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Merchant acquirer is a mouthful of a term you’ll hear from time to time, but all it refers to is the bank or financial institution (FI) that processes your card payments. When the funds from a credit card transaction show up in your business account, it was your merchant acquirer who put it there.
The merchant acquirer connects to the “issuing bank.”
The issuing bank is where the cardholder’s account is. After a card transaction, the funds are transferred by the issuing bank through to your merchant acquirer, but not right away.
- The transaction begins with your customer running their card through your payment machine. Then, the issuing bank jumps into action.
- They send a request for identity confirmation to the card network (Visa, MasterCard, etc.) to prevent fraud. Then, they release the funds into the payment gateway where they’re encrypted for security and routed to the payment processor.
- The payment processor picks up the encrypted funds from the gateway and sends the issuing bank a request to check that the cardholder has sufficient funds/credit to cover the purchase. Upon confirmation, the payment processor sends the response to your payment machine that the transaction has been approved.
At some point in the next few days, you as the merchant will compile and send all your authorized transactions to your payment processor. They will then send those details to the card network, who will pass them on to the various issuing banks. Those issuing banks directly transfer the funds from the cardholder’s credit line or debit account to your merchant acquirer company, who will then transfer the funds into your account.
Some FIs are both a merchant acquirer and a payment processor.
As a merchant, the benefit to being with an acquiring and processing FI is that you’ll have one fewer relationship to manage. The downside is that their processing capabilities may be limited to only North American payment methods, leaving you without a way to capitalize on the World of PaymentsTM options you could be offering, and a global customer base you could be building.
How to choose a merchant acquirer company.
You need a merchant acquirer if you plan to take card or digital payments. And you should choose wisely because they’ll be integral to keeping your operation funded month over month and year over year.
As you consider your options, ask yourself these important questions:
Are they accredited?
Do they adhere to the strict rules and regulations set out by the Payment Card Industry Data Security Standard and Fintechs Canada? If they don’t, you could be opening your business up to risk you don’t need, regardless of how low their fees may be.
How many ways can they help me make money?
Are you a subscription business? Do you take payments from inside your app? Is enough of your customer base international to need a global payment solution? Research your options, what they offer and where they excel. The market has enough merchant acquirers for you to find the right fit.
Where do I see my business growing?
Can an acquirer support your big dreams? If you plan on selling big ticket items, does a merchant acquirer with lower fees make more sense? If you plan to open up new sales channels, can your merchant acquirer support them? If you plan to expand into other countries, can your merchant acquirer accept payment from those countries’ preferred payment methods? And if they do, are their terms affordable for you?
What other payment-related services would help me?
Could they help you with loyalty programs? Can they make it easier and faster for you to get your money? Do they offer strategic services for helping you price your goods or services more effectively?
Merchant acquirer examples
JPMorganChase is the largest merchant acquirer in the world, with a global market share of over 15%; and the top five FIs for merchant acquisition processed $7.5 trillion in payment card volume in 2023. All of them are bank-owned or have bank partners.
At OTT Pay, we have a variety of strategic partners that we work with, depending on our clients’ needs and applications. We are also a certified Payment Facilitator (PayFac), giving us the ability to underwrite, board and control more aspects of the payment process to offer unparalleled value and service levels. In fact, OTT Pay is your one-stop-shop for all your payment needs.
Merchant acquirer examples
Yes, you can. But dig into the terms of your agreement before you do:
- Is there a penalty to cancel your service? If there is you’ll have to weigh the benefits of switching over the cost to do so.
- Do they own your credit card terminals or POS systems? If they do, you’ll need another solution.
- Will the new merchant acquirer service you’re considering integrate with the payment processor you use?
- If you run a customer loyalty program with your existing merchant acquirer, can it be ported over without disruption?
For all the reasons mentioned above, your merchant acquiring service is an integral part of your financial operations. Make the right choice and go confidently into the future.