Mobile Payments: Who is an Acquirer?

Who is an Acquirer?

A merchant or a retailer store cannot just accept cash. They have to accept credit cards and debit cards to get your business. In order for them to get paid for a credit card transaction, they have to first authorize your transaction with the corresponding Issuer bank every time you swipe. But there are just thousands of such Issuer banks. You may be holding a credit card from any one of the thousands of banks. If every merchant had to establish a direct link and relationship with every other Issuer bank in the country, the system would have fallen apart long time ago.

An Acquirer is the entity that helps a Merchant to accept credit card and debit card payments. They are sometimes referred to as the Merchant Acquirer or the Acquiring Bank as well.

In this setup, a merchant establishes connectivity and relationship only with their Acquirer and nobody else. The Acquirer will in-turn maintain their own link to every other bank. To be accurate, the Acquirer doesn’t maintain a link with every other bank either; instead they connect only to the major payment networks like Visa, MasterCard, American Express, Discover and so on. The payment networks in-turn maintain a link with all their respective Issuers.

Acquirers do a lot more than just assist in authorizing transactions. They help with clearing and settlement. They manage chargebacks, refunds and disputes. They own the responsibility if a merchant goes belly-up. This list goes on, but you get the idea. Bank of America, Chase Paymentech and Wells Fargo are examples of Acquirers.

Often times an Acquirer outsources their work to external entities called Acquirer Processors. They process transactions on behalf of the acquirers by connecting merchant transactions to payment networks. They also provide the POS device, securely route transactions from the POS to the payment network, manage authorization, clearing and settlement. They may also have tie-ups with sub-processors, ISOs and other partners to get the job done. First Data, Elavon and TSYS are examples of Acquirer Processors.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and not so FAQ series and you are on FAQ #2. The idea behind this series is to share and learn as much as possible about the field of mobile payments. If you like, you can read all of the FAQs on the Mobile Payments category or by visiting the Table of contents page.

Mobile Payments: Who is an Issuer?

Who is an issuer?

An Issuer is the bank who issues you the credit card, debit card or any payment card for that matter. They are sometimes referred to as the Issuing Bank as well. For example, if you have a Chase Freedom card, then your Issuer is Chase bank. If you own a Capital One Platinum card, then your Issuer is Capital One bank.

What if you have a Marriott Rewards credit card? No, Marriott is not your issuing bank. In general, when you get a credit card from an establishment other than a bank, maybe from a merchant like Marriott, it is only because they have tied up with some bank. It is the bank that manages the back-end work, while the branding is done with the merchant’s name on it. In the case of Marriott, the issuing bank is Chase.

Also, remember that Visa and Master Card are not issuers. They are called Card Networks, or more generally, the Payment Networks. We will discuss them in another post.

In the context of a payment transaction, an Issuer is the entity that authorizes the transaction when you swipe your card at a point of sale. They pay the merchant from their customer’s account through a process called Clearing and Settlement. They also charge Interchange fees, which is generally collected from the merchant. Bank of America, Chase and Wells Fargo are a few of the largest Issuers.

Sometimes Issuers outsource card processing activities to external entities called Issuer Processors. Issuer Processors may take on some or all the activities of card processing from the Issuer depending on their contract. First Data, FIS and TSYS are examples of Issuer Processors.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and not so FAQ series and you are on FAQ #1. The idea behind this series is to share and learn as much as possible about the field of mobile payments. If you like, you can read all of the FAQs on the Mobile Payments category or by visiting the Table of contents page.

Mobile Payments: FAQ and not so FAQ

I have been working in the field of payments, specifically mobile payments for quite sometime now. If you haven’t noticed, a lot is happening in that area. The players in this field keep coming up with new stuff all the time; the field keeps coming up with new players all the time. Some of them just make sense, but some just don’t regardless of how hard we think. It is not their mistake. They are trying out new and innovative ideas hoping that one of them will click.

Mobile payments come with a lot of variables and not everyone has the knowledge or patience to understand all of them equally well. For instance, a credit card expert may not understand how HCE (Host Card Emulation) is affecting the SE (Secure Element); while an NFC expert may not understand how a Card network gets involved in tokenized transactions.  Apparently, it is not a surprise that many questions come to our mind that needs an answer – a short and simple answer.

My goal here is to try and answer these FAQs and not so FAQs for my benefit and reference. I plan to use a question/answer format where each question is answered in one short and simple blog post. As a general rule, I will prefer simplicity to absolute accuracy, because i don’t like my learning to be limited by some fine-print details. In many cases, I will restrict the details to the context of mobile payments to avoid information over-bloat.

I am confident that this will benefit me and hopefully it will benefit others too. I am also hoping that any expert stumbling across these blogs will offer their valuable thoughts thereby helping the rest of us.

Welcome to Mobile Payments FAQ and not so FAQ series. View all posts from the Table of Contents page