A card issuing bank and an acquiring bank are some of the required parties to conduct a payment transaction. It is important for merchants to understand what responsibilities each of the parties has, how they get involved in payment processing, and what the difference between these two notions is.
The issuing bank or entity is a financial institution that issues and services debit and credit cards. Issuing banks are members of international payment networks and act as guarantors of the fulfillment of financial obligations that arise in the process of using a credit card.
The plastic card provided by the issuing bank is considered its property throughout the entire validity period, with the user standing as its owner. The credit card’s issuing entity is indicated on the plastic.
The acquiring (servicing) bank, also known as the merchant acquirer, is a credit organization that arranges points for accepting bank card purchases (terminals, ATMs). It also carries out a whole range of activities related to transaction settlements and payments on bank cards at these points, i.e. such institutions process credit cards.
When conducting transactions on the cards of other financial institutions’ issuing, the acquiring bank uses the payment system of the credit card issuer to transfer funds to its service point. The settlements of transactions between the merchant acquirer and the card-issuing bank are carried out by the settlement bank in which these credit institutions open correspondent accounts.
As a bank customer willing to set up a merchant account, note that some financial institutions offer dual solutions, performing the roles of both an issuer and an acquirer.
The acquirer can transfer the technical side of the credit card transaction cycle to specialized service organizations, called processing centers.
To better understand the difference between these two institutions, let’s consider the main functions that the acquirer and the issuer perform.
|The Issuing Bank||The Acquiring Bank|
|Plastic card issuing and its registration by creating a personal current account.||Customer card authorization by sending a transaction request to the issuing bank.|
|Customer card authorization by providing a response to the acquirer’s request.||The process of transferring funds to the settlement account of an outlet.|
|Transfer of funds based on invoices issued in the acquiring system.||Refunding the outlets where goods or services were paid for via a credit card transaction.|
|Provision of an account statement.||Accepting, sorting, and sending electronic and paper documents.|
|Financial security. Setting additional requirements that improve the level of security networks throughout the payment process (code requests, limits for card transactions).||Stop-list distribution.|
The issuing and acquiring banks play an active role in the chargeback process, which is a reimbursement of money to a consumer in the event of a fraudulent or unwanted transaction. In a nutshell, the process goes like this:
This is only a brief overview of the chargeback process that is meant to demonstrate the differences between the parts issuers and acquirers take in the interaction with consumers and other parties involved.
For more detailed information on chargebacks, check out our comprehensive guide.
The merchant acquirer is an institution that provides clients with the authorization to conduct non-cash payment transactions at the sales points or online using POS and mPOS terminals. So, the main advantages that companies get from the cooperation with the merchant acquirer include:
To choose a suitable bank, one needs to compare all the conditions offered by acquirers. Here are some essential features to pay attention to when selecting an acquiring bank for your business’s debit and credit card payment processing:
Transaction Fees and Commission
It is crucial that you are aware of the commission charged per every debit and credit card transaction alongside other costs. After all, each acquiring financial institution has its own tariffs and interest rates, and while the payment commission may be higher, the equipment could be provided free of charge or at a minimum price. For others, on the contrary, a low transaction rate is complemented by the high cost of the terminal. Besides, check if there are any hidden service expenses, monthly subscription costs, or account fees.
It is important for merchants not to forget about opening a current account. Its maintenance also requires costs. And here, it is important to study all the proposed conditions.
This can be done in several ways:
POS Terminal for Card Transaction Processing
Not all banks give authorization to work with POS terminals and smart cash registers obtained from third parties. So, it is essential to compare the expenses related to renting, purchasing, setting up, and maintaining these devices.
Is your target customer group local, or are you aiming for an international outreach? If you are willing to conduct sales with a global card transaction scale, ensure that the acquiring bank you choose offers worldwide coverage.
Customer Service and Technical Support
Check if the bank's staff will deliver and set up the equipment. Besides, it is essential to know the support team’s working hours and whether or not their services are included in the pricing.
Is the acquiring bank you have in mind versatile enough in terms of functionality? Does it have features like payment routing, credit and debit card transaction processing, fraud detection, purchases with delayed confirmation? Checking such details is extra important.
Selecting a merchant acquirer that can provide your business with a tailor-made solution is a brilliant idea. In the long run, working with banks that offer both direct acquiring and various additional payment methods will save you funds, time, and human resources.
So there you have it - you are now ready to make an informed decision when selecting the ideal option among the variety of acquiring banks. However, there is yet another thing to consider: a reliable payment gateway.
Helping Cards, Merchants, Customers, and Banks Work Together
As you probably know, a payment gateway is an intermediary that networks between a merchant and a customer. It passes encrypted debit or credit card information between multiple parties, including the acquiring and issuing banks. That is why it is an essential link in the payment process and must also be selected wisely.
Payneteasy offers a customizable, PCI DSS-compliant payment gateway solution that provides a full range of processing services. You can count on a smooth shopping experience for every customer and enhanced safety of their funds, as we guarantee:
Reach out now and receive a personalized quote within one workday!
The current bank issues the card and indicates its data on the card, i.e. it is the issuing bank that is indicated on the card.
Yes, one financial institution can combine the acquiring and issuing functions.