A merchant acquirer is the financial institution that allows you to accept credit card payments. They collect the funds from the customer’s bank account, then deposit them into your merchant bank account.
What is a Merchant Acquirer and What Do They Do?
A merchant acquirer plays several important roles throughout the lifecycle of a credit card transaction. Here’s a quick breakdown:
- A customer purchases an item using their credit card – either online, over the phone, or at a payment terminal.
- The terminal or e-commerce gateway encrypts the card details and sends them to the acquirer.
- The acquirer sends a notification to the credit card association on the customer’s card (e.g., Visa, Amex, MasterCard, or Discover).
- The card association approves the payment and asks the customer’s bank (also known as an issuing bank) to authorize the payment.
- The issuing bank approves the transaction.
- The card association notifies the acquirer that the transaction has been authorized.
- The issuing bank places a hold for the total amount on the cardholder’s account. This will be deducted from their available credit once the transaction clears.
- Your acquirer deposits the payment into your account.
Your merchant acquirer also handles chargebacks and disputes on your behalf. When a customer disputes a charge – whether due to a stolen card, unauthorized use of their card, a product that was not delivered, or a product that was not as described – your merchant acquirer reviews the transaction details and addresses the claim. When this happens, your acquirer typically charges a chargeback fee.
Is a Merchant Acquirer the Same as a Payment Processor?
It’s important to note that a merchant acquirer is not a payment processor. While an acquirer is a financial institution, a payment processor passes data from organization to organization. They collect the customer’s credit card data and forward it to the card networks and banks.
Sometimes, one company will offer both acquiring services and payment processing services. In most cases, however, these services are provided by two separate organizations.
How Does Your Merchant Acquirer Impact Your Business?
Your merchant acquirer impacts several key areas of your business. At a high level, they:
- Set your payment processing fees
- Determine how quickly you get paid
- Determine which payment processing technologies you can use
Fees
Merchant acquiring services commonly use one of two pricing models:
- Interchange plus pricing
- Tiered or bundled pricing
Interchange plus offers the most transparency. Merchants pay the standard interchange rate plus a pre-determined processing fee. This fee depends on specific factors, such as the type of card and the type of transaction.
Bundled pricing is a bit simpler. Every transaction is grouped into one of three buckets: qualified, mid-qualified, or non-qualified. Each tier gets a different processing rate. However, on your statement, all of the transactions are bundled together. This makes it harder to know which transactions qualified for the lowest rate. It also does not let you qualify for discounts based on card type or transaction type.
Deposits
Your acquirer also has a direct impact on how quickly you receive your funds. Ideally, you’ll want to get paid the day after you settle a transaction – but not all acquirers support next-day deposits. This can delay your cash flow.
Technologies
Different merchant acquiring companies support different payment processing solutions. Choosing a merchant acquirer that has an integration with you companies ERP package, financials or order entry software can save you time and money.
Other Factors
Your merchant acquirer can also limit the currencies, card types, and payment methods you can accept. Some acquirers, for instance, do not support Discover cards; others may not support digital payment options such as ApplePay or GooglePay.
When to Consider Changing Acquirers
The most common reason merchants change acquirers? Their payment processing fees are too high, and their current acquirer can’t – or won’t – offer a lower rate.
If it’s been a few years since you last negotiated your rate, it may be time to shop around – even if you don’t end up making a switch. Like car insurance, rates – and the factors that influence them – change often. For instance, some merchant acquiring services offer discounts to merchants who are PCI compliant, while others offer lower rates for merchants that exceed a certain number of transactions. A bit of comparison shopping can end up saving you thousands of dollars in revenue.
It may also be time to consider a change if you need faster access to your funds. If your merchant acquirer can’t make next-day deposits to your bank, a more responsive acquirer can help you improve your cash flow.
Changing to a new payment processing platform also gives you an opportunity to make sure you’re working with the best merchant acquirer for your business. In fact, new technologies may require a changeover.
Of course, changing acquirers requires time and paperwork, as well as an underwriting process. If you’re in the middle of an existing agreement, it may also involve a buyout of your existing contract. However, while it isn’t an immediate switch, you can start to see the impact on your very first statement. Depending on your transaction volume, it may only take a few months to see a substantial savings.
Customer support can play a key role as well. The payments industry is complex, with quite a few players. When your merchant acquirer also has a relationship with your payment processor or bank, it can help streamline the process. In this regard, we tend to talk about the concept of a “merchant acquiring partner” – a business that supports the unique structure of your business, with responsive customer service that takes the stress out of payment processing.
Find Out if Your Merchant Acquirer is the Best Fit For Your Business
At Curbstone, we’ve been in the payments industry for more than 25 years. We’ve helped merchants of all sizes – from one-location retailers to large manufacturers and distributors – improve their payment operations. We’re here to help you make sure you’re in the best merchant acquiring relationship for your business.
