Home » How Bank Identification Numbers (BINs) Work and What They Can Be Used For
Those who make or receive payments online understand how important it is for them to secure data from cardholders. This is so true, especially for information related to the card used to make payments.
However, most people do not know that the numbers on their credit or debit cards have a certain meaning. They assume that they are just numbers that are strategically put there without any meaning or reason.
Before explaining what these numbers are, did you know that credit card purchases surpass the 450 billion mark every year? This means that there are over one billion debit and credit card transactions taking place every single day!
With such huge numbers, it makes sense for a cardholder or even a merchant to understand what the numbers on these cards mean. These numbers (the first four to six numbers are called the BIN numbers).
What is a BIN (Bank Identification Number) Number?
A BIN number, sometimes known as Issuer Identification Number (IIN), can be defined as the first four to six numbers written on debit or credit cards and used to identify the issuer of the card. The first digit is used to identify the major industry of the issuer while the remaining digits identify the financial institution that provided the card.
The main purpose of these numbers is to make it easy for transactions to be tracked to the issuer of the card. BIN numbers are not only found on credit and debit cards but also on other cards such as gift and charge cards among others.
BIN numbers play a vital role when identifying fraud cases, especially identity theft or cases of stolen cards. With the BIN number, the type of card in use, the location of the card issuer, and the institution that issued the card can be identified. With this information and of course using data from the cardholder, fraudulent charges can be detected.
How Bank Identification Numbers Work
The BIN numbering system was created by the International Organization for Standardization in conjunction with the American National Standards Institute (ANSI) and is used globally by banks and other card issuing institutions.
The BIN code refers to the number used to identify a card’s issuer or where authorization requests are sent whenever a cardholder initiates a transaction.
Let us say that you have a credit card that you use for payments. You walk into a store and make a purchase. Immediately after you use the credit card, a request is sent to the bank that issued the card to you to authorize the transaction.
The bank also confirms that you are paying from a legitimate account and that the account has enough funds to cater for the purchase.
If the bank finds that everything checks out, then the transaction is processed. In case of a problem, the bank declines the transaction and a message is sent back to the business receiving the payment and the cardholder.
What Are BIN Numbers Used For?
BIN numbers are used for streamlining the checkout process, increasing efficiency, and avoiding or detecting errors. They do this by adding a level of authentication and security in the checkout process.
In a nutshell, BIN numbers are used for the following;
Ensuring compliance with laws no matter where the transaction is taking place.
To confirm that the customer using the card is the authorized owner of the card.
Identifying the person initiating the transaction.
To confirm whether a merchant accepts a debit or credit card even before an authorization request is sent.
Identifying the issuer of the card.
Checking whether the cardholder has enough funds to cover the purchase.
BIN numbers play an important role in the world of online transactions. With technology advancement, we are going to see an increase in cashless transactions over time, meaning that BIN numbers will keep playing a key role in these transactions.
Aneta is a staff writer covering money content, including personal finances, savings accounts, taxes, loans, mortgages, credit cards, interest rates and insurances for FintechZoom. Contact: [email protected].