What an Acquirer is in a Merchant Account Setting

An acquirer is also known as the acquiring bank or the merchant bank or the clearing bank. It has several functions, which include the following: provides the merchant account, accepts credit card, and facilitates and maintains merchant transactions.

For businesses conducted over the Internet or commonly referred to as the E-commerce using shopping carts, e-mail, and the like; an acquirer is a financial institution that provides, accepts, and maintains electronic transactions for the merchant's business account. Sometimes, it is also referred to as the acquiring bank, merchant bank, or the clearing bank.

An acquiring bank serves several functions in online businesses namely:

Provides the merchant account

An acquirer or the merchant bank processes the merchant's credit card sales and facilitates the deposit of funds to the merchant's depository bank account. When the consumer uses his credit card, it is then charged according to the transactions on that particular day. The acquiring bank receives the funds to be placed into the merchant's account.

Accepts credit card

An acquirer serves as the banking entity that accepts payment for the goods or services acquired on behalf of the merchant. When a customer purchases online using his credit card details, the acquirer processes and coordinates with the issuing bank for verification and sales approval. Sometimes it is also called the clearing bank since all card transactions are cleared through the acquiring bank.

Facilitates and maintains merchant transactions

The acquiring bank maintains merchant relationships as well as receives all bank related transactions. It serves as the middleman between the merchant and the credit-card-issuing bank.

The whole transaction usually takes few seconds to complete, which includes the following process flow: the acquiring bank receives the application, it sends request to the issuing bank, issuing bank issues a confirmation code to the acquiring bank and then, the acquirer sends back the code to the merchant for completion of purchase.

The acquirer must be a licensed member of Visa or MasterCard, which is the issuing bank that issues credit cards to the consumers. The issuing bank is the institution that gives the approval and extends the line of credit to the consumer and not the acquiring bank. The speed of transaction approval determines the effectiveness of the acquiring bank. The faster the consumers get approval, the more efficient they become in the eyes of the consumers and the merchants.