Payment acquiring refers to the process by which an acquiring bank or financial institution facilitates card payment transactions on behalf of a merchant.
There are four key steps in the payment acquiring process.
The customer commences the payment process by swiping, tapping, or inserting their credit or debit card.
After the cardholder has initiated the transaction, the acquirer receives an authorisation request from the merchant.
Once the authorisation request has been received, the acquirer collates the transaction information and submits it to the card networks - such as Visa, Mastercard, American Express, and Discover.
The card network then processes the request, clarifying with the issuer whether sufficient funds are available.
The issuer approves or declines the transaction after examining the cardholder's account, then forwarding the status of the transaction back to the acquirer.
If sufficient funds are available and the transaction is approved, money is then transferred from the issuing bank to the acquirer, who deposits the money into the merchant account.
Payment acquiring is an integral part of payment processing, allowing businesses to seamlessly accept credit and debit card payments by providing the necessary infrastructure to process transactions.
Acquirers also ensure security, manage chargebacks, facilitate international payments, and guarantee timely settlements.
The acquiring bank and issuing bank are both important to accept payments, but their roles are very different.
A merchant acquirer, usually a bank or financial institution, represents the business in a transaction. The acquiring bank enables a merchant to collect payments made during credit or debit card transactions.
The merchant acquiring bank receives the money from the issuer and ensures the payment is processed and completed, depositing the money into the correct merchant's business account.
An acquirer is also responsible for complying with the security standards implemented by the Payment Card Industry Data Security Standards Council (PCI DSS). If the acquiring bank fails to implement the necessary security measures, it will be liable in the event of a data breach or if a cardholder's information is stolen.
Moreover, acquirers carry a financial risk. If a chargeback occurs (when a customer disputes a charge and requests for the transaction to be cancelled or the funds returned), the acquirer is liable for repaying the issuer. Supplying this service carries a substantial cost for merchant acquirers as they require the internal resources to review chargeback requests.
They may offer a line of credit to a business to cover these costs. However, if the business claims bankruptcy or becomes insolvent and is unable to pay, then the acquiring bank must accept the loss.
To reduce this risk, businesses often go through a vetting process before a merchant acquirer decides to represent them, assessing and limiting their financial risk and liability.
In comparison, an issuing bank is representative of the customer in the transaction. They can take the form of a traditional bank, credit union, or other financial institution. The issuing bank supplies an individual with the debit or credit card they use to initiate a transaction.
As such, they take the risk of issuing credit to an individual. To do so, issuers consider the creditworthiness of an individual based on their credit score and financial history.
Once approved, they issue a card which enables the individual to access a line of credit. The loans offered are usually unsecured (no collateral or security is required to guarantee repayment).
However, the customer's bank can collect interest if the loans are not paid back by their predetermined deadline. If the customer is unable to do so, the issuer becomes liable for the debt and, therefore, responsible for the initial transaction.
Issuing banks also handle chargebacks, serving as the arbitrator and determining whether the customer's request is reasonable.
Payment acquirers facilitate the payment process and manage the transaction flow. Here are some key considerations to make before choosing a suitable payment processor:
Customer Support: Choosing an acquirer who prioritises accessibility and provides a responsive support system, such as a dedicated account manager, to address payment-related issues, is important.
Acquiring banks have several responsibilities that are vital to process payments.
Merchant acquirers provide businesses with the essential infrastructure needed to process credit card transactions and ensure the merchant is compliant with card network regulations.
Of course, switching banks is possible.
As each business grows, its needs change. Finding and switching to the right acquirer can be easy with a provider that prioritises seamless integration.
Acquiring banks offer several pricing models, so it's easy to find a model to suit each business's needs.
One option is a fixed pricing model, merchants are charged a fixed fee regardless of the number of transactions processed.
Some acquiring banks may also offer a variable pricing model, in which merchants are charged a fee per transaction.
A business needs to consider which works best for them.
A payment gateway refers to a platform in which the customer's payment data (e.g. credit and debit card details) is securely collected and transmitted, while the acquiring bank facilitates the authorisation and settles the transactions.
Working together, payment gateways and payment acquirers ensure transactions are fully authorised and funds are transferred successfully.
Yes! Multi-acquirer gateways are equipped to connect multiple acquiring banks across the globe.
Implementing a secure payment system is made easy with a capable merchant acquirer.
Payment processors should be PCI DSS compliant, using fraud prevention systems and tokenisation to prevent data breaches and protect sensitive information.
Some payment acquirers can process international transactions. DECTA, for example, accepts over 50 currencies, helping businesses attract new customers and grow around the world.
DECTA offers everything merchants and Payment Service Providers need to accept online payments via Mastercard, Visa, PayPal, Apple Pay and more.
Our robust payment services prioritise growth, with a broad range of payment methods that debit and credit card holders can recognise and trust.
DECTA's flexible pricing model caters to every business, no matter how big or small.
Find out more about how payment acquiring can benefit your business.