The difference between merchant acquirers and payment processors can sometimes be confusing. Both entities are critical partners for merchants and payment facilitators. And the terms, particularly the term acquirer, are often used interchangeably. But they are not the same thing.
The term merchant acquirer, or simply acquirer, typically refers to what is also known in the payments industry as an acquiring bank. This is the bank that holds a merchant’s account, accepting the deposits from the merchant’s sales.
Acquiring banks have relationships with the card networks, such as Mastercard and Visa. They enable merchants to run card transactions on the networks and accept financial responsibility for that activity. As the entities that provide access to this system, they must follow the relevant laws, regulations and card brand rules, and they perform underwriting and ongoing due diligence to make sure that their merchant customers do as well.
True to its name, a payment processor is the entity that processes payment transactions. Processors are technology companies, with the infrastructure and technical connections necessary to authorize transactions and move them from the merchant through the card networks to a consumer’s bank and back again. They also manage the process of settling the funds – moving funds from the consumer’s bank to the merchant’s bank.
In some cases, one entity can provide both functions for merchant customers. Payment processors often provide merchants with access to deposit accounts through their own relationships with acquiring banks. And acquiring banks, particularly the larger ones, sometimes offer payment processing services to their merchant clients.
Companies that offer both services are often referred to as merchant acquirers, and they eliminate the need for a merchant to identify a provider for each service.
In the payment facilitator model, individual merchants do not have direct relationships with merchant acquirers or payment processors. Having embedded payments into its own offering, the payment facilitator has the relationships with these entities. It then offers these services directly to the merchant, serving as a one-stop shop where a merchant can obtain everything needed to accept digital payments.