Debitoor's accounting dictionary
Merchant acquirer

Merchant acquirer - What is a merchant acquirer?

A merchant acquirer is a bank that processes payments on behalf of a merchant.

Wondering how to accept payments from your customers? Check out our blog on ‘How to accept payment with Debitoor’.

The term ‘acquirer’ can be used to describe a merchant acquirer or a corporate acquirer. A merchant acquirer is a financial institution that processes credit and debit card transactions for a company or merchant.

A merchant acquirer may also be referred to as an acquiring bank.

What does a merchant acquirer do?

A merchant acquirer helps merchants with all card and transaction-related matters including:

  • Processing payments:
    • Authenticating the customer
    • Card authorisation
    • Receiving the money from the card-issuing bank
  • Pays all of the scheme fees for the merchant (e.g. VISA, MasterCard, AMEX, etc.)
  • Assists the merchant with refunds, chargebacks, and returns

Merchant acquirer in the payment cycle

It only takes a second for a customer to tap their card and for the transaction to be approved. But what exactly happens during that second, and how does a merchant acquirer fit into the payment cycle?

Well, during that second after the customer taps or inserts their credit card, a lot happens. The transaction is sent to the acquiring bank, to the card scheme, and to the customer’s bank for authorisation.

Here is a visual representation of how the payment cycle works:

Image showing payment cycle

What is the difference between an acquiring bank and an issuing bank?

An acquiring bank (merchant acquirer) processes card transactions on behalf of the merchant.

An issuing bank, on the other hand, issues credit cards to consumers.

Therefore, an acquiring bank is a middleman for the merchant, and the issuing bank is the middleman for the customer.

Do I need a merchant acquirer to start accepting payments?

The answer can be yes or no depending on what your company is trying to accomplish.

If you are charging credit cards using a card reader, a point of sale, or a Virtual Terminal, the company you use those services through will require a merchant acquirer. You as a merchant using payment services through a payment provider will not need to sign a contract with an acquirer.

If you are a company that processes the payments for your own company, you will need a merchant acquirer, unless your financial team has the skills and funds to set themselves up as their own acquirer.

Most businesses will use a payment provider and pay a transaction fee per transaction to use their services. When you accept a card payment from a customer, it will be sent to the payment provider, who will then send it to their merchant acquirer, who will send it to the card scheme, and finally, to the issuing (customer’s) bank.

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