Merchant Acquirer vs. Payment Processor

Merchant acquirers and payment processors both play key roles in the business payment ecosystem. Learn more about acquirers vs processors here.

Summary: This blog explains the roles and differences between merchant acquirers and payment processors in facilitating card payment transactions.

  • Roles Defined: Merchant acquirers are financial services providers, often banks, that manage merchant accounts and handle funds, while payment processors facilitate transaction communication between banks and merchants.
  • Operational Differences: Payment processors coordinate the transaction flow without handling funds directly; merchant acquirers store and protect the funds.
  • Business Impact: Understanding the distinct functions of each can help businesses optimize their payment processing strategies and reduce costs.

In some ways, payment processing is incredibly simple. When everything is set up correctly and all the right pieces are in place, your business can easily complete transactions in seconds.

In other ways, payment processing is especially complex. There’s an awful lot that goes into the easy and seamless experience enjoyed by your customers.

From the technology to the many service providers and various payment processing cost models and fees, the inner workings of payment processing can feel hard to understand.

That’s why we take the time to help you learn more about important topics in payment processing. Today, we’re taking a closer look at two key players in the payment processing workflow: merchant acquirers and payment processors. Although both have vital roles in completing transactions, they’re very distinct from each other.

Swipesum is here to help you learn more about payment processing and optimize your approach to processing payments as a business. Our experienced payments experts help you find the right tech, tools, and providers and cut down on fees through effective negotiations.

We can help you continually optimize your payment processing strategy, too. Book a free consultation to learn how changing your approach to payments can lead to major benefits for your business.

Now, let’s take a closer look at acquirers vs processors.

Understanding Payment Processors and Merchant Acquirers

Before comparing payment processors and merchant acquirers, it helps to have a clear definition of each. Here’s some foundational info about processors and acquirers.

What is a Payment Processor?

As we explain in our blog on the basics of merchant credit card processing, a payment processor is a facilitator that connects other parties in each transaction. In other words, “Payment processors receive authorization requests, passing them along to card networks and issuing banks and then back to the merchant.”

The most foundational players in a card-based transaction are the:

  • Merchant, who is paid for their products or services.
  • Customer, who makes the purchase.
  • Acquiring bank, where the business or merchant holds their account and money from the transaction is ultimately deposited.
  • Issuing bank, which issues the credit or debit card to the customer.

It’s not easy for all of these individuals and organizations to quickly and efficiently share information. That’s where payment processors come into play.

Payment processors streamline the process of sharing vital information about a customer’s card and its associated account.

More specifically, payment processing services receive authorization requests from the merchant (which are passed through a payment gateway) when a customer tries to make a purchase. That request then goes to the card network and then to the issuing bank, which checks if sufficient funds are available.

If those funds are indeed available, the card network notifies the merchant bank. That information is then shared with the payment processor, which passes the “approved” or “declined” message back to the merchant.

What is a Merchant Acquirer?

The term “merchant acquirer” can sound a little abstract. What does acquiring merchants have to do with card-based transactions? The simplest answer is that a merchant acquirer is the bank used by a merchant to hold an account that accepts customer card payments.

That’s right — merchant acquirer is simply another term for the acquiring bank or the merchant’s bank. These banks help move transactions along, playing their role in the larger payment processing workflow. They also take on the responsibility for chargebacks and other disputes related to card payments for merchants, as Stripe explains.

The merchant acquirer is indispensable. Every merchant needs to work with an acquiring bank to maintain a merchant account and accept card payments.

It is important to note that we’re using the term “bank” conversationally to mean a financial services provider. Many, although certainly not all, merchant acquirers are actual banks. Others aren’t structured like traditional banks and provide more or different services than those organizations.

Merchant acquirers can be other types of financial institutions as well as banks. The lack of traditional bank structure or certain operations does not make this type of merchant acquirer less legitimate or trustworthy.

A customer hands their payment card to a cashier.

What’s the Difference? Payment Processors vs Merchant Acquirers

You can look at payment processors and merchant acquirers as closely related parties that work together in card payment processing. Both must participate in a card-based transaction for the necessary information (and money) to move between the appropriate parties. Additionally, both are service providers that merchants pay to work with.

Without both a payment processor and merchant acquirer, a card payment cannot be completed.

However, these two entities don’t serve the same role. Instead, payment processors are primarily facilitators. They pass information between the other parties in a transaction, helping the process go quickly and smoothly.

Also, processors don’t directly handle the funds from a transaction. Instead, they share important information related to those funds with organizations like the issuing bank and merchant acquirer.

Merchant acquirers are banks or other financial service providers that work with merchants. They maintain and protect the merchant’s account.

If a card-based transaction is approved in the authorization process, the merchant accepts the funds from the customer’s issuing bank. Ultimately, the merchant acquirer makes that money available to the merchant.

These two entities are distinct because they complete different tasks in the payment processing workflow. However, they work together in every card-based transaction and are both crucial for successful card payments.

Finding the Best Merchant Acquirer and Payment Processor for Your Business

Swipesum helps merchants just like you find the best possible approach to payment processing. By leveraging our deep industry knowledge and experience, we assemble customized recommendations based on your unique needs. The result is an optimized strategy for payments, from finding the right acquirer and processor to reducing negotiable fees and similar charges.

Our analysis, optimization proposal, and fee negotiations come at no additional cost to your business. Ready to improve payment functionality and improve related costs? Schedule your consultation today!

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Michael Seaman

Michael Seaman

Michael Seaman is the co-founder and CEO of Swipesum. A veteran of the payments industry and former employee at one of the largest payments companies, Michael, along with his brother Stephen, has led Swipesum since its inception in 2016. Swipesum is committed to providing innovative payment solutions and exceptional service to its diverse clientele. In his free time, Michael enjoys traveling with his wife Kelsey and their three children, pole vaulting, and engaging in typical Midwestern dad activities.

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