What Is An Acquirer?
May 20, 2023
An acquirer is a bank or financial institution who is a licensed member of a card association that maintains the merchant’s bank account. The acquirer allows merchants to accept credit card payments by working with the credit card companies and acting as a mediator for all transactions.
There are several steps when setting up your business to accept payments. The role and definition of an acquirer is a common misunderstanding. However, it remains an important factor in the lifecycle of a processed payment.
The Role Of An Acquirer
In order to process credit card payments on your website as a business, you must sign a contract with acquiring banks. The acquiring bank accepts the risk that the merchant has assets in excess of liability and can pay their debts.
If a merchant has an average of 1% chargebacks on transactions, card associations will consider that business as a risk.
Customers use their American Express, Visa, Mastercard or other credit card company to purchase a merchant’s goods or services online. The acquiring bank can either authorize or reject the transaction. A transaction rejection can result from data produced by the card network and the issuing bank.
Debit & Credit Card Transaction Approval Process
Each merchant is assigned a Merchant Identification Number (MID) by the acquirer. This is a unique code to identify that particular business. It is similar to a bank account number. The MID is used to determine the merchant during the approval process of the card transaction. Below is a list of steps that happen once the card transaction receives approval:
01. The customer uses a debit or credit card in a purchase.
02. The acquiring bank receives the payment authorization request from the merchant.
03. The acquiring bank then sends the payment authorization request to the issuing bank for approval.
04. The transaction is either rejected or approved.
05. If the transaction is approved by the issuing bank, the funds are deposited into the merchant’s account.
This payment authorization approval process is the same whether the company is within the range of low risk vs high risk payment processing.
Security Standards And Acquirers
Acquiring banks take the responsibility and risk for all transactions processed. Therefore, the security of the purchase is extremely important in order to successfully and fairly facilitate this monetary activity.
As a consequence of the acquirer assuming this risk, there are various fees for services (ie. chargebacks, transactions and refunds). These fees are commonly a percentage of the total merchant sales.
The acquirer determines if the transaction fees are a monthly charge or taken out per transaction. The purchase fees vary from each acquiring entity. Online transactions are at a higher risk for sensitive data breaches and security weaknesses. It is essential for all entities in the credit card transaction process to follow security standards. Payment Card Industry Data Security Standard sets these regulations with the PCI Compliance Security Standard Council in order to prevent fraud. The PCI Standard is an information security standard for businesses that handles transactions from major card companies.
Additional Acquirer Details
Most acquirers will enter into partnerships with a network of providers in order to give high risk merchant accounts a smooth approval experience throughout the transaction. Partnering with several providers gives acquirers more options for financial transactions and electronic payments.
Some examples of high risk businesses are CBD, Online Gaming, Pawn Shops, Subscription Boxes, Adult, Vape and Travel. For a full list of high risk industries that PayKings specializes in, visit our High Risk Processing Industries page.
There is another definition for acquirer that is not related to financial institutions or card processors. The other translation for acquirer refers to a person or company that acquires something such as another business or product. This is also known as a corporate acquisition.
May 20, 2023 | Merchants | Kyle Hall