What is a merchant acquirer?

People make payments every day online with their credit and debit cards, but often don’t know what is happening to make this possible. In this article, we break down the role of a merchant acquirer and what they do to make sure that online payments happen.

A merchant acquirer is either a bank or another type of financial body that offers the option to process card payments. The merchant is most likely you, and to make a credit card payment you must partner with what is called a payment acquirer. A payment acquirer handles all of the processing of a payment being made and makes sure that the card being used is valid and authorized. Not all transactions are authenticated, but it is always useful to make sure that the transfer is legitimate. The payment then moves to the bank which is needed to deposit the money of the transaction.

Why is this important

So, we have explained how a bank’s job is to manage a merchant’s bank account and to make payments for them. This all starts when a person adds their payment details to an online payment form, which you’ll be more than familiar with and can be found on sites such as Amazon all the way down to independent retailers. Once the card details have been approved by the bank, the merchant acquirer’s job is to take the money from the debit or credit card and hold it. Once the payment goes through the money is then moved into the sellers account.

This process involves several stages, where money is authorized, cleared and then settled from the person issuing the money to the person acquiring the money.

Authorization:

At this stage in the process, the transaction is either approved or canceled before any money ever leaves the bank.

Clearing:

This is the stage where money goes from the bank that is issuing the money to the bank that is receiving it through the merchant acquirer.

Settlement:

The transaction is finally settled when the money is deposited into the final bank account by the merchant acquirer.

Fees for bank transfers

The bank that is receiving money takes on an element of risk in the process. Due to this they often charge a small fee for the service of transferring any money.

How do you find the best merchant acquirer?

A great article on finding the best merchant acquirer is Understanding the Merchant Acquirer | Powercash21, which describes this in depth. To summarise though, if you are setting up an ecommerce business this is a very important decision. It will dictate the types of payment methods and credit or debit cards you can accept. The fees are also important depending on the number of transactions you plan to be doing every week and month. Some providers charge on every transaction, while others have a monthly fee. Finally, different merchant acquirers serve different regions. This means that if you are wanting to make international payments it would be good to select a provider that has a low fee and is able to process for this type of transaction.