Meaning Of BIN
Bank identification number refers to first four to six digits on payment cards issued by banking companies to their group of customers. These numbers assist in identifying the card type, geographical location of card issuer and name of company or bank that has issued the card. The BIN serves as security measure for both merchants and consumers, protecting them while doing transaction in online marketplace. This number assists in getting useful information for identifying the cases of theft, fraud and stolen cards by doing comparison in between the data gathered from BIN and data of card holders. Bank identification number is also referred to as IIN (Issuer Identification Number) as all of the payment cards are not only issued by banks. There are several other financial institutions as well that issue cards such as PayPal, netSpend and Walmart issues prepaid and virtual gift cards that all incorporates BIN data.
This type of numbering system for payment cards was created by American National Standards Institute (ANSI) and International Organization for Standardization (ISO). Both of these organization works on developing business and industry standards in U.S. as well as internationally. Such standards comprise of issuance of issuer identification numbers and bank identification numbers. Bank identification number is of crucial importance in online transactions as it enables in connecting the card-based transactions with issuers of card. It is this number only that ensures the correct account is debited or credited whenever transactions take place via payment cards.
How does Bank Identification Number work?
First character in Bank identification number relates to industry identifier and simply denotes the industry of issuing company. For instance, cards starting with number 4 or 5 belongs to financial and banking institutions. In the same manner, other numbers are reserved for other industries such as hospitality, airlines and entertainment. The rest 5 digits of BIN on payment cards denotes the card issuing institution.
A BIN enables in tracking the origin of customer’s funds and this is done via electronic payment processing system. This system involves a merchant, its payment processor, merchant’s bank and the issuing bank. A payment in online purchase system is completed via 2 step process: authorization and clearance. The first step in process of payment that is authorization is completed through BIN. A BIN recognized that which issuer i.e., bank or card company, should get an authorization request for finding out if account is valid or not and whether if it has amount of purchase withing its available limits.
The process of authorization takes place very quickly behind the scenes as numbers get validated against a third-party service provider. In few cases, request also get denied when transaction value is higher than the daily limit of withdrawal.
BIN on payment cards is of utmost importance as in its absence, the online payment platforms and credit card machines won’t be able to detect the account from where funds need to be debited and therefore payment will not get completed.
Importance of Bank Identification Number
BIN not only helps in knowing the card issuing institution and their location but also makes data known to person engaged in online transaction. All participants involved in online payments transaction are able to evaluate the details and recognize cases of fraud, theft and stolen cards via BIN.
Let’s take example of consumer doing an online purchase. Once card number is entered into by consumer on payment page, online retailer can easily find out details regarding the financial institution that has issued card and their location. However, it does not help in itself, the information can be matched by online retailer to customer’s location mentioned on his profile. This will assist in knowing the authenticity of transaction.
Once all information’s are cross-verified and if in case, there is any instance of fraud then the further investigation can be done by online retailer. In similar manner, consumer transferring funds to retailer via online banking can authenticate online retailer details prior to making a transaction.
In this way, BIN safeguards the interest of both consumers and merchant in today’s world where both trade and commerce are increasing moving online. It plays efficient role in ensuring that all online transactions are carried out in smooth manner.
Benefits of Bank Identification Number
Various benefits of bank identification number are as discussed in points given below: –
Safety of Card Validation
Bank identification number makes the process of card validation smoother, efficient and error-free via adding high level of security and authentication to checkout function. BIN helps in performing authentication of consumer details, issuing bank information and card withdrawal limit prior to completing the online transaction, therefore avoiding the chances of fraud and theft.
The BIN helps in making the checkout process speedier. All transactions take place in automated manner through computerized systems such that all validation occurs behind the scene very quickly. It performs validation of payment card with regard to whether it will be accepted by particular merchant or not prior to sending authorization.
Helps to identify purchaser
It enables in identifying the purchaser’s detail by offering an additional signal through which consumer’s details and location are matched with information mentioned on his profile. BIN locates the origin of customer’s funds via electronic payment system and then accordingly send a validation request to issuer bank for checking the validity of account associated with payment card.