requirements that your processor must support:

PCI DSS compliance: The processor maintains PCI Level 1 certification, reducing your compliance scope and audit burden.

Tokenization and encryption: Secure handling of sensitive card data throughout the authorization and settlement process.

Network security mandates: Compliance with card network security requirements including strong authentication, encryption standards, and incident response protocols.

Regulatory reporting: Support for jurisdiction-specific regulatory requirements around transaction monitoring, sanctions screening, and reporting obligations.

Transaction Data and Reporting

Access to detailed transaction data enables operations, reconciliation, and customer service:

Real-time transaction feeds: Webhook notifications or streaming APIs that provide immediate visibility into authorizations, clearing, and settlement events.

Comprehensive transaction details: Full authorization data including merchant information, interchange qualifications, network response codes, and custom fields.

Reconciliation tools: Daily settlement files and transaction-level data in formats compatible with your financial systems and accounting platforms.

Dispute and chargeback management: Integration with network dispute processes, providing case data and supporting representment workflows.

Analytics and monitoring: Dashboard visibility into authorization volumes, approval rates, decline reasons, and processing performance metrics.

Developer Experience

Your engineering team's ability to integrate, test, and maintain the processing connection affects your program’s overall success.

Modern API design: RESTful APIs with clear documentation, code samples, and SDKs in common languages.

Sandbox environments: Full-featured test environments that simulate network behavior without processing live transactions or incurring costs.

Webhook testing: Tools for simulating authorization requests and testing your decisioning logic before production deployment.

Monitoring and debugging: Detailed logging, transaction tracing, and diagnostic tools that accelerate troubleshooting.

Choosing the Right Partner to Help You Connect to a Payment Network

Selecting an issuing processor requires evaluating both current needs and future requirements across multiple dimensions.

Decisioning Control Requirements

Assess how much control you need over authorization logic:

Full decisioning control needed: Choose a processor that allows you to stand in the authorization decision if you're building differentiated products, serving specialized use cases, or need custom fraud models.

Processor decisioning acceptable: Consider delegating authorization decisions to the processor if you're launching standard card products, want to minimize operational complexity, or lack sophisticated risk management infrastructure.

Hybrid approaches: Some programs benefit from processor stand-in for certain transaction types (ATM withdrawals, certain merchant categories) while maintaining control over core authorization logic.

Use Case Alignment

Different use cases have different processing requirements:

BaaS platforms: Need multi-tenant architecture, program-level customization, and segregated reporting across multiple end customers.

Cross-border programs: Require multi-currency support, dynamic currency conversion capabilities, and efficient international settlement.

Benefits administration: Need specialized data fields for healthcare merchant validation, split-tender authorization (when transactions exceed benefit balances), and detailed merchant category filtering.

Investment-linked cards: Require integration with securities systems, real-time portfolio valuation, and sophisticated balance calculations.

Corporate expense platforms: Need enhanced Level 2/3 data capture, integration with spend management systems, and real-time policy enforcement.

Technology Stack Compatibility

Your existing infrastructure influences processor selection:

Cloud-native organizations: Prioritize processors offering webhook-based decisioning, API-first design, and modern authentication methods.

Traditional financial institutions: May prefer processors supporting legacy integration patterns, batch processing options, and established settlement workflows.

Hybrid architectures: Need processors that bridge modern APIs with core banking systems, offering flexibility in integration approaches.

Economic Considerations

Issuing processor pricing models vary significantly and impact program unit economics:

Per-transaction pricing: Fees charged per authorization, clearing, or settlement message. Typical for high-volume programs where predictable per-unit costs matter.

Platform or monthly fees: Fixed costs regardless of volume. May be more economical for lower-volume programs or during launch phases.

Tiered pricing: Volume-based pricing with lower per-transaction costs at higher tiers, rewarding program growth.

Revenue share models: Processing fees tied to interchange or program revenue, aligning incentives but potentially limiting margin.

Consider total cost of ownership including integration costs, ongoing support, network fees passed through by the processor, and costs of any required middleware or additional services.

Vendor Partnership Considerations

Beyond technical capabilities, evaluate the relationship and support model:

Support and SLAs: Availability of technical support, incident response times, and uptime guarantees. Card authorization is mission-critical; downtime directly impacts revenue.

Roadmap alignment: The vendor's product development priorities and their responsiveness to your feature requests.

References and track record: Experience with similar use cases, proven scale, and reputation among other fintechs or financial institutions.

The right issuing processor enables your card program vision while the wrong choice can create lasting constraints on product capabilities and unit economics.

When evaluating options, prioritize alignment with your specific use cases and technology architecture over generic feature checklists. For example, a processor optimized for traditional bank debit cards may be inadequate for cryptocurrency-linked cards or healthcare benefits administration.

Most importantly, understand the implications of authorization stand-in decisions. Maintaining control over authorization logic provides competitive flexibility but requires operational maturity. Delegating decisions to the processor simplifies operations but limits differentiation.

Want to Learn More? 

Whether you're launching your first card program or optimizing an existing portfolio, your issuer processor partner represents foundational infrastructure that compounds in importance as you scale. Organizations that invest in understanding processing capabilities and selecting the right partner position themselves for sustained program success.

Contact us to learn more about how Galileo’s issuer processing services can help power your card program.

Frequently Asked Questions

What's the difference between an issuing processor and a payment gateway?

An issuing processor connects card issuers (financial institutions and fintechs) to card networks for processing authorization requests from merchants. A payment gateway connects merchants to payment processors for accepting customer payments. They operate on opposite sides of the transaction flow. Issuing processor handle "Can this cardholder spend this amount?" while payment gateways handle "Can this merchant accept this payment?"

Why does it matter who "stands in" the authorization decision?

Standing in the authorization decision means your organization controls the approval or decline logic rather than delegating it to the processor. This matters because it determines your ability to implement custom business rules, integrate specialized decisioning systems, differentiate your product, and optimize approval rates. For specialized use cases (healthcare benefits, investment-linked cards, cross-border programs), this control can be essential to the product value proposition.

What technical capabilities do we need to stand in authorization decisions?

You need systems capable of receiving authorization requests, evaluating them against your business logic, and returning decisions within network time limits (typically under 2 seconds, ideally under 500ms). This includes available balance checks, fraud detection, spending controls, and any specialized validation. You'll also need high-availability infrastructure, monitoring capabilities, and operational procedures for incident management.

How do issuing processors handle network certifications?

Reputable processing providers maintain direct connections to card networks and handle ongoing certification requirements. They absorb network specification changes, protocol updates, and security mandate implementations. This shields you from needing to maintain separate network relationships and keeps your integration stable even as network requirements evolve. Verify that potential processing providers have current network certifications and clear processes for maintaining them.

Can we use multiple issuing processors?

Yes, though it's less common than in merchant acquiring. Some organizations use different processors for different card programs (consumer vs. commercial) or different networks (Visa vs. Mastercard). This provides redundancy and can optimize costs, but adds integration complexity and operational overhead. Most organizations start with a single processing partner and only add additional connections when specific requirements justify the complexity.

What data do we receive from the processor for authorization decisions?

Authorization messages include standard data fields covering transaction amount, merchant category, location, time, card details, and transaction type. Many issuing processors support enhanced data fields including detailed merchant information, cross-border identifiers, digital wallet indicators, and custom fields. The specific data available depends on the card network, transaction type, and other capabilities. This data enables your decisioning logic—fraud detection, spending controls, and specialized validation rules.

How does pricing typically work for issuing processors?

Pricing varies widely by provider and program characteristics. Common models include: per-authorization fees, monthly platform fees, tiered volume pricing, or revenue share arrangements. Some providers charge separately for authorization, clearing, and settlement messages. Consider total cost including network fees (which often are passed through), integration costs, and support. Request detailed pricing across your expected volume tiers and transaction mix.

What happens if our authorization system is unavailable?

Processors typically offer stand-in processing that makes authorization decisions when your systems can't respond. You configure stand-in rules defining which transaction types and amounts the processor can approve on your behalf. Conservative stand-in rules minimize fraud risk but may decline legitimate transactions. More aggressive stand-in maximizes approval rates but may increase fraud exposure. Programs can balance these considerations based on transaction type—tight limits for ecommerce, higher limits for in-person transactions.