Merchant acquirers, also known as acquiring banks, are banks that enable businesses and other organizations to accept credit and debit card payments. They manage many important steps in the payment process, such as authorization and settlement.
Merchant acquirers are incredibly important in today’s payments landscape, because of the volume of transactions today, the number of tools that allow people to start a business, and the speed with which customers expect to make purchases.
What is a merchant acquirer?
If you’re a business owner, whenever you think of “merchant acquirer” think of the words “my bank.” This is the bank that holds the money you get from customers through debit card and credit card payments. If you’re a customer, whenever you think of “merchant acquirer” think of the words “the store’s bank.”
The merchant acquirer has a few basic, but very important roles. Let’s look at those roles in the context of accepting payments for your business.
Let’s say you sell courses online, and one of your website visitors decides to buy a course. The final total is $50, and they decide to use their Visa card to pay.
First, they have to go through your payment gateway. A popular payment gateway for online transactions is Stripe.
The payment gateway will send a request to the merchant acquirer. The merchant acquirer will then contact the relevant payment network or scheme, which in this case is Visa, in order to authorize the payment.
Visa will then send a message back to the merchant acquirer to either approve or decline the transaction.
The merchant acquirer will then settle the transaction and deposit the $50, minus any applicable fees, into your bank account. Your customer gets your course, and you get the customer’s money.
What is the Difference Between the Issuer and the Acquirer?
The major difference between an issuing bank and an acquiring bank is the person the bank serves.
When you’re using your credit card and the money is being taken from your account, that money is coming from an issuing bank.
When you’re selling something to someone and they pay you with their credit card and the money is being deposited into your account, that is the acquiring bank.
One bank can be both types of banks. They can be an acquiring bank for their customers that hold a business bank account, and they can be an issuing bank for customers that hold regular checking accounts with them.
The issuing bank’s responsibilities are a little different from the acquiring bank’s responsibilites.
They are responsible for issuing cards to customers and making sure that customers meet their qualifications for an account or for credit.
This is the bank that will ask you to:
- bring a piece of government-issued ID when you come into the branch to open an account
- fill out an application
- check your credit score to make sure you’re a suitable client
They are also responsible for managing your account. This includes everything from sending you a statement to managing collections if you fall behind with your payments.
A Step-by-Step Example of How Payment Processing Works with an Acquirer
- Rebecca (the customer) walks into a Starbucks and hands her card (Mastercard) managed by the issuing bank (Bank of America) to the barista (Jacob) to pay $7 for her grande vanilla latte (goods/product)
- Jacob puts Rebecca’s Mastercard through the payment processor (Chase Paymentech)
- JP Morgan Chase (the acquiring bank) then sends a message to Mastercard to authorize the $7 payment
- Mastercard sends a message to the issuing bank (Bank of America) to confirm that Rebecca has enough credit
- Since Rebecca has enough money, an electronic message is sent back through the chain all the way to the payment processor, and there’s an “Approved” message – Rebecca gets her coffee and Starbucks gets its $7
- Bank of America will then send the money to JP Morgan Chase
- Starbucks gets its money
What are the most popular merchant acquirers in 2025?
Some of the top payment providers are:
- Fiserv
- Wells Fargo Merchant Services
- Bank of America Merchant Services
- Chase Paymentech Solutions
- Global Payments
- Worldpay
- Stripe
- Adyen
- PayPal
There are a lot of different terms that different individuals use when referring to the payments process. This is because some financial institutions serve multiple functions. In the earlier example, JP Morgan Chase was the acquiring bank and the payment processor through Chase Paymentech Solutions. There’s also confusion because some companies that were known for one business eventually branched into another area.
For example, Stripe is both a payment processor and an acquirer. Many companies use Stripe to process their online payments, and they do not need to worry about getting an acquiring bank. If Stripe were only a payment processor, they would need to open a business bank account with another institution such as Bank of America, Wells Fargo, or Citibank.
What are Acquirer Fees and What is the Settlement Process?
An acquirer fee is the money that acquiring banks charge to merchants for managing their transactions. These fees cover the different responsibilities that acquiring banks take on such as authorizing transactions, managing chargebacks and disputes, managing fraud, and other tasks.
The settlement process is the final stage in a transaction. This is when everything that needs to be verified has been verified and any funds can be properly deposited in the customer’s account.
What are Merchant Acquirer Reference Numbers (ARN)?
The Acquirer Reference Number (ARN) is a unique, 23-digit code that allows for easy tracking throughout a transaction. The same number is used as the transaction moves from the acquiring bank to the issuing bank and back. This makes it easier for all institutions involved to manage the transaction, particularly if there are any disputes.
Merchant acquirers play an important role in the payments ecosystem
Without acquiring banks, businesses would be limited in the number of payments they could accept, which means they’d be limited in the amount of business they can do and the customers with which they can work.
That said, one of the drawbacks of managing a large volume of transactions, especially online transactions, is the increase in chargebacks.
Purchasing a chargeback management system can help you manage these better and hang on to more of your revenue.
You can book a call with a member of the ChargebackStop team here to learn more.
