Acquiring and Merchant Acquiring Services 01 1

Acquiring and Merchant Acquiring Services

Acquiring and Merchant Acquiring ServicesAcquiring is an opportunity for a merchant to accept cashless payment for goods and services with plastic cards. Acquiring also includes banking and technological services – transmission and processing of customer data. It is performed by an authorised bank-acquirer by installing payment terminals (POS-terminals in case of traditional merchant acquiring, mPOS-terminals in case of mobile acquiring) or imprinters at trade or service enterprises. Recently, terminals built into online cash registers have been gaining popularity.

The majority of the acquiring services market is occupied by Visa, MasterCard, JCB and American Express member banks.

The ability to pay by card makes the process easier and faster at any retail outlet.

Types of acquiring

Merchant acquiring – this includes payment via POS-terminals: a combined cash register and terminal for cashless payment. To carry out the transaction, the card is inserted into the terminal or brought to the device, and the money is debited. After the money is debited from the bank card, it is instantly transferred to the seller’s current account. After the money is credited, the bank charges a commission of 1.5-2.5 per cent of the transaction amount.

Mobile acquiring is a relatively new type of electronic payment. The name of the terminals is mPOS terminals. With their help, the client transfers money to an account via a card reader on the merchant’s smartphone or computer. The advantage of this type of acquiring is that it is not tied to any point of sale. At the same time, the commission fee is 2.5-3%.

Internet acquiring – accepting bank cards and electronic money for payment via the Internet using a specially designed web interface that allows you to make settlements in online shops and pay for various services. It does not require installation of any equipment. This type of acquiring costs shops 3-6% of the transaction amount.

Cash disbursement to bank card holders (often this procedure is also referred to as acquiring). Such disbursement, as a rule, is carried out through ATM or with the help of a specially configured POS-terminal (POS – cash point). This area also includes various self-service devices that accept cards.

Acquiring process

Merchant – an organisation engaged in selling goods or services, initiator of acquiring connection. Pays a commission to the acquiring bank for the use of acquiring.

An acquiring bank is a credit organisation in which the merchant’s current account is opened and which provides acquiring equipment. Such a bank must be registered in payment  system (UnionPay, Visa, MasterCard and/or any other accredited in the country of the transaction). It is responsible for the technical side of card purchase transactions and receives commission from the merchant.

Issuing bank – a credit organisation that issues bank cards, payments from which are accepted by terminals. It is fully responsible for the correctness of settlements with the client within the framework of the purchase procedure using a bank card.

Payment system – an organisation through which the acquiring bank can transmit information about a transaction to the issuing bank in order to execute that transaction. If the acquiring bank does not support the card payment system of the issuing bank, the transaction will fail.

Customer – a buyer, holder of a bank card obtained from the issuing bank.

Sequence of payment processing

  1. Information about the desired purchase is entered into the POS terminal.
  2. The customer’s card is attached to the POS terminal.
  3. POS-terminal makes a request to the server of the acquiring bank with information about the payment.
  4. The server of the acquiring bank makes a request to the payment system of the card involved in the transaction.
  5. The payment system processes the request and forwards it to the issuing bank.
  6. The issuing bank checks whether the transaction is possible, may temporarily block the funds, sends a response to the payment system.
  7. The payment system sends a response to the acquiring bank.
  8. The acquiring bank sends a response to the POS terminal.
  9. The POS terminal reports the result of the transaction.

Acquiring participants

  • Seller. The organisation that sells the goods.
  • Acquirer. A bank or service that provides the necessary equipment, accepts payments, and services the current account. It charges a commission for its services.
  • Customer. A person who makes a non-cash purchase.
  • Issuing bank. The bank that issued and services the buyer’s card.

Payment terminals or special applications are used to process and transfer data in the acquiring process.

Card acquiring services

To connect acquiring, a merchant and an acquiring bank conclude an agreement. The bank provides the conditions – opens a current account, sets up equipment and trains employees.

Direct acquiring works like this:

  1. Payment information from the card or the buyer’s device is transmitted through the terminal or application to the processing centre of the acquiring bank.
  2. The acquirer sends the information to the issuing bank to verify the information. If irregularities are detected (no funds, card blocking, account seizure), the transaction is cancelled.
  3. Next, the issuer checks the buyer’s account balance against the purchase amount, verifies PIN-code matching and identifies possible signs of fraud. If all checks are positive, the issuer approves the transaction.
  4. Transaction approval information is received by the acquiring bank and further transmitted to the terminal.
  5. A confirmation of payment shall be sent to the issuing bank.
  6. The required amount is withdrawn from the buyer’s account and transferred to the acquirer.
  7. The acquiring bank transfers the funds to the seller’s current account.

As a rule, payment takes a few seconds. The process of information exchange between terminals and banks may take a little longer due to poor internet connection or malfunctions within the system.

The money is actually credited to the seller’s account only after a few days. Immediately at the moment of payment, the purchase amount is automatically reserved on the buyer’s card and becomes unavailable to him. The issuer then transfers the money to the acquirer, who in turn transfers it to the merchant. The exact term for crediting the funds is specified in the contract.

How acquiring is useful for business

If a business does not have acquiring, it inevitably loses customers and profits. The possibility of cashless payment brings the following benefits to a business:

  • Increased revenue. Sometimes customers do not have enough cash to make a purchase, but they have enough money on their cards. More often than not, once cashless payment is enabled, the average purchase receipt increases. Users have the opportunity to spend more or pay for goods with a credit card.
  • Expanding the customer base. Some categories of people hardly ever carry cash and prefer to pay with a smartphone or card. When this option is not available, customers simply leave for more technologically advanced competitors.
  • Increased speed of service. Sellers don’t waste time counting cash and change, which means faster customer service and shorter queues.
  • Ensuring security. When accepting cash, there is a risk of receiving counterfeit notes. It is much more difficult to fake payment by card. In addition, the absence of cash in the cash desk eliminates the possibility of money theft. Also, during the transaction the clients’ funds are protected to the maximum extent possible.
  • Geographic expansion. If you sell services, such as counselling, an online acquiring site will allow customers to buy your product from anywhere in the world.

The only disadvantage of acquiring is that you have to pay for it. In addition to purchasing equipment and ensuring a stable internet connection, you have to pay regular service fees to banks or services.

Who needs acquiring and how compulsory it is

The introduction of acquiring is relevant for any company or organisation that sells goods or services for cash. For some merchants acquiring is compulsory at the legislative level.  According to the law “On Protection of Consumer Rights” the client has the right to choose the method of payment – cash or card. The seller is obliged to ensure that both cash and non-cash payment methods are available. All merchants are obliged by law to implement acquiring. Failure to provide a suitable method of payment is recognised as a violation of consumer rights, which threatens the seller with a fine. For internet businesses, only the condition of general trade turnover applies.

Types of acquiring

There are different types of acquiring. The main difference is the method of accepting payment information. The principle of operation remains practically the same in all cases.

Merchant acquiring

It is a way of accepting cashless payments from bank cards or smartphones in any retail outlet, from small shops to large supermarkets.

To organise acquiring, payment terminals – POS terminals – are installed in retail outlets. Payment can be accepted in different ways: contact (inserting a card) and contactless (holding a card), as well as via NFC, using a virtual card in a smartphone.

Merchant acquiring

The payment terminal is connected to a cash register. There are also portable devices that combine a cash register and a terminal. It is built into a vending machine or self-service device.

Mobile acquiring

Mobile acquiring is the acceptance of cashless payments via a smartphone or tablet. A retailer connects a mobile POS terminal to a smartphone. A special application is installed in it, which generates an electronic cheque for the buyer. Mobile terminals are compact and inexpensive, so it is a good alternative to a cash register.  The devices are compatible with all modern smartphones and tablets. Mobile acquiring allows you to accept payments anywhere, as long as you have access to the internet. That is why it is often used in the field service of a company’s customers.

Internet acquiring

A variation of merchant acquiring without direct contact. Payment is made via a web interface or mobile application, in which the client specifies the card details. In this case, it is important not only to verify the payment information, but also to ensure a high level of security. For this purpose, the services use a secure connection, and during the payment process they apply payment verification and confirmation technologies (3D Secure).

No special equipment is required to organise internet acquiring. It is necessary to set up automatic transfer of the customer to the online payment page. Once the customer has entered his details, he confirms the payment with a password received in an SMS or push notification. Then the money is debited from the card. The customer receives a payment confirmation and an electronic cheque.

ATM acquiring

ATM acquiring is a method of accepting payments through self-service devices (terminals or ATMs). It differs from merchant acquiring in that customers can not only pay for goods, but also check their balance and withdraw cash. Only a credit organisation has the right to install a terminal or ATM in a retail outlet.

QR acquiring

QR-acquiring is an alternative method of online acceptance of non-cash payments which does not require additional equipment. A stable internet connection is sufficient. The essence of the technology is the use of a QR code – a graphic image in which information about the seller is encoded.

The seller places a QR code on a paper carrier at a point of sale, on a website or app. The buyer scans the QR code with the help of his smartphone, enters the purchase amount and confirms the payment. The bank checks the data encrypted in the code and the buyer’s payment information. If everything is in order, the funds are debited from the buyer’s card and transferred to the seller’s account.

Cost of acquiring service

The cost of acquiring is made up of two indicators: service fee and commission. The service fee is usually a fixed monthly amount. The percentage rate of commission is determined by the contract with the acquirer. The average commission is approximately 1-3% of the purchase amount.

The cost of acquiring is influenced by factors such as:

  • Choice of payment system. The bank also pays commission for transactions to payment systems, which may set different rates.
  • Type of equipment. Banks provide terminals on different terms. You can accept payment through online applications, buy a portable device or rent a terminal.
  • Location of the processing centre. If a bank has its own centre, it does not pay for the services of third parties. Accordingly, acquiring will cost less.

The commission amount may also vary depending on the trading turnover and the number of connected terminals.

How to choose the right acquirer

Acquiring conditions vary from bank to bank, so it is important to consider all the nuances when choosing a contractor. In Europe, cashless payment services are provided by both banks and payment services organised as non-bank credit organisations.

Acquiring banks usually offer lower rates for services, as they work directly with clients. But large credit organisations often refuse to cooperate with small clients and prefer not to get involved with Internet business if there is even the slightest doubt as to its legality.

And it is even more complicated than that. If the bank’s rules are not met by the clients of the company which concludes the acquiring contract, the bank can switch off the service.

Payment services are more loyal to small businesses and online sellers, offer more flexible terms and a wider choice of payment systems. However, their service fees are higher.

Regardless of whether the acquirer chosen is a bank or a payment system, the criteria to look out for are the same:

  • speed and ease of connection;
  • the amount of transaction fees;
  • number of supported payment systems;
  • the term of crediting the funds to the current account;
  • ways to combat fraud;
  • promptness and quality of technical support.

It is also worth paying attention to additional features. Sometimes an acquirer provides services that are useful for business. For example, multi-currency payments (with favourable conversion within the system), one-click payment (based on saved information about the client), recurring payments (connection of regular debiting), holding (blocking of funds on the buyer’s account until the seller confirms the order), invoicing (electronic invoicing). Also acquiring service can become an opportunity of additional earnings for a company with EMI/PSP licence in Europe.

How acquiring is useful for merchant business

Increased sales. Shoppers will not have to abandon purchases if for some reason they do not have cash with them. In addition, many people prefer to pay with cards because of cashbacks – partial refunds after a purchase provided by banks. It is known that a customer spends money from a card more easily, and the average cheque is higher than when paying in cash. It is difficult to predict the exact revenue growth after the introduction of cashless payment, but, on average, it is at least 10%.

Reduction of queues. Terminals process the payment almost instantly and withdraw the exact amount. The
cashier does not waste time checking the notes, counting out the change. With an intensive flow of customers, merchant acquiring significantly accelerates the calculation at the cash desk, which allows the shop to get rid of large queues.

Reduction of risks and expenses. When the majority of revenue is non-cash payment, less time and money is spent
on collection services. In addition, when paying by card, the cashier will not make a mistake in the change, and fraud is impossible.

Protection from counterfeit money. The terminal is not a protection against counterfeiters, but with its help you can reduce the turnover of cash, thereby reducing losses due to the acceptance of counterfeit notes.

Improved business reputation. A shop using the services of an acquiring bank looks reliable and modern to visitors.

Improving the quality of service. Taking
care of customer comfort is an obvious competitive advantage for any retailer.

Disadvantages of acquiring

In a number of cases, the connection of merchant acquiring may not bring such obvious benefits. Among the main problems are noted:

Technical failures of the equipment. In some shops it can be seen that there is a regular system failure due to a lack of communication with the bank. For them, having a terminal becomes a problem rather than a profitable acquisition. The easiest way to avoid this is to choose the right internet provider and credit organisation.

The need for expenses on the purchase, maintenance of devices. Relevant for small businesses that do not have high sales and customer flow. For them, these expenses may be unreasonable.

Losses from fraudsters. If when paying with a bank card there are frauds with the buyer’s bank details, leading to the blocking of the account, the seller is obliged to compensate for losses. His own losses are only compensated if the offender is caught.

Merchant acquiring services

  • Payment information is transmitted from the customer’s card (or mobile phone) to the terminal.
  • The data is received by the processing centre of the bank with which the merchant has entered into an acquiring agreement.
  • The credit organisation sends the information to the payment system that owns the card, the information received is checked and searched in the lists of blocked or seized accounts.
  • If irregularities are detected, a transaction denial is generated. If approved, the information is transferred back to the bank that issued the card.
  • The balance on the buyer’s account is compared with the amount of the purchase, in parallel, signs of fraud are detected, PIN-code matching.
  • At the end of all checks, a transaction response is issued.
  • The information is received by the acquiring bank and then transmitted to the terminal.
  • A confirmation of payment is sent to the credit organisation where the buyer is serviced.
  • Money is withdrawn from the account, goes to the acquirer, then directly to the merchant.

Payment is performed automatically, takes a few seconds. The purchase amount is reserved on the buyer’s card and becomes unavailable to him. The money actually arrives to the seller’s account only after a few days. The exact term of receipt is stipulated in the contract.

Sometimes the process of information exchange between the terminal and banking systems can be prolonged. For example, if the internet connection fails or any of the links delays the response due to internal malfunctions.

Acquiring for buyer and seller

On the buyer’s side, everything is simple: he or she brings the card to the terminal, the money is debited and the cheque is printed. There are no additional commissions. The organisation of the cashless payment procedure and the associated costs are borne by the seller.

To provide merchant acquiring, the shop needs to conclude an agreement with a bank that provides such a service. The simplest scheme looks like this: a credit organisation opens a current account for a corporate client, activates the selected package of services, leases or sells the equipment. The banking offer also includes:

  • setting up POS-terminals, Wi-Fi routers;
  • 24/7 technical support;
  • training of shop personnel to work with the equipment in normal situations and failures;
  • repair of machinery – if necessary.

How much acquiring services cost

The seller pays a commission for each transaction in the amount of 2-3% of the purchase price, which depends on the terms of the bank agreement.

What the commission amount is made up of:

  • Charges to the bank that issued the buyer’s card. The amount is determined by the payment system used, the location of acquiring member banks, the security protocols involved, the assortment sold (food and household goods, household appliances, electronics, etc.), the status of the card, and the total turnover of the shop.
  • The share of the acquiring bank. Prescribed in the contract, set by the credit organisation itself. Theoretically, it can be any, in practice it rarely exceeds 3%.
  • Payment system fee. A fixed amount that depends on the number of transactions for the selected reporting period – usually a month.

What to pay attention to when connecting acquiring services

  • Turnover requirements. Check whether your company’s turnover is sufficient to use the selected bank tariff, and whether there are penalties for its reduction after the start of using the service.
  • Period of receipt of money to the account. A transaction may take either one or ten days. Be sure to specify the maximum terms specified in the agreement and the credit organisation’s liability for breaching them.
  • Time of consideration of the application. It is worthwhile to find out in advance how long it takes to check documents and how long it takes to make a decision on the provision of the service.
  • Terminal costs. Some banks charge only for the lease or purchase of equipment, others charge additionally for installation, configuration, and training.
  • Technical, service support. The retailer should have access to 24-hour service, even if shop opening hours are limited.
  • Work with payment systems. It is good if the terminal supports different systems.
  • Access to Contactless technology. Not every terminal can make contactless payments, so it is important to clarify this point in advance.

Who is involved in the acquiring transaction

Bank. Two banks participate in acquiring – acquiring bank and issuing bank. The acquiring bank provides the acquiring service. It gives the business a terminal for accepting cards – on the Internet it is replaced by an Internet payment gateway – and credits money from the buyer to the account. It is up to entrepreneurs to decide which bank to use as an acquirer.

The issuing bank is the bank that issued the buyer’s card, which the buyer uses to pay at a terminal or online. The issuing bank transfers money from the buyer’s account to the merchant’s account. The acquiring bank and the issuing bank may or may not be the same.

Sellers of goods and services. Vendors – online shops and offline points of sale – conclude an agreement with a bank providing acquiring services. If it is an offline shop, the entrepreneur has to come to the bank in person to pick up the terminal and bring it to his point of sale.

After that, the terminal is installed and connected in the shop, and you can accept card payments. Some banks bring the terminal themselves to the point of sale. With an online shop, a payment gateway must be connected.

Buyers. To use the service, the buyer must have a bank card of the payment system accepted by the seller. In Europe, buyers most often have Mastercard, Maestro and Visa cards. It is better to make sure that you can pay for your purchase in your shop with cards of common systems.

Minuses when using acquiring

Bank fees. Acquiring costs money. Usually the commission is 1-2.5% for merchant acquiring and 3.5-5% for internet acquiring. With each card payment, the merchant pays this amount. For a business with a small profit percentage, this can be a significant expense. A terminal for an offline point of sale also costs money. It can be bought or rented.

The money does not arrive immediately. The term for crediting the money is set by the acquiring bank. It is usually 1-3 working days. Until the money is credited, the business cannot use it.

There may be technical problems. The terminal may break down. Fixed and mobile terminals need internet connection to work. If there is no internet connection, you will not be able to accept payment by card. And finally, electricity is needed – without it the terminal does not work. An online shop may have technical failures, such as network malfunctions, in which case the payment may not go through.

Acquiring security

In case of merchant or mobile acquiring, information is read from the customer’s card by the terminal and sent to the bank in encrypted form. The security of the data transfer is ensured by the bank. The business only needs to use the terminal as instructed and the money will be transferred to the current account.

The security of Internet acquiring is the responsibility of the merchant gateway through which the payment is made. It is also provided by the bank, which monitors the security of data transmission.

Acquiring operations

The whole process of paying for goods or services in acquiring is fast. After the merchant has dialled the required amount on the terminal, it usually takes only a few seconds before the receipt is printed.

Here’s how it’s arranged at the offline point in merchant acquiring:

  1. The merchant enters the payment amount into the terminal – either manually or using an accounting programme.
  2. The customer applies the card or device or inserts the card into the terminal. If necessary, the terminal asks for a pin code. In some cases the pin-code is not requested. For example, if the amount is less than the limit set by the bank.
  3. The card is read and the payment information is sent to the payment system and the issuing bank.
  4. The issuing bank checks the existence of such a card, its solvency, the balance of money on the account and the pin code. If everything is in order, a positive response is received, if not enough, the transaction is rejected.
  5. The issuing bank debits the purchase amount from the buyer’s account and sends it to the acquiring bank via the payment system.
  6. The terminal prints two copies of the receipt – one for the buyer and one for the seller. The receipt also prints how the payment was confirmed. For example, “pin code entered” or “buyer’s signature”.
  7. If the customer’s signature is required to confirm payment, the cashier invites the customer to sign the receipt.
  8. In addition to the receipt, the customer must be given a cashier’s cheque.

With internet acquiring, the payment process is a little different:

  1. The buyer forms an order on the seller’s website and clicks the “Pay” button.
  2. The merchant’s website redirects the buyer to a secure payment gateway – a separate website with a special interface for entering card data.
  3. At the payment gateway, the buyer sees the merchant’s data: to whom, for what and how much he pays. There he enters his card data: number, name of the cardholder, card expiry date, CVV2 or CVC2 code from the back of the card.
  4. The payment gateway sends a request to the payment system and the issuing bank. Usually the debit via Internet acquiring needs to be confirmed with a code from an SMS. The code is sent to the buyer by the issuing bank.
  5. The issuing bank checks the availability of such a card, its solvency, the balance of money on the account and the sms-code. If everything is in order, a positive response is received, if there is not enough money in the account, the transaction is rejected.
  6. The issuing bank debits the purchase amount from the buyer’s account and sends it to the acquiring bank via the payment system.
  7. The seller sends a receipt to the buyer’s email, which contains information about the payment: amount, date and time, identification number, transaction number and status, as well as an electronic cashier’s cheque.

When the proceeds are credited. The bank sets the deadline for crediting the proceeds. The fastest is the next day, including weekends. Usually the money is credited in 1-3 working days.

Acquiring fee

The cost of acquiring consists of a commission and additional payments, which vary from bank to bank. For example, it may be the rental of a terminal, the servicing of equipment and the commission for crediting money to an account. The acquiring bank takes the acquiring commission from the business. From its commission it gives a part of it to the issuing bank and the payment system.

The acquiring bank’s commission is specified in the contract with the acquiring bank. The business pays only this commission, the acquirer pays the rest of the participants in the transaction.

Commission of the issuing bank is a fee paid by the acquiring bank to the issuing bank that transfers the customer’s payment. Its amount is established by an agreement between the banks.

Payment provider fee is a fee charged by the payment system. The fee is paid to the payment system by the acquiring bank. Usually it is 0.1-0.2% of the payment amount.


  • Acquiring allows you to accept payment for goods and services by bank cards.
  • Cashless payment acceptance can be set up in stationary and mobile outlets and via the Internet.
  • Payment by QR code is an alternative to merchant acquiring for small businesses: no equipment is required to accept payments, and transaction fees can be lower.
  • Acquiring reduces the risk of fraudulent payments, speeds up service at the cash desk, solves problems with change, and reduces refusals from purchases. Synchronisation with accounting programmes simplifies reporting and monitoring of financial indicators.
  • A contract with the bank is required for connection. When choosing a partner, pay attention to the possibility of providing equipment and software, technical support, transaction fees, monthly service fees.

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