A financial institution or bank that accepts transactions by credit and debit cards from cardholders; making the process of shopping both online and in normal stores faster and easier for both the merchant as well as the customer.
The term acquirer is used for the bank that acquires or accepts these payments from the banks within an association. The most common and worldwide association are MasterCard, Visa, American Express, Discover, Diners Club, Japan Credit Bureau, and China UnionPay, and credit cards that are issued by these associations can be used in millions of outlets all over the world.
Acquiring banks often work deep behind the scenes and work through intermediaries rather than directly serving the merchants. You can think of acquiring banks as facilitators who help with the exchange of funds between the banks who issue the cards and the merchants who accept the cards. The acquiring banks rarely sell these services on their own though, and most typically it is third-party organizations that are responsible for signing up merchants and providing them with customer service.
Most people think that acquiring banks benefit from processing fees, and they do to some extent, but really the fees are small and they play a very small role in the actual credit card transaction. Most of the fees and costs come from the markup fees and interchange fees.
Surprisingly given the small fees they receive, acquiring banks assume most of the risk in the credit card process since the merchant accounts are considered as lines-of-credit rather than holding accounts. This is why acquiring banks won’t offer accounts to every merchant, and require the use of third-party organizations which provide the backing for merchants who couldn’t qualify on their own.
Even though acquiring banks work primarily in the background, they still fill a very necessary and important role in the credit transactions process. By providing the backing necessary for merchants to accept credit cards they hold the fate of many businesses in their hands. Let’s face it, a merchant who can’t accept credit cards might as well close down immediately, especially online ecommerce merchants.