As a business owner navigating the world of digital payments, I often encounter confusion surrounding the terms “merchant acquirer” and “payment processor.” Understanding the differences between these two crucial components is essential for optimizing my payment systems and ensuring smooth transactions for my customers.
In this article, I’ll break down the distinctions between a merchant acquirer vs payment processor, highlighting their roles, functionalities, and how they work together to facilitate seamless payment processing. Whether you’re starting a new business or looking to enhance your current payment solutions, this guide will provide the clarity you need to make informed decisions.
What is a Merchant Acquirer?
Merchant Acquirer are financial institutions that provide financial services to merchants through their merchants accounts. Merchants acquirer receive payments made to the merchant’s account and is directly involved in storing and transferring the funds.
After opening a merchant account under the acquirer, the merchant’s payments are authorized to be received and accepted by the Merchant Acquirer and goes to his merchant account. Merchant Acquirer is referred to as an acquiring bank and also receives deposits alongside accepting payments.
Merchant Acquirers are a must for any business that decides to expand online or is fully online-based or provides card-reading payment options at the stores. Additionally, merchant acquirers have an excellent relationship with well-known international card companies like Visa and Mastercard. This allows customers to make international payments and businesses to grow on a global scale.
Regardless of what sort of payment you are making online, every one of those transactions will require an acquirer. While accepting payments and transfer of funds, there are certain regulations of Merchant Acquirers that need to be maintained in order for those transactions to go through.
What is a Payment Processor?
According to Wikipedia, a Payment Processor is some sort of transactor for financial calculations, technically an invertible currency exchange (often a third party) appointed by a merchant to handle transactions from various channels such as credit cards and debit cards for merchant acquiring banks.
In simpler words, what that means is, Payment Processor acts on behalf of merchants to accept payments by authorizing them and facilitating the transaction itself. They are not directly involved in transfer of the funds, rather they move information regarding transactions from the consumer’s bank to the merchants account.
Payment Processors are quite a beneficiary to businesses in terms of accommodating customers and offering different types of payment methods. Moreover, it makes the payment process easy-to-use for customers and relatively less time-consuming. Additionally, merchants using Payment Processors can accelerate the time-to-market of their products, while significantly reducing overall costs.
Alongside ensuring secure credit card transactions, it also reaches relevant information regarding the transaction to both parties, offering transparency. However, when choosing a Payment Processor, merchants must look at two important things, PCI compliance and compatibility.
Check out the difference between Money Transmitter and Payment Processor.
Merchant Acquirer vs Payment Processor
Firstly, Payment Processors are involved in authorization and transactions, but they don’t directly get involved in the transfer of the funds. But, Merchant Acquirers are acceptors of deposits and payments and are directly involved in the transfer of funds.
Furthermore, while funds are transferred to the Merchant Acquirer, which is the acquiring bank, the information regarding the transaction is reached by the Payment Processor. Merchants open their merchants account as a reference point for their payment acceptance, whereas, Payment Processors just process the payment on behalf of the merchants. This clearly highlights their different roles in the whole payment processing system.
Payment Processors and Merchant Acquirers are quite different from each other. Payment Processors are companies that handle and facilitate transactions. On the other hand, Merchant Acquirers are really the acquiring banks which host the merchant account.
