Bank Card Association

A bank card association is an organization owned by financial institutions that licenses bank credit card programs. The two national and best-known bank card associations, VISA and MasterCard, have become publicly-traded companies. There are many regional bank card associations, however, that may be owned by a single bank or a consortium. These smaller organizations issue more retail credit cards.

A bank card association can offer attractive perks to its business members in exchange for a fee. Brands that want to launch a credit card program or offer a branded credit company that uses the name of, say. Visa or MasterCard would pay that bank card association the required fee to get permission to use that name. After paying this fee, the company running this promotion or program can then use the bank card association name, logo and related collateral and resources. In return, the bank card association provides authorizations for cardholders’ transactions.

The bank card association also performs operational functions for its members, including transaction processing and authorizations, interchange settlements and fee processing. In this sense, the bank card association handles all the critical and routine tasks involved with managing its own customers’ accounts, while also serving as a sort of outsourced “back office” for the companies and retailers that have paid the licensing fee to that bank card association.

The bank card association serves as a sort of central clearinghouse. Its headquarters processes all transactions and handles all operations for the entire group of customers it serves, both retailers and individuals, in the same way. This consistency across the entire spectrum of customers served by that card association provides for a seamless process, and helps everyone involved in the process feel more secure because they know what to expect, and the transactions follow familiar, routine procedures. These established systems also help deliver a smooth, efficient operation.

Businesses that obtain a license from a large bank card association enjoy a number of important benefits. They have access to critical processing and account management services that might otherwise be difficult for them to manage or afford on their own. In fact, this was what initially prompted the creation of bank card associations in the first place. Smaller, regional financial institutions wanted to pool their resources so they could have shared access to technical support and operational systems that each institution could not afford on its own.

By utilizing the card association’s name and logo, they can also leverage that name recognition to appeal to customers who trust the reputation of that well-known brand.