If you’re an entrepreneur, you’ve likely looked into accepting debit and credit cards for your business and have come across the word “acquirer”. After all, payment cards are the most used non-cash payment system. According to the European Central Bank, there were 70 billion card payments within EU countries in 2017, representing 52% of all transactions that didn’t require physical bills. And all of them were managed by acquirers.
In the payments industry, acquirers go by a few different names. You may have heard them being called a merchant account bank, a merchant bank, or a settlement bank. These are all good descriptions of what an acquirer does for businesses. Acquirers do provide merchant accounts and settle card payments.
But that’s only a part of what acquirers do and why merchants need them.
So what is an Acquirer?
An acquirer is an organisation with a licence to process debit and credit card payments on behalf of merchants. Sometimes an acquirer is a bank. Sometimes an acquirer is a financial institution, like a fintech company.
Acquirers provide merchant accounts to businesses wishing to accept debit and credit cards. Merchant accounts are what allow businesses to safely and effectively process card transactions. It is the role of the acquirer to screen businesses to make sure only legitimate and financially sound companies receive merchant accounts. Businesses that apply are asked a variety of questions to prove they sell their products and services to customers as they describe them.
Once a business is approved to receive a merchant account, it is up to the acquirer to process card transactions on behalf of the merchant and complete the financial settlement so the merchant gets paid.
The Acquirer Within the Payment Process
To see where acquirers fit within the payments ecosystem, imagine a typical card transaction. The moment customers enter their card details into a payment form online or tap their card against a point of sale terminal, they begin a payment process. This process takes a matter of seconds, but it involves communication between the merchant, the acquirer, an issuing bank, and a card scheme.
The online payment form or the POS terminal sends the message to the acquirer to authorise or reject the transaction. Whether the card is accepted or rejected is usually based on data from the issuing bank and the card scheme. It is the job of the acquirer to receive the payment request from the merchant and send it to the issuer for approval. The issuer is the bank that issued the debit or credit card to the customer. The card scheme is the payment network linked to the particular type of payment card (Visa and Mastercard for example). When the payment is approved, the funds from the customer are sent to the merchant’s account. Cha-ching, the merchant gets paid!
Put simply, the acquirer exchanges money between the merchant and the bank that issued the credit card used to make a purchase.
Why do I need an Acquirer?
If you’d like your business to accept payments from Visa, Mastercard, or other card schemes, then you need a reliable acquirer to provide you with a merchant account and to process card transactions securely.
The acquirer will not only ensure that your business can receive debit, credit, and prepaid cards. Depending on your type of business, the acquirer will deal with different difficulties associated with management, security, and fraud. The acquirer must have sufficient infrastructure to manage these risks so your business can do its thing without worries.
How to choose the right one
Choosing the right one is essential. A good acquirer will work to ensure your business processes the maximum amount of payments possible, assist with the management of chargebacks, mitigate risk, and keep payments safe. You can help determine if you’re entering into a positive relationship with an acquirer by asking how these payment issues are managed. Other factors to consider when choosing the right acquirer include the following.
Look for Transparent Fees
The types of fees acquirers charge are typically associated with a percentage of merchant sales as well as one-time fees for refunds and chargebacks (i.e. disputed transactions). Merchants searching for an acquirer will want to understand their fees thoroughly and do their research to ensure they’re receiving a good rate.
Security and PCI Compliance
You’ll want to feel confident the company’s transactions and sensitive data are being handled safely. Two questions you should ask any potential acquirer is whether they are PCI DSS compliant and whether they offer strong customer authentication methods such as 3D Secure. If the answer to either of these questions is no, the acquirer in question is not complying to fundamental payment safety requirements and should be avoided.
Types of Cards
Bear in mind that not all the acquirers accept the same cards. You’ll want to confirm what card schemes the acquirer supports, e.g. Visa and Mastercard. This should be clarified from the beginning since this will directly impact your ability to take payments.
Currencies & Locations
Make sure that the acquirer supports transactions in the locations your business needs, both your target market and where your company is registered as a business. If not, you risk not being able to accept payments from some of your customers.
Payment Gateway
If your business will be accepting payments via your website, you’ll need a payment gateway. Often, your acquirer can provide this but not always, so it is important to ask. It may be that you already have a chosen payment gateway. In that case, you will need to find out whether your selected acquirer and payment gateway are compatible. If you aren’t already connected to a payment gateway, finding an acquirer that also offers payment gateway services could speed up your onboarding and integration. Also, keep in mind that it’s easier to hold a single supplier accountable for your transaction processing than managing multiple relationships.
The bottom line
Acquirers are crucial to how safely, quickly, and fairly businesses are paid from customers who use credit and debit cards. Armed with some information about their role in the payment process and how to spot a good one, entrepreneurs can feel confident about accepting cards.
