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 are involved in payment processing, and what the difference between these two notions is. Let’s get started!
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, such as those linked to card networks like Visa, Mastercard, Discover, and American Express, is considered its property throughout the entire validity period, with the cardholder standing as its owner. The credit card’s issuing entity is indicated on the plastic.
Now you have some insights into what a few of the issuers’ most common tasks are. But what do acquirers do? Read ahead to find out!
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. it processes credit cards.
When conducting transactions on the cards of other banks’ issuing, the acquiring bank uses the payment system of the credit card issuer to transfer money 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 those 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 transactions to specialized organizations, called processing centers.
To better understand the different roles of the two institutions in question, 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 transfer of money 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. |
| Transfer of funds based on invoices issued in the acquiring system. | Refunding the outlets where goods or services were paid for via credit card transactions. |
| Provision of an account statement. | Accepting, sorting, and sending electronic and paper documents. |
| Financial security. Introducing additional requirements that improve the level of the networks’ privacy and security throughout the payment process (code prompts, limits for card transactions). | Stop-list distribution. |
The issuing and acquiring banks play an active role in disputes and the chargeback process that may follow. Chargebacks are instances of money reimbursement to consumers in the event of a fraudulent or unwanted transaction. In a nutshell, the procedure of disputes and chargebacks goes like this:
This is only a brief overview of the dispute and chargeback process demonstrating the key roles issuers, acquirers, and card networks play in the interaction with consumers and other parties involved.
But, for those who want to gain more valuable information on chargebacks, we have a comprehensive guide dedicated to them - make sure you check it out!.
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 while selecting an acquiring bank for your business’s debit and credit card payment processing:
Fees and Commission
It is crucial that you are aware of the commission fees charged per every debit and credit card transaction alongside other costs. After all, each bank has its own tariffs and interest rates, and while the payment commission may be higher, the equipment could be offered 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 whether there are any hidden service expenses, monthly subscription costs, or account fees.
It is crucial for any merchant not to forget about opening a current account. Its maintenance also requires costs. And here, it is critical to study all the proposed conditions.
This can be done in several ways:
After you learn all the information you wanted to know about the current account’s terms and applicable policies, you can rest assured that you will not encounter any unexpected expenses the moment you start receiving payments.
POS Terminal for Card Transactions
Not all banks give authorization to work with POS terminals and smart cash registers obtained from third parties. Thus, it is essential to compare the expenses related to renting, purchasing, setting up, and maintaining these devices.
Transaction Coverage
Is your target customer group local, or are you aiming for an international outreach? If you are willing to conduct business with a global card transaction scale, make sure that the bank you choose offers worldwide coverage and won’t run into an unexpected issue when authorizing cross-border payments.
Customer Service and Technical Support
Check whether 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.
Available Features
Is the bank you have in mind versatile enough in terms of functionality? Does it have features like payment routing, credit card transaction processing, fraud detection, and purchases with delayed confirmation? Checking such details is extra important.
Customization
Selecting a merchant acquirer that can offer your business a tailored solution is a brilliant idea. In the long run, collaborating with banks that offer both direct acquiring and various additional payment methods will save you money, time, and human resources.
So there you have it - you are now ready to make an informed decision while selecting the ideal option among the variety of acquiring banks. But there is yet another thing to consider: a reliable payment gateway.
Choosing the wrong acquiring bank can have significant consequences for businesses, namely:
What’s more, if you realize that you’ve chosen the wrong bank, switching to a new one can be challenging, as it can involve data migration, complex technical integration, and potential downtime. Thus, at the end of the day, it is crucial to take your time when researching banking alternatives.
As you probably know, a payment gateway is an intermediary that networks between a merchant and a customer. It passes encrypted credit card information to multiple parties, including the acquiring and issuing banks. That is why it is an essential link in the payment process and should also be selected wisely.
Payneteasy offers a customizable, PCI DSS-compliant payment gateway solution that offers a full range of processing services. You can count on a smooth shopping experience for every client and enhanced safety of their funds, as we guarantee:
Contact us now and we will get back to you with a personalized quote within one workday! Besides, when you connect with us, you can receive expert help in resolving your doubts about our solutions and offers.
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.
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