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Who is a Merchant Acquirer?
The merchant acquirer handles transactions between your business and the issuing bank and lets you accept credit card or debit cards.
Almost all existing businesses have some sort of agreement with an acquiring bank or a merchant services provider that works in tandem with the acquiring bank. In other words, they are the bank that holds your merchant account and the one that deposits funds to your chosen business account after receiving your batch transactions.
As issuing banks are the gateways through which customers acquire payment, acquiring banks and their partners are the gateways through which merchants acquire payment.
Participants in a typical eCommerce transaction
If you look deeper into acquiring banks and issuing banks, you may wonder who all is involved in an eCommerce transaction. And for a process that is accomplished in seconds, the answer may surprise you.
Cardholder: In this case, it is the individual or company who makes a purchase request from the merchant and provides required information to facilitate the transaction.
Payment gateway: This is the software that takes sensitive information about the payment and delivers it to the payment processor.
Payment processor: A payment processor facilitates the transaction between acquirers and card networks by forwarding transaction information from the payment gateway to the card network on the acquirer’s behalf.
Card network: The card network routes the transaction information to the correct issuing bank so that the bank can authorize the transaction.
Issuing bank: If funds (either credit or debit) are available, the issuing bank sends an authorization code for the transaction to the card network, ensuring there are no fraudulent signs.
Card network: Upon pinging the card network again, the issuing bank sends an authorization response indicating whether it has been successful or denied and forwards that response to the processor.
Payment processor: Provides payment information to the payment gateway after receiving the issuer’s authorization status from the card network.
Payment gateway: Obtains authorization approval from the processor and forwards it to the merchant to complete the transaction.
Merchant account: As soon as the merchant receives the authorization, they fulfill the order, and batch the transaction information with the day’s sales.
Merchant acquirer: At the end of the day, the credit card acquirer will receive the batch of transactions from merchants and deposit the total of the batch minus the applicable fees into the merchants account.
Historically, any merchant who wanted to accept payments had to enter into a partnership or contract with one of these parties. Today, that process is simplified for many smaller business owners. Payment facilitators go through an underwriting process to obtain merchant accounts, and they integrate their technology with the payments processing system. They then collect payments on behalf of their sub-merchants, eliminating the need for those sub-merchants to navigate the merchant acquiring maze.