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Acquiring Bank and Issuing Bank: What are They and Why are They Needed?

Boaz Gam

Boaz Gam


3 min
The Essence of the Issuing Bank The Essence of the Acquiring Bank Acquirer VS Issuer: Functions
Why is Acquiring Bank Necessary for your Business? Tips on Picking the Right Acquirer

An issuing bank and an acquiring bank are some of the required parties to make payments. It is important for merchants to understand what responsibilities each of the parties has, how they get involved in the payment process, and what the difference between these two notions is.

The Essence of the Issuing Bank

The issuing bank or entity is a financial institution that issues and services plastic cards. The bank is a member of the international payment system and acts as a guarantor of the fulfillment of financial obligations that arise in the process of using a credit card.

The plastic card issued by the bank is considered its property throughout the entire validity period, with the user standing as its owner. The bank that issued the card is indicated on the plastic.

The Essence of the Acquiring Bank

The acquiring (servicing) bank is a credit organization that arranges points for accepting bank cards (terminals, ATMs) and carries out the whole range of financial transactions related to settlements and payments on bank cards at these points, i.e. such institutions process credit cards.

When performing transactions on the cards issued by other financial institutions, the acquiring bank uses the payment system of the card-issuing bank to transfer funds to its service point. Settlements between the acquirer and the issuer are carried out by the settlement bank in which these credit institutions open correspondent accounts

Note that one financial institution can combine the functions of the payment acquirer and the credit card issuer.

The acquiring bank can transfer the technical side of the card service activities to specialized service organizations, called processing centers.

Acquirer VS Issuer: Functions

To better understand the difference between these two institutions, let’s consider the main functions that perform each of them.

The Issuing Bank The Acquiring Bank
Plastic card registration by creating a personal current account. Card authorization by sending a request to the issuer.
Card authorization by providing a response to the acquirer’s request. Money transfer 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 using cards.
Provision of an account statement. Accepting, sorting, and sending electronic and paper documents.
Financial security. Setting additional requirements that improve the level of security (code requests, limits for transactions). Stop-list distribution.

Why is Acquiring Bank Necessary for your Business?

The acquiring bank is an institution that provides clients with the opportunity to make non-cash payments 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:

  • the ability to accept cashless payments;
  • getting a well-functioning credit card payment platform for making secure transactions;
  • 24/7 availability;
  • ease of making accounting reports;
  • fraud prevention.

Tips on Picking the Right Acquirer

To choose a suitable bank, one needs to compare all the conditions offered by acquirers. Each institution has its own tariffs and interest rates. For some, payment commission will be higher, but the equipment is provided free of charge, or at a minimum price. For others, on the contrary, a low rate is complemented by the high cost of the terminal.

It is important 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:

  1. By contacting the nearest bank branch;
  2. By calling the hotline number;
  3. Leaving a request on the institution’s website.


Which bank is indicated on the card – issuer or acquirer?

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.

Can the acquiring bank and the issuing bank be the same one?

Yes, one financial institution can combine the acquiring and issuing functions.

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