Acquiring banks are an important, yet often unheralded, part of the payment processing industry and knowing the role they play in each transaction can help you better understand how the payment industry works.
If you accept credit card payments, there is a good chance you have heard the term acquirer or acquiring bank. Each of these terms is referencing the bank that completes credit card processing on your business’s side of the transaction
The acquiring bank works on the opposite side of the transaction from the issuing bank, which works on the cardholder side. While the issuing bank provides the debit and credit cards to the customers so they can visit your business and make a purchase, the acquiring bank represents your business and processes the transaction on the back end.
Instead of signing up with an acquiring bank, you can instead choose to sign up with a payment processor. If you sign up with a payment processor, like Helcim, they will communicate with the issuing banks through their own acquiring bank partner and act as a mediator between your business the cardholders issuing banks.
Acquiring banks set up merchants with a merchant account, which is the processing arrangement between the business and their credit card processor, along with the processing equipment that you would need to be able to accept payments. This agreement with the acquiring bank (or the payment processor acting on behalf of the acquiring bank) allows for the exchange of funds with the card-issuing banks and your business.
Once you process a transaction, it is approved by the cardholder’s issuing bank, and the funds are then cleared through the acquiring bank before being deposited into your business’s bank account. Your business’s bank account doesn’t need to be with your acquiring bank, it can be with whichever institution you choose to do business with.