Mobile Payments: Who is an Acquirer?

Who is an Acquirer?

A merchant or a retailer store cannot just accept cash. They have to accept credit cards and debit cards to get your business. In order for them to get paid for a credit card transaction, they have to first authorize your transaction with the corresponding Issuer bank every time you swipe. But there are just thousands of such Issuer banks. You may be holding a credit card from any one of the thousands of banks. If every merchant had to establish a direct link and relationship with every other Issuer bank in the country, the system would have fallen apart long time ago.

An Acquirer is the entity that helps a Merchant to accept credit card and debit card payments. They are sometimes referred to as the Merchant Acquirer or the Acquiring Bank as well.

In this setup, a merchant establishes connectivity and relationship only with their Acquirer and nobody else. The Acquirer will in-turn maintain their own link to every other bank. To be accurate, the Acquirer doesn’t maintain a link with every other bank either; instead they connect only to the major payment networks like Visa, MasterCard, American Express, Discover and so on. The payment networks in-turn maintain a link with all their respective Issuers.

Acquirers do a lot more than just assist in authorizing transactions. They help with clearing and settlement. They manage chargebacks, refunds and disputes. They own the responsibility if a merchant goes belly-up. This list goes on, but you get the idea. Bank of America, Chase Paymentech and Wells Fargo are examples of Acquirers.

Often times an Acquirer outsources their work to external entities called Acquirer Processors. They process transactions on behalf of the acquirers by connecting merchant transactions to payment networks. They also provide the POS device, securely route transactions from the POS to the payment network, manage authorization, clearing and settlement. They may also have tie-ups with sub-processors, ISOs and other partners to get the job done. First Data, Elavon and TSYS are examples of Acquirer Processors.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and?not so FAQ?series?and you are on FAQ?#2.?The idea behind this series is to?share and learn as much as possible about the field of mobile payments.?If you like, you can read all of the FAQs on the Mobile Payments?category or by visiting the Table of contents page.

Mobile Payments: Who is an Issuer?

Who is an issuer?

An Issuer is the bank who issues you the credit card, debit card or any payment card for that matter. They are sometimes referred to as the Issuing Bank as well. For example, if you have a Chase Freedom card, then your Issuer is Chase bank. If you own a Capital One Platinum card, then your Issuer is Capital One bank.

What if you have a Marriott Rewards credit card? No, Marriott is not your issuing bank. In general, when you get a credit card from an establishment other than a bank, maybe from a merchant like Marriott, it is only because they have tied up with some bank. It is the bank that manages the back-end work, while the branding is done with the merchant’s name on it. In the case of Marriott, the issuing bank is Chase.

Also, remember that Visa and Master Card are not issuers. They are called Card Networks, or more generally, the Payment Networks. We will discuss them in another post.

In the context of a payment transaction, an Issuer is the entity that authorizes the transaction when you swipe your card at a point of sale. They pay the merchant from their customer’s account through a process called Clearing and Settlement. They also charge Interchange fees, which is generally collected from the merchant. Bank of America, Chase and Wells Fargo are a few of the largest Issuers.

Sometimes Issuers outsource card processing activities to external entities called Issuer Processors. Issuer Processors may take on some or all the activities of card processing from the Issuer depending on their contract. First Data, FIS and TSYS are examples of Issuer Processors.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and?not so FAQ?series?and you are on FAQ?#1.?The idea behind this series is to?share and learn as much as possible about the field of mobile payments.?If you like, you can read all of the FAQs on the Mobile Payments?category or by visiting the Table of contents page.