What is an acquiring bank?

An acquiring bank is a financial institution that accepts and processes credit and debit card transactions on behalf of merchants. Sometimes referred to as an âacquiring bankâ or "merchant bank."

What is the function of an acquiring bank?

An acquiring bank (acquirer) serves a key role in payment card transactions. They link merchants with issuing banks (those that issue credit and debit cards to consumers), and facilitate payments between parties.

What is the difference between a card issuer and acquirer?

While issuing banks work directly with cardholders, acquiring banks provide the financial backing and infrastructure for merchants to accept credit cards. They also assume much of the financial risk involved with credit card purchases, responsibility for securing the flow of data, and initial liability in the event of a dispute.

What is the difference between a payment processor and acquirer?

A payment processor acts as the intermediary, securing payment data and making sure transactions comply with security standards. These companies do a lot of the legwork such as verifying card details, facilitating transfers, passing information back and forth between parties, and keeping that information secure in the process.<br><br>The acquiring bank, in contrast, maintains its customersâ merchant accounts. This is an open line of credit, allowing the bank to accept transactions and deposit funds on behalf of each business it works with.<br>

Why are acquiring banks necessary?

Processors are not banks; theyâre limited in the services they can provide. Some acquirers may offer payment processing solutions, and many larger ones do. Ultimately, though, merchants need someone to facilitate payments (the processor), and someone to extend credit and receive payments (the acquirer). Acquirers provide the funds that allow for the timely settlement of payment card transactions. Itâs comparable to extending a loan to the merchant or PSP until the card transaction can be settled.