Building an Issuer Processor: What Does It Take?

1?? Why are fintech giants like Revolut and Monzo building their own issuer processors instead of relying on third parties?

2?? What makes issuer processing such a high-margin, sticky business - and why are investors pouring billions into it?

3?? How does an issuer processor differ from a payment or acquiring processor, and why does that distinction matter?

4?? What are the biggest technical and compliance challenges in building an issuer processor from scratch?

5?? What does the future hold for issuer processing, and how will AI, real-time payments, and embedded finance shape the industry?

These questions and more will be answered in the article below. Now let’s dive in ?? and don't hold back any comments or critique! ??????

The Strategic Value of Issuing Processors in Modern Fintech

Issuer processors have played a critical role in transforming modern fintech companies, enabling them to build innovative financial products while maintaining control over their payment infrastructure. A widely known example is Revolut, which initially relied on third-party providers but later built its own issuing processor to gain greater flexibility and cost efficiency. Similarly, Monzo developed its in-house processing capabilities to reduce reliance on external vendors and enhance transaction speed, reliability, and cost management. These moves reflect a broader industry trend where fintechs, instead of depending solely on legacy banking infrastructure, take control of their payment rails to deliver superior customer experiences. ??

Having built a software product in this space myself, I know firsthand that:

?? It’s a serious undertaking,

? It’s never a straight line, and

?? You’re rarely the only one with the same idea.

Nevertheless, the economics for an issuer processor are very attractive, and if you’re doing the basics right, it’s a very sticky business. ??

?? Breaking Down the Issuer Processor

So, what are the fundamental elements of an issuer processor?

To all my issuer processor friends out there, I'm not planning to build an issuer processor anytime soon, but I was curious enough to put my knowledge to the test and take the challenge apart. ??

So, I’ve broken it down into three key areas:

? The Must-Have Essentials – The core infrastructure and compliance requirements.

? The Value-Add Services – The differentiating features that enhance usability and revenue.

? The Big Differentiators – What truly sets a processor apart in the industry.

Now let’s take a closer look! ????

?? A Booming Sector: Big Investments and Acquisitions

The last few years have seen massive investments in issuer processing. Here are just a few standout transactions:

?? SoFi 's acquisition of Galileo Financial Technologies (2020), followed by SoFi’s Nasdaq listing (2021).

?? Teya (formerly SaltPay) acquired Tutuka and Paymentology (2021) and merged them into Paymentology .

?? Mastercard invested in Episode Six (2021), Visa invested in Enfuce (2023).

?? Card networks running their own processors: Mastercard Payment Transaction Services (MPTS), VisaNet, and Visa DPS (Debit Processing Service).

?? Mastercard and Visa invested at different times in Marqeta and Thredd (formerly Global Processing Services, GPS).

?? New entrants like CLOWD9 | Certified B Corp? and The Money Service Lab ( TheMSL ) successfully launching their own processors.

Whilst funds have been deployed into processing, there has also been interest in vertical integrations in the space. One processor has pulled it off, Marqeta , and acquired TransactPay (formerly known as #TPL) as recently announced.

With high margins and extreme client stickiness, issuer processing remains an attractive and competitive sector. The deeper a client is integrated into your processing engine, the harder it becomes for them to switch providers. ??

?? Issuer Processor vs. Payment Processor vs. Acquiring Processor

?? Where Does the Issuer Processor Sit?

To start off, let's remind ourselves where the issuer processor sits, as it's very often misunderstood how many specialist processors there are in a card transaction:

1. Issuer Processor – Connects issuing banks with card networks and authorises transactions.
2. Payment Processor – Facilitates payments between merchants and banks.
3. Acquiring Processor – Handles transaction processing for acquiring banks, enabling merchants to accept card payments.

In the payment processing landscape, distinct yet often overlapping roles exist:

Acquiring Processors handle the technical mechanics of transaction processing for acquiring banks - the financial institutions that maintain merchant accounts and receive funds from card payments. They route authorisation requests and manage the communication between merchants and card networks. Meanwhile,

Payment Processors typically offer a more comprehensive suite of services that may include acquiring processing capabilities alongside additional merchant services such as payment gateways, detailed reporting, dispute management, and tokenisation solutions.

The boundaries between these roles have significantly blurred in today's industry. Many companies have evolved to provide integrated services that span multiple functions within the payment ecosystem. European payment giants like #Worldpay (now part of FIS), #Adyen, and Checkout.com exemplify this trend, offering both specialised acquiring processing infrastructure and full-service payment processing solutions. Similarly, widely recognised payment facilitators such as #PayPal, #Stripe, and #Klarna effectively function as both payment processors and acquiring processors for their merchants, creating streamlined, end-to-end payment solutions that simplify the complex payment landscape for businesses of all sizes. Other notable European players including #Nets (part of Nexi Group), #SumUp, and #PPRO have also expanded beyond their original roles to offer more comprehensive payment services.

Here’s a structured comparison:

?? Under the Hood: What Does an Issuer Processor Look Like?

An issuer processor is a software service with many moving parts. The complexity comes from:

? Scheme certifications (Visa, Mastercard, etc.), which differ per region.

? Integration challenges with various third-party services.

? Client use cases that vary widely, requiring customisation and adaptability.

The challenge is certifications with schemes in various regions – sadly, there is no global Mastercard or Visa certification yet that covers all the regions. ??

?? The Evolution of Processor Architecture

Modern issuer processors have evolved significantly from the monolithic systems of the past. Today’s leading processors employ?cloud-native, microservice-based architectures?that enable:

1. Scalability?– The ability to handle transaction volume spikes during peak periods.
2. Resilience?– Distributed systems that maintain uptime even during partial outages.
3. Deployment Flexibility?– Feature releases without system-wide downtime.
4. Performance?– Sub-second response times for authorisation decisions.

Key architectural considerations include:

???Active-Active Redundancy?– Multiple live processing centers instead of primary/backup models.

???Real-Time Data Synchronisation?– Ensuring consistent account information across all nodes.

???Global Load Balancing?– Directing traffic to optimal processing locations.

???Containerisation?– Deployment flexibility across cloud providers (your preferred cloud provider might not be available in a particular region).

???Event-Driven Design?– Using message queues to handle processing asynchronously.

??? The Compliance Maze: A Key Challenge

Regulatory requirements are a major hurdle. Issuer processors must comply with:

???Card Network Certification?( Visa , 萬事達卡 , 发现金融服务公司 , UnionPay International , etc.)

• Regional differences mean certification per geography.
• Requires ongoing updates as specifications change.

???Data Privacy Regulations

• GDPR, CCPA, and other jurisdiction-specific laws.
• Stringent rules around consent, data minimisation, and breach notifications.

???Security Standards

• PCI DSS for cardholder data protection.
• SOC 2, ISO 27001, and regular penetration testing.

These regulations create?barriers to entry?but also act as a?moat?for established players who have already navigated them. ??

? How Do Issuer Processors Differentiate?

Some might be?green, others?ethical, and some built?by developers, for developers - each one has to carve out its own angle. ????

It all depends on what you?already have, what you?need solved by an issuer processor, and what you?outsource to other vendors. ??

In my experience over the years, in scale, you will likely have to use specialist providers for various responsibility areas that you have to solve (e.g. transaction monitoring, lending & lending policies, etc.). The issuer processor will therefore have to fulfil at a bare minimum the core processing in the markets that you need and do that well.

While core processing capabilities form the foundation of any issuer processor, differentiation happens across several dimensions:

1. Technical Architecture Approaches

• ???Cloud-Native vs. Legacy Systems?– Newer entrants build cloud-first, while established players modernise legacy systems.
• ???Monolithic vs. Microservices?– Impacts scalability, maintenance, and feature velocity.
• ???Regional vs. Global Infrastructure?– Some processors focus on specific markets, while others invest in global redundancy.

2. Developer Experience

• ???API-First Design?– Developer-friendly APIs and comprehensive documentation.
• ????Sandbox Environments?– High-quality testing tools accelerate client onboarding.
• ???Integration Support?– Varies significantly between providers.

3. Value-Added Services

• ???Fraud Management?– From basic rules to AI-powered systems.
• ???Data Analytics?– Advanced transaction insights and reporting.
• ???Currency Capabilities?– Multi-currency, digital assets, and cross-border optimisation.

4. Business Model Variations

• ???Pricing Structure?– Transaction-based, account-based, or hybrid models.
• ???Geographic Focus?– Regional vs. global providers.
• ???Industry Specialisation?– Processors tailored for corporate cards, crypto, travel, etc.

5. Strategic Positioning

• ???White-Label vs. Co-Branded?– Some processors operate behind the scenes, others seek brand recognition.
• ???Standalone vs. Integrated?– Whether the processor is part of a broader banking or payments ecosystem.
• ???Target Client Size?– Enterprise, mid-market, or startups.

The most?successful processors?align their?differentiation strategy?with their?technical capabilities?and?target market needs. As the landscape evolves, we're seeing increased specialisation alongside growing platform capabilities.

For the rest, it then comes to what do you prefer to have:

• Fewer vendors doing more for you, or
• More vendors with each covering their own specialist function well?

What is better? In my opinion, it is not possible to answer what is better, but what suits you more and what can you handle better. It's quite individual.

The most expansive services an issuer processor offers that I have come across is Galileo Financial Technologies . They have always been on the wider side of services offered and the SoFi acquisition may have only helped reinforce that. Strong in the Americas, but not seen it anywhere else. Have you?

This might give some of the European processors ideas about possible directions to take for value add and differentiating services.

?? The Future of Issuer Processing

As we look ahead, several trends are likely to shape the evolution of issuing processors:

1?? Embedded Finance Acceleration – Processors that can easily enable non-financial brands to offer financial products will capture growing market share.

2?? Real-Time Everything – The move from batch processing to real-time capabilities across all processor functions.

3?? AI Integration – Advanced fraud detection, dynamic pricing, and personalisation through machine learning.

4?? Cross-Border Simplification – Reducing the complexity of multi-currency, multi-region transactions.

5?? Blockchain & Tokenisation – Selective adoption of blockchain technologies and decentralised payment models where they solve specific problems.

The processors that will succeed in this evolving landscape will combine technical excellence, regulatory sophistication, and the flexibility to adapt to new payment modalities as they emerge. ??

?? Closing Thoughts

Did I get close to what it takes? What have I missed? ??

Share your thoughts – after all, execution is key, and apart from showing expertise, you won’t be giving away an obvious trade secret! ??