It can be confusing to grasp all the moving parts of payment processing. Between the complex technology, confusing terminology, and compliance regulations it’s easy to see why businesses are quickly overwhelmed. We get it—most people simply want competitive rates and secure transactions without delving into the nitty-gritty details. However, getting to know the distinct roles of merchant acquirers and payment processors can shed light on how they work together and the advantages and challenges each presents.
What is a Merchant Acquirer?
A merchant acquirer, often simply called an acquirer, is a financial institution that partners with businesses to process credit and debit card payments. It’s the central hub for all incoming and outgoing business funds acting as an intermediary between merchants, card networks, and issuing banks. Acquirers not only process credit and debit transactions but also assume the associated risks, including chargebacks and fraud. By offering essential infrastructure and financial oversight, merchant acquirers play a vital role in empowering businesses to securely and efficiently process electronic payments from their customers.
What is a Payment Processor?
A merchant acquirer, often simply called an acquirer, is a financial institution that partners with businesses to process credit and debit card payments. It’s the central hub for all incoming and outgoing business funds acting as an intermediary between merchants, card networks, and issuing banks. Acquirers not only process credit and debit transactions but also assume the associated risks, including chargebacks and fraud. By offering essential infrastructure and financial oversight, merchant acquirers play a vital role in empowering businesses to securely and efficiently process electronic payments from their customers.
Key Differences
Acquirers and processors work together to ensure efficient and secure payment processing. With processors handling data and security and acquirers overseeing the financial operation and merchant services, both are integral to the payment ecosystem but their roles and responsibilities differ dramatically.
-Roles and Responsibilities
Acquirers manage merchant accounts and handle the financial settlements of transactions. In contrast, payment processors focus on the technical side of processing transactions, including data transmission and security.
-Regulatory and Risk Management
Acquirers face higher regulatory scrutiny and financial risks, such as chargebacks and fraud, requiring a merchant acquiring license. Processors, while also regulated, primarily focus on maintaining data security standards.
-Relationships with Businesses
Acquirers have a direct financial relationship with businesses, managing their merchant accounts. Processors generally have a more operational relationship, facilitating the daily processing of transactions.
-Chargebacks and Disputes
Acquirers directly manage financial adjustments, debiting merchant accounts when chargebacks occur. Processors handle the operational aspect, mediating disputes by communicating evidence from merchants to acquirers.
National Processing: Your payment processor and full merchant acquirer
You can save a lot of effort and build efficiency into your payment processing by consolidating payment processing and acquiring into a single solution. National Processing provides a secure payment gateway and full and direct acquiring to streamline electronic payments for all types of businesses.
Here’s how we integrate every step of the way:
-Onboarding
When a business signs up with National Processing, it receives a merchant account enabling it to accept and process a variety of digital payments, including credit and debit cards, eliminating the need for a separate acquirer.
-Transaction Processing
Whenever a customer makes a payment, National Processing’s integrated payment gateway securely captures and forwards the transaction details to its processing network.
-Transaction Authorization
As both the payment processor and acquirer, National Processing communicates with card networks and issuing banks to authenticate transaction details and confirm fund availability.
-Approval or Decline
The issuing bank then approves or declines the transaction based on card details and available funds. National Processing receives this response and communicates it back to the business.
-Settlement
If the transaction is approved, National Processing facilitates the fund transfer from the issuing bank to the business’s account. For retail and restaurant transactions, funds are transferred the next day funding, while online transactions receive funding within an average of two days.
A Few Questions We Hear: Merchant Acquirer FAQs
What does a merchant acquirer actually do?
- What does merchant acquiring entail? Merchant acquirers handle card and transaction processing, ensuring secure payment transfers and receipt of funds for merchants. They verify card validity, protect cardholder data, process payments, handle fees, provide refunds and chargeback management, and necessary payment infrastructure.
What’s the difference between an acquiring bank and an issuing bank?
- The acquiring bank processes transactions for merchants, while the issuing bank provides consumers with credit or debit cards. A card network intermediates between the two during transactions, ensuring consistent communication and payment processing.
Do businesses need a merchant acquirer to start accepting payments?
- While some small operations might use payment facilitators like PayPal, most businesses will need a merchant acquirer, especially if using POS systems, virtual terminals, or card readers for card payments.
How do merchant acquirers make money?
- Merchant acquirers make their bottom line by setting interchange fees, agreed upon with card networks, to cover their costs. Whether processing directly or through service providers, these fees impact both merchants and processors, influencing the pricing model.
Ready to take the next step? Reach out today and let’s get your payment processing set up so you can scale confidently!
