Consider you have just set up a small bank, and you want to issue (for example) Visa cards. There’s a lot processes and infrastructure you would need to set up, and the processor can provide one (or all) of these services on your behalf if you choose to engage them:

– Card production: Printing and embossing the cards, and performing the cryptography to generate and mail the PIN numbers.

– Authorization: Providing computing services to authorize transactions against a credit limit.

– Fraud detection: Providing computing services to check incoming transactions against likely fraud (i.e. a transaction comes from Russia, but you did one in Atlanta two hours ago)

– Connection to networks: The authorization system has to be certified and connected to Visa and/or MasterCard

– Settlement: Clearing the transactions after authorization

– Chargeback: Managing the arbitration of dispute cases when a customer says he didn’t perform a transaction, or disputes the amount

In addition, the processing companies provide the same services for issuing branded credit cards which aren’t associated with a bank – for example, a football team or an airline.