Payment service providers deliver payment processing solutions through some major merchant acquirers. Signing a contract with your merchant acquirer is one of the things you need to do before starting to accept payments on your website. But what is an acquirer, and why would you need one?
An acquirer is a bank or financial institution that is a member of a card association and creates and maintains a merchant’s bank account. They can also be a settlement bank providing communication and settlement services to merchants.
As an issuer and acquirer, these banks may act as both the provider of payments services and the issuing bank simultaneously. However, a third-party provider can also help the acquiring bank process payments.
How Does An Acquirer Play A Role In Payments?
An online merchant account is required to accept credit and debit card payments through their website. A bank acquiring the loan signs a contract with them.
An acquirer then authorizes or rejects transactions and connects the merchant to the issuing bank during the payment process. Upon approval, the money is deposited into the merchant’s account.
An acquirer must, therefore, after receiving card information from the payment gateway, perform the following:
- Authorization — asking the issuer whether the card is valid and there are sufficient funds in the account to complete the transaction.
- Authentication — an optional verification of the cardholder’s identity, which is carried out after typing in the card details during purchase. Authentication is usually performed using 3D Secure.
Are The Acquiring Banks Compatible With The Payments You Are Considering?
Supporting recurring payments is something you should ask for if needed. Any payment issue should be resolved within a short period of time.
What About Security?
The acquiring bank is also responsible for the risk and consequences of the processed transactions. In turn, the acquirer charges service fees (usually a percentage of merchant sales) for transactions, refunds, and chargebacks.
Additionally, online transactions are always susceptible to data breaches, so all parties involved in the credit and debit card payment process, including the acquiring bank, must follow current security standards for fraud prevention. This standard can be found in the Payment Card Industry Data Security Standard (PCI DSS), so you should ensure that the acquirer is PCI-compliant and financially regulated.
As a result, we recommend that you choose an acquirer that provides fraud prevention tools and anti-fraud solutions that will shield your business against cyberattacks and fraudulent activities.
What you need to know
- An acquiring bank is a financial institution that maintains a merchant’s bank account.
- A merchant who believes in processing credit and debit card transactions through a processor or other online payment methods must sign a contract with the acquirer.
- In the acquiring bank, card transactions are authorized or rejected, and the issuing bank is notified to ensure that the card is valid and there are sufficient funds to complete the transaction.
- Payment processing solutions are sometimes offered by acquiring banks.