Although many business owners might not fully realize its significance, a merchant acquirer is an essential player in the growing field of electronic payments.
It ensures that transactions between customers and businesses are completed securely and efficiently.
Businesses may save costs, enhance the general customer experience, and make well-informed decisions regarding their payment processing systems by having a thorough understanding of how merchant acquirer’s function.
What is a Merchant Acquirer?
Financial institutions or banks that handle credit and debit card transactions for businesses are known as merchant acquirers.
They mean a great deal in the ecosystem of payment processing, serving as liaison intermediaries between and among both merchants and consumers and card networks such as Visa and Mastercard.
The deeper one understands the inner mechanics at work within a merchant acquirer, the better a business can decide on what type of payment processing solutions work for it.
Role of Merchant Acquirers
The merchant acquirers enable the electronic payment channels on the organizations’ part to let them receive all sorts of different payments. Their major functions are:
Transaction Authorization: In each sale of goods and services by business to a customer, the merchant acquirer has to send information about the cards of the customers to the respective bank that issues the cards for the authorization of that transaction. This is the most important step to determine that the account has adequate funds and is a valid card.
Settlement of Transactions: After authorization is sorted, the acquirer proceeds to the settlement. In essence, money needs to be moved from the customer’s bank to the merchant account, which, for most of the terminals, goes in batch mode at the end of the day and will make it available as soon as possible to the merchant.
Risk Management: It is the responsibility of the merchant acquirers to assess and manage the risks in the transactions. On behalf of the merchants or consumers, they set up different fraud-detecting tools and methods to avoid losses against fraudulent activities or chargebacks.
Acquirer Versus Issuer: How Do They Differ?
To further explain the role of a merchant acquirer, there is a dire need to draw a line between the acquirer and the issuer. Typically, the acquirer is an interested bank that handles payment processing and handles transactions on the merchant’s behalf.
The issuer, in some sense, is the financial institution from which the consumer received his credit or debit card. It is the issuer who maintains the account of the cardholder and thus authorizes or rejects any transaction based on the cardholder’s balance and limit of credit.
That is a big difference, but the two organizations work in harmony in order to give a seamless experience regarding the processing of the payment. When the consumer is paying for some product or service, the acquirer requests consent from the issuer-meaning that when it comes to the processing of a transaction, there is very much a direct relationship between the two organizations.
The Process of Merchant Acquisition
This is the process of adding new merchants to the network. The parties that are directly involved in this step include:
Business Needs Assessment: This will be the very first step, where, based on the needs assessment by the merchant, an understanding is provided as to what use he would be putting the payment processor. This would be about the nature of the transactions the business will carry out and whether they are in-store, online, or both.
Contract Negotiation: The requirement thus identified is followed by a contract from the acquirer giving details about the terms and conditions of the services provided. These include transaction fees, service charges, and other add-on features that the merchant may require.
Integration: This is where, after the contract has been signed, the merchant under integration is helped by the bank to have different payment-processing solutions integrated into existing systems. This could involve an e-commerce gateway for online merchants or an actual point-of-sale system for brick-and-mortar merchants.
Training and Support: The training by merchant acquirers is generally provided to the staff for better utilization of the payment system. Furthermore, support is also extended to ensure that minor glitches that crop up during the payment process are overcome.
Read about: Top Payment Gateways In 2024. All You Need To Know
Top 10 Merchant Acquirers
The value addition, technological integrations, and reach across the globe of the top 10 merchant acquirers are not only perceived for their ability to process payments but also for the addition of much value. Most of the acquirers will give additional features such as fraud protection, analytics, and customer support which turn them into ideal partners in this business of making payment processing seamless. Examples include:
- Square: Very user-friendly; most recommended for small businesses; provides mobile pay solutions.
- PayPal: Recognized brand; a complete suite of online pay services.
- Stripe: Highly customizable online pay solution, a favorite among startups.
- Fiserv: Full-service company, very secure, volume merchants.
- Worldpay: Several options in all industries, largest international provider.
- Adyen: International pay processing; can handle many currencies.
- Chase Merchant Services: Major bank behind it, with many different service offerings.
- Global Payments: Innovation and security-oriented serving of varied business types.
- Elavon: Covers vertical markets and provides customized solutions for various sectors.
- Worldpay (Vantiv): Complete suite of services from small to large organizations with great customer support.
Understanding Acquirer Payment Processing
Acquirer payment processing involves several steps throughout the whole transaction cycle:
Transaction: This is triggered when a customer makes a purchase and pays with his credit or debit card at the point of sale-physical outlet or website of the merchant.
Authorization Request: The merchant’s payment system will forward an authorization request for processing to the merchant acquirer, who will be responsible for routing the message to the card network to the issuer for verification.
Response Handling: This would cover the processing of an authorization response in case an acquirer gets one, confirming whether a transaction is approved or refused. This response goes back to the merchant in real-time.
Settlement: This is the process that the acquirer undertakes when the transaction has been approved. They initiate an STP of funds from the issuer onto their bank and finally into the merchant bank account. This typically involves batching, hence taking one to three business days to get the funds settled.
Reporting: The acquirer sends comprehensive post-settlement reports on the transactions that took place, together with the fees and chargebacks, for the merchant to be at par with his sales so that he could manage his financials without any problem.
Read about: Solutions to Most Common Financial Challenges For Business.
Service of Merchant Acquirers
Payment processing services are related to different types of services offered by the merchant acquirers:
Payment Gateway Integration: In the case of an e-commerce merchant, there has to be a payment gateway integration on his website. The acquirers provide payment gateways, which securely forward the transaction details from the website of the merchant to them.
POS Solutions: Acquirers also provide brick-and-mortar businesses with point-of-sale systems that help them to accept in-person payments and manage their inventory, among others communicating with customers.
Fraud Prevention Tools: With fraudsters becoming increasingly smart, the identification and blocking of fraudulent transactions become a high priority by means of state-of-the-art security controls that comprise real-time monitoring, machine learning algorithms, and chargeback management tools.
Customer Service: It is the after-sales service of any merchant who might have a problem with the processing of a payment. For processing technical operational issues or any inquiry about the transaction, the acquirer hires a customer service professional.
Analytics and Reporting: Most acquirers avail analytics, which can help a merchant understand his selling trend, customer behavior, and also payment trends. These could be the basis for any business decisions or strategies that are to be set for business growth.
Multi-Currency Support: Supporting businesses with international customers, some acquirers allow multi-currency processing that may enable different varied transactions in several currencies with no complicated conversions.
Recurring Payments and Subscriptions: These may be included by acquirers in the case of business entities with subscription services offered to make things easier for all merchants and their customers alike.
Mobile Payment Solutions: With mobile commerce continuing to grow, options also continue to increase through acquirers, giving businesses the capability to accept mobile device payments with a larger aim of increasing customer convenience for speed and efficiency.
Conclusion
In other words, merchant acquirers are extremely valuable partners for any business willing to accept electronic payments. This kind of service plays a pivotal role in facilitating transactions, managing risks, and leading the merchants through the overwhelming minutiae involved in payment processing.
The role and services concerned, together with how merchant acquirers work, can best be utilized by an enterprise for making informed choices as far as their payment solutions are concerned.
Whether it is a small enterprise looking for mere, simple processing of the payments or an enterprise large in size and requiring an overall comprehensive solution, choosing the correct merchant acquirer becomes one crucial decision for success in today’s increasingly digital economy.
Merchant acquirer services will help businesses improve customer experience, operational efficiency, and top-line growth in the long run.
Do follow us on Facebook and LinkedIn, to stay connected with us.
