Acquirer (or Acquiring Bank)

An acquirer, also known as an acquiring bank, is a financial institution that facilitates electronic payment transactions on behalf of merchants. When a customer makes a purchase using a credit or debit card, the acquirer plays a crucial role in processing the transaction and transferring funds from the customer’s account to the merchant’s account.

The primary function of an acquirer is to provide merchants with the necessary infrastructure and services to accept electronic payments. This involves establishing relationships with card networks such as Visa, Mastercard, American Express, and Discover, as well as other payment processors. By partnering with these networks, the acquirer enables merchants to accept a wide range of payment cards, expanding their customer base and facilitating convenient transactions.

To become an acquirer, a financial institution must undergo a rigorous certification process to ensure compliance with industry regulations and security standards. Acquirers are responsible for implementing and maintaining secure payment processing systems to protect sensitive customer data and prevent fraud. They also play a crucial role in ensuring that merchants adhere to the Payment Card Industry Data Security Standard (PCI DSS) to safeguard cardholder information.

When a customer makes a purchase, the acquirer initiates the transaction by sending an authorisation request to the cardholder’s issuing bank. The issuing bank then verifies the customer’s account details and approves or declines the transaction. Once approved, the acquirer transfers the funds from the customer’s account to the merchant’s account, usually within a few business days.

Acquirers provide merchants with payment processing solutions, including point-of-sale (POS) terminals, virtual payment gateways, and mobile payment options. These solutions enable merchants to accept payments in various environments, such as retail stores, online platforms, and mobile applications. Additionally, acquirers offer value-added services like fraud detection and prevention, chargeback management, and detailed reporting and analytics to help merchants optimise their payment operations and mitigate risks.

Acquirers generate revenue by charging merchants fees for their services. These fees typically include interchange fees, which are paid to the card networks and issuing banks, as well as acquirer fees for processing transactions and providing additional services. The fee structure varies depending on factors such as transaction volume, average ticket size, industry risk, and the level of service provided by the acquirer.

In summary, an acquirer is a financial institution that enables merchants to accept electronic payments by providing the necessary infrastructure, security measures, and payment processing services. They act as intermediaries between merchants, card networks, and issuing banks, ensuring the smooth and secure transfer of funds during transactions. Acquirers play a vital role in the modern financial ecosystem, facilitating seamless electronic payments and driving the growth of e-commerce and digital transactions.