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The Issuer Perspective

Prerequisites

Before understanding the issuer view, know:

TL;DR
  • Issuers see the whole customer relationship, not just your transaction
  • One of their biggest fraud concerns is false declines, not just catching fraud
  • Issuers operate under Reg E/Z obligations that shape their dispute handling
  • Industry analyses suggest around 1 in 5 issuer declines are fraud-related; of those, roughly 40% are false positives
  • Merchants and issuers have aligned incentives on approving good transactions. Communication is the gap.

Most fraud and payments content is written from the merchant perspective. But understanding how issuers think helps explain why authorization decisions happen the way they do, why disputes flow the way they flow, and how merchants can improve outcomes by working with issuer incentives rather than against them.

Different Data, Different Decisions​

When you see a transaction, you know everything about the shopping session: device fingerprint, browsing behavior, time on site, cart composition, shipping address history, and more. You might have hundreds of data points informing your fraud decision.

When an issuer sees that same transaction, they know:

  • Cardholder name and billing address
  • Transaction amount and merchant category code
  • Merchant name and location
  • Maybe AVS and CVV results
  • The cardholder's complete transaction history across all merchants

Issuers have deep longitudinal data about the cardholder but almost no context about the specific transaction. They know this customer spent $47 at a coffee shop last Tuesday and $200 at an electronics store last month. They don't know whether you verified the customer's identity, whether the shipping address matches previous orders, or whether this device has been seen before.

This information asymmetry explains a lot about why issuer declines happen. Issuers are often guessing based on patterns, because that's what they have.

Different Incentives​

Merchants and issuers both want to approve legitimate transactions and decline fraud. But the weight they put on each objective differs:

PriorityMerchant PerspectiveIssuer Perspective
Approve good ordersHigh - it's revenueHigh - it's interchange + happy cardholders
Decline fraudHigh - it's loss + chargebacksMedium-high - it's loss + customer complaints
Avoid false declinesMedium - lost sale, but unknownVery high - cardholder might switch cards
Customer experienceImportant for your brandCritical for their brand

For merchants, a false decline is an invisible problem. You never know about the legitimate customer you turned away. They just leave. You do know about every chargeback.

For issuers, false declines are highly visible. The cardholder calls, frustrated, often while standing at a checkout counter. Studies show that 39% of cardholders will abandon a card after a false decline, and 25% will move it to "back of wallet." That's direct revenue loss for the issuer.

This is why issuers are often more willing to approve borderline transactions than you might expect. They've done the math on false decline costs.

The False Decline Problem​

Industry analyses suggest that around 1 in 5 issuer declines are coded as fraud-related (the rest are insufficient funds, expired cards, etc.). Of those fraud-flagged declines, roughly 40% are actually legitimate customers who were falsely flagged.

One industry study estimated that for every $100M in bank declines, roughly $8M represent false declines from legitimate customers. That's real money left on the table for both merchants and issuers.

Why is the rate so high? Because issuers are often guessing. They see limited transaction data and have to make a decision in milliseconds. When in doubt, some issuers decline. Others approve and deal with fraud when it happens.

What Issuers Know About You​

Issuers build risk profiles for merchants based on:

  • Historical chargeback rates: High chargeback merchants see more declines
  • TC40/SAFE fraud reports: Even fraud that doesn't become a chargeback affects your standing
  • Industry risk: Certain MCCs (digital goods, travel, subscriptions) get more scrutiny
  • Geographic patterns: Transaction origins that don't match typical customer profiles

If you've had elevated fraud or chargebacks, issuers remember. Their models will decline more transactions from your merchant ID until you've demonstrated improvement. This can take months to recover from. Issuer models update slowly.

Those fraud and dispute patterns also roll up into network monitoring programs like Visa VAMP and Mastercard ECP, which further influence how issuers treat your traffic. See Dispute Monitoring Programs for how those ratios are calculated.

How Merchants Can Help Issuers​

The communication gap between merchants and issuers is fixable. Here's how to help issuers approve more of your legitimate transactions:

Send clean traffic: Block obvious fraud before it reaches the issuer. Issuers track your fraud rates. If you're sending mostly legitimate transactions, their models learn to trust you.

Use enrichment tools: Order Insight and Consumer Clarity provide issuers with transaction context they wouldn't otherwise have: your logo, item descriptions, customer service info. This helps cardholders recognize charges and helps issuers make better decisions.

Enable 3D Secure: When issuers authenticate a transaction themselves, they're more confident approving it. 3DS shifts liability but also improves approval rates because the issuer has verified the cardholder.

Work with fraud partners who have issuer relationships: Some fraud prevention providers share their fraud assessments with issuers. When an issuer sees that a trusted third party has already vetted the transaction, they're more likely to approve.

Don't retry declined transactions aggressively: Repeatedly retrying the same declined transaction (especially "05 - Do Not Honor" or hard fraud codes) is a signal of fraud to issuers and can get your merchant ID or BIN flagged. Excessive retries waste money and damage your reputation.

The Regulatory Framework​

Issuers operate under consumer protection regulations that merchants don't face directly. Understanding these helps explain issuer behavior:

  • Regulation E (debit cards): Requires issuers to investigate disputes and provide provisional credit within specific timeframes
  • Regulation Z (credit cards): Limits cardholder liability to $50 for unauthorized charges (in practice, most issuers offer $0 liability)

These regulations create obligations that shape how issuers handle disputes. When a cardholder reports fraud, the issuer has regulatory deadlines to meet. This is partly why dispute investigations can feel like they favor cardholders. Issuers face penalties for non-compliance.

Next Steps​

Understanding issuer behavior?

  1. See what data issuers have - Limited context on transactions
  2. Understand incentives - False decline costs
  3. Know the false decline problem - 40% of fraud declines are false

Improving issuer relationships?

  1. Help issuers approve you - Send clean traffic, use 3DS
  2. Know what issuers track about you - Chargebacks, TC40s, MCC
  3. Use enrichment tools - Order Insight, Consumer Clarity

Understanding regulatory context?

  1. Review Reg E/Z framework - Consumer protections
  2. See how this shapes disputes - Issuer obligations
  3. Improve representment evidence - What issuers accept

See Also​