Merchant Acquirer Vs. Payment Processor: Know the Difference!

Published on
Jun 17, 2024
Written by
Rob Smith
Read time

Merchant Acquirer Vs. Payment Processor: Know the Difference!

If you are business seeking efficient and secure payment solutions then electronic payments are a must. But navigating the roles of merchant acquirers and payment processors can be confusing.

While these entities share similarities in facilitating electronic payments, they differ significantly in their regulatory requirements, payment process, relationship with merchants, pricing structures, and more.

Understanding these differences is key for businesses in selecting the right payment solution tailored to their unique needs.

In this comprehensive guide, we unpack what merchant acquirers and payment processors are, and their similarities and differences.

Infographic with a definition of a Merchant acquirer

What is a merchant acquirer?

A merchant acquirer, often also referred to as an acquirer or an acquiring bank, is a financial institution that processes credit and debit card transactions on the behalf of businesses.

The acquirer plays an important role in:

● Establishing and maintaining merchant accounts, allowing businesses to accept payments.

● Maintaining the merchant's bank account and facilitating the transfer of funds between the customer's bank and the merchant's bank.

● Authorising and settling transactions between the business and the issuing bank (the bank that issues the credit or debit card to the customer making the purchase).

● Assuming the risk of fraud, chargebacks, and disputes of card transactions.

The acquirer processes both credit and debit card payments for businesses.

Acquirers communicate with the issuing banks through card networks, such as Visa and Mastercard.

The card networks verify payment details and ensure that sufficient funds are available to complete the purchase. They allow merchants to accept card payments on the networks and take financial responsibility for all activity.

Acquirers must follow the rules and regulations enforced by the card networks and ensure that merchants do the same.

Once a transaction is approved, the acquirer will settle the funds with the merchant. The timeframe for this can vary but it is usually within a few working days.

Infographic with a definition of a Payment processor

What is a payment processor?

A payment processor, on the other hand, is an entity that processes payment transactions on request.

When a payment is initiated, the processor authorises the transactions and moves them from the consumer to the merchant account across card networks. They are also responsible for the process of settling funds.

The role of the payment processor

The payment processor initiates the process by receiving the transaction data from the payment gateway and sending it to the merchant acquirer.

Prior to authorisation, they will then ring-fence the requested payment amount.

They will then authorise the payment by verifying that the card exists, ensuring that the cardholder has sufficient funds, and that the account is not blocked nor under any investigation.

Authentication requires them to transmit authentication data from the cardholder to the issuer, then simultaneously deliver that response to the acquirer.

Penultimately, the payment processor will deduct the correct amount from the cardholder’s account balance.

The payment will finally be settled once the payment is transferred into the merchant’s account.

Merchant acquirers vs payment processors: Similarities

There are some key similarities between merchant acquirers and payment processors.


Payment processors can allow merchants access to merchant accounts through their relationship with acquiring banks, therefore partially functioning as a merchant acquirer.

Acquiring banks, especially large ones, can also offer merchants payment processing services.

Payment gateways

A payment gateway is a technology platform that accepts, processes, and manages in-store and online card payments, including credit cards, debit cards, and digital wallets. Payment gateways are crucial for facilitating secure online payments.

Acquirers and payment processors allow merchants to accept credit card payments made through a payment gateway.

Once the payment processor receives authorisation from the issuing bank, the payment gateway will complete the transaction by forwarding all information to the merchant acquirer.

The payment facilitator model

Payment facilitators are payment service providers used by merchants, allowing customers to accept electronic payments through their platform. They work by having a master merchant account through their relationship with acquiring banks. Payment service providers can offer merchant acquiring services, streamlining operations for businesses by allowing them to accept card payments and alternative methods of payment in a single platform.

Using the payment facilitator model means that merchants have no direct communication with either the merchant acquirer or the payment processor. Instead, payment facilitators interact with both entities.

Services offered by both the acquirer and processor are offered to merchant clients via the facilitator.

Merchant acquirers vs payment processors: Differences

Although payment processors and merchant acquirers work alongside each other to perform the same goal, they are two separate entities with distinct differences.

Role in the transaction process

Once a customer begins the transaction process, the payment processor is the one to contact the merchant acquirer with the payment request.

The payment processor acts as a conduit, meaning the acquirer does not typically engage with the merchant or customer regarding individual transactions.

The processor delivers the message of payment success or failure back to the merchant and the customer. Then, the money will arrive in the merchant account.


A significant difference between the two is that the merchant acquirer must possess an acquiring license to operate in their given region.

There is a much higher barrier to entry for a merchant acquirer to exist and operate, compared to a payment processor.

Meaning there is usually a lengthier sign-up process with an acquirer, compared to its counterpart.

Relationship with the merchant

The payment processor typically has a closer relationship with the merchant than the acquirer; as it is the payment processor that sends and receives payment requests daily on behalf of the merchant.

Merchants may see a direct relationship develop with their processor as they negotiate rates, make data requests, and receive service updates.

Pricing and fees

Merchants tend to pay a monthly fee to the acquirer for their merchant account. Whereas payment processors charge ongoing service fees as well as per-transaction fees.

Payment processor’s fee structures vary based on transaction volume, business size, and security requirements for payment card services. The business will pay interchange fees for every payment made with a credit or debit card.


An issuer will initiate a chargeback, payment processors will then pass on the chargeback reason code to the acquirer. The acquirer will then deduct the funds from the merchant account.

Merchants are able to dispute the chargeback by submitting evidence to the payment processor, who will the collaborate with the acquirer to communicate this back to the issuing bank.

Which one should you choose?

Merchants aren’t ‘one-size-fits-all’, each have unique and specific needs.

Before deciding which payments provider to choose, a merchant should take time to assess their individual needs, evaluate the advantages and disadvantages of alternative payment methods, and consider consulting with an expert in the payments industry.

A business that deals with large transaction amounts and volumes, is looking to scale, and needs more customised support may want to consider a merchant account. On the other hand, a start-up, high-risk merchant, or a business with low transaction volumes might see a payment processor as the best option for them.

However, there are many other important factors to consider when choosing a payment processor or a merchant acquirer:

● Cost – Payment processors typically have lower rates. Some offer a dual pricing programme, which significantly lowers credit card processing costs. Having straightforward pricing and lower transaction fees allows merchants to keep more of their profits. Whereas depending on merchant risk, businesses can pay anywhere between 0.6 and 6% in acquiring fees.

● Security – Sensitive customer data must be protected from unauthorised access through advanced security features, including encryption and fraud detection. Ensure that the payment processor or acquirer chosen has fraud prevention and security as a key focus and is compliant with industry security standards such as PCI DSS.

● Merchant support – It is critical that the processor or acquirer chosen by the merchant offers full transparency and customer service. Helping merchants quickly, efficiently, and effectively reduces delays and disruptions, in turn providing excellent customer support. Make sure costs and other financial variables are clarified, providing businesses have transparency.


Understanding the distinction between merchant acquirers and payment processors is vital for selecting the right payment solution.

Merchant acquirers manage merchant accounts and handle the risk of transactions, while payment processors manage the movement of funds between consumers and merchants.

Both play essential roles in the payment ecosystem but differ in their regulatory requirements, relationships with merchants, and cost structures.

By evaluating your business needs, growth plans, and customer preferences, you can choose the optimal payment partner to enhance your transaction process and improve customer satisfaction.

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