Why Do You Need An Acquirer To Process Payments?
Before you start accepting payments on your website, there are a few things you need to do. And one of them is signing a contract with your acquirer. So, what’s hiding behind this acquirer term and why do you need one?
The acquirer, also known as a credit card bank, acquiring bank or merchant bank, is a bank or financial institution, licensed as a member of a card association (like Visa or MasterCard), that creates and maintains the merchant’s bank account. Both Visa and MasterCard have their own regulations and lists of compliance requirements to become an acquirer.
What’s the role of the acquirer in the payment process?
When merchants want to process credit and debit card transactions on their website, they need to sign a contract with acquiring banks. Then, during the payment process, the acquirer authorizes card transactions and connects issuing banks (What is an issuing bank?) on the merchant’s behalf.
Whenever a cardholder uses a credit or debit card in a purchase, the acquiring bank either authorizes or rejects the transaction based on the data from the issuing bank and card network. In short, the acquiring bank receives the payment authorization request from the merchant and then sends it to the issuing bank for approval. If the purchase is approved, the funds are deposited into the merchant’s account (usually at regular intervals).
Read more about the entire payment process: Online payments in a nutshell: A guide for beginners.
Some major acquiring banks also take on the responsibility of a payment service provider and provide payment processing solutions. There are also banks that provide a full-service offer, with an issuing bank, acquiring bank and payment service provider in one place. Note that an acquirer can also partner with third-party providers to deliver payment processing services.
What about security?
Acquiring banks also take the risk and responsibility for processed transactions. This is why the acquirer charges various fees (usually a percentage of total merchant’s sales) for its services, such as transactions, refunds and chargebacks, to name a few.
It is also important to note that online transactions come with a high risk of sensitive data breach, so all parties involved in the credit and debit card payment process, including the acquiring bank, must follow security standards for fraud prevention. Such standards can be found in the Payment Card Industry Data Security Standard (PCI DSS).
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