Merchant accounts, which let businesses accept payments via credit card processing, are a necessity for any business today. To accomplish this, a business needs the assistance of an Acquiring Bank. Sometimes known simply as an Acquirer, this bank is the one responsible for supplying the actual merchant account to let the business accept credit card payments.
These banks generally operate far behind the scenes, and usually don’t directly serve the merchant. Most acquiring banks only act as facilitators, helping with exchanging of funds between merchant and the card-issuing bank. These banks rely on third-party organizations to sell the accounts and provide customer service to the merchants. On very rare occasions, Acquiring banks not only process the payments but also market, sell and service their merchant accounts directly.
As for the actual overall cost of the credit card processing fees, Acquiring banks surprisingly play a very small role in the transaction. They collect a small set fee for each credit card transaction, and are only a bit player in this event. Most of the costs associated with credit card transactions with businesses come from interchange fees and the markup fees tied to the processors and providers.
When it comes to the risks involved with credit card processing transactions, Acquiring banks assume the majority of the risk because merchant accounts are considered lines of credit rather than holding accounts like traditional savings or checking accounts. Once the dust settles, the Acquiring bank is hoping the merchant does very well with its business. In the event a business goes belly-up, the Acquiring bank loses money involved with fraud or chargebacks. Because of this, most Acquiring banks require any person or business entity wishing to establish an account with them to accept credit cards to be subject to a credit check and supply certain financial data before acceptance.
While Acquiring banks operate in the backdrop of most transactions, their role in working with businesses is extremely important. By being able to subject a business or individual to credit checks and financial evaluation prior to acceptance, they essentially hold the fate of a business in their hands. A business today that does not accept credit card payments is almost doomed from the start, so these banks play a pivotal role in shaping the business landscape of today. As paying with credit continues to boom, these banks will continue to play a role of great importance.