What is Acquirer Processing?

Acquirer processing plays a pivotal role in the payments process by acting as a behind-the-scenes mechanism that enables businesses to accept card payments from their customers.

It involves the acquiring bank (or acquirer) handling key steps in the transaction journey - such as capturing payment details, routing payment requests, obtaining authorisation, settling funds, and managing risk.

The acquirer manages the financial and operational responsibilities of merchant accounts, including facilitating fund transfers and resolving disputes to ensure smooth transaction processing.

In this article, we’ll break down what acquirer processing involves, how it fits into the broader payments ecosystem, and why it’s essential for merchants looking to offer a seamless and secure checkout experience.

Acquirer processing involves several key stages that facilitate the seamless transfer of funds from the customer’s issuing bank to the merchant acquirer’s bank or financial institution. Here’s a breakdown of the key stages, illustrating the merchant acquirer vs other players in the payment chain:

Transaction Initiation

The process begins when a customer makes a card payment by presenting their card at a card terminal in-store or entering their card details at an online checkout. The merchant’s system captures the payment request and sends it to the payment gateway.

Authorisation Request

The payment gateway collects the transaction details, including card details such as the card number, expiry date, and security code, and forwards them to the acquiring bank for authorisation.

Fund Verification

The acquiring bank sends the authorisation request to the card network, which then routes it to the customer’s issuing bank (the customer’s bank or card issuer). The issuing bank verifies fund availability before authorising the transaction.

Transaction Approval

If the customer’s issuing bank approves the transaction, the authorisation is sent back through the card network to the acquiring bank. The acquiring bank works with card associations (like Visa or Mastercard) to process card payments and settle funds.

Settlement

The acquiring bank initiates the settlement process, transferring the approved funds from the customer’s issuing bank to the merchant’s account at the merchant’s bank. The card networks communicate with the customer's issuing bank and card issuers to transfer funds to the merchant's account at the merchant's bank.
 

Merchant Funding

Once the settlement is complete, the merchant’s bank credits the merchant’s account with the transaction amount. This process may involve both a payment processor and a merchant acquirer, or sometimes the same entity if a payment service provider offers an integrated solution.

Modern payment service providers often combine the roles of acquirer and processor, providing the technical infrastructure needed to process card payments efficiently.

The acquiring bank - also known as the merchant acquirer - serves as the financial institution that maintains merchant accounts and processes payments on behalf of merchants. Its core responsibilities include:

Merchant acquiring involves processing card payments across various card networks and payment ecosystems, ensuring efficient and secure transactions that support business operations.

Effective acquirer processing is vital for several reasons:

According to industry reports, electronic payments now account for over 70% of global retail transactions, emphasising the importance of efficient and secure acquirer processing in today’s payment ecosystem.

The merchant acquirer is a financial institution that accepts card payments on behalf of merchants, maintains merchant accounts, and settles funds after successful transactions. Its primary role is to enable businesses to accept card payments securely and efficiently, ensuring that funds are transferred from the customer’s issuing bank to the merchant’s account.

Merchant acquirers are responsible for managing the relationship with the merchant and providing the necessary infrastructure to process electronic payments.

The payment processor acts as an intermediary that routes transaction data, authorises transactions, and ensures the secure transfer of transaction details between the merchant, card networks, and issuing banks. It handles the technical communication required to process credit or debit card transactions smoothly and securely.

Think about the roles of a merchant acquirer vs payment processors in the context of their direct customers.

The customers of merchant acquirers are the merchants themselves, who enable merchants to accept credit or debit cards or other payment methods.

The customers of the payment processors, on the other hand, are the merchant acquirers. Payment processors work behind the scenes to process transactions, essentially facilitating secure and compliant electronic payments across various payment methods.

While both are essential components of the payment ecosystem, the merchant acquirer is primarily responsible for maintaining the merchant’s account and settling funds, whereas the payment processor focuses on facilitating the transaction flow and ensuring security throughout the process.

Together, they enable efficient and secure card payments, supporting the overall payment processing infrastructure that businesses rely on to operate smoothly.

DECTA empowers businesses to accept electronic payments securely and efficiently through flexible, end-to-end payment solutions. From merchant acquiring and payment processing to risk management, our services support credit and debit cards, digital wallets, and alternative payment methods - helping you reduce transaction failures, improve cash flow, and boost revenue.

Partner with DECTA to master your payment processing strategy to grow your business.