Merchant acquirers are often misunderstood in the payment world. Although it refers to one specific function, the term is often used more broadly in the payments processing chain, since key players commonly perform multiple roles.
It is a bank that allows merchants to process debit and credit card payments. To accept credit cards and debit cards, a merchant needs an acquirer that will deal with the authorization and authentication parts of the transaction. It involves verifying both the validity of the card for the purchase and the availability of the transaction’s amount.
What Is The Significance Of An Acquirer In The Payment Processing Process?
Acquiring banks assist merchants in processing payments by managing their accounts. The customer’s payment journey begins at the time they fill out their credit card information at the checkout page.
When a purchase is made using a credit or debit card approved by the issuing bank, the payment is held by the acquirer. Following this, the money will be transferred to the merchant account and settled into the merchant’s bank account. An issuer and a buyer conduct a transaction process that involves authorization, clearing, and settlement.
Here is a step-by-step description of the issuer-acquirer transaction:
- Before purchase finalization or cash disbursements, authorization pertains to the approval or decline of a transaction.
- During clearing, the acquiring bank provides the issuing bank with final transaction data for posting to the cardholder’s account; the issuer and acquirer compute the charges, and the amount of the transaction is altered between the two currencies.
- An acquirer settles a transaction by depositing the funds into a merchant’s account. To settle the transaction, the issuing bank must transfer funds to the acquiring bank’s payment processor.
How Do You Choose The Right Acquiring Bank?
If you are setting up an eCommerce business, choosing an acquiring bank is one of the most critical decisions you need to make.
The following factors will have a major impact on your decision before selecting an acquiring bank:
- It is important to decide which payment cards you plan to accept – some acquiring banks are not equipped to accept certain credit cards. Your e-commerce website will accept credit cards that are accepted by certain acquirers. The acquirer will handle payments made with those cards.
- It does not matter whether you expect to make several transactions each week or several transactions each month – some acquiring banks charge monthly fees that are excessive for small businesses. You should always ensure that you consider all the fees the acquiring bank charges and how they will impact your business before finalizing a partnership.
- The amount of money made per transaction – based on that amount, you can predict how much a potential acquiring bank will charge you for every transaction.
The merchant had to have a relationship with one of these parties to accept payments historically. Today, that process is simplified for many merchants.
To obtain their merchant accounts, payment facilitators go through the underwriting process. They then integrate their technology with the payments processing system. As a result, they facilitate payments for their sub-merchants, providing a single point of contact and saving their sub-merchants the hassle of dealing with merchant acquiring.