What is an acquirer processor – and how does it differ from an acquirer?

Technology has made payments quick and easy, which means that we often don’t think about what happens behind the curtain. With the simple tapping of a card and one-click online payments now the norm, it’s easy to just think of money moving magically from one bank to another.

We’ve explored the four-party model elsewhere, and how that model may be changing. Having looked at the issuing side in detail, here we explore the future of acquirers and acquirer processors.

First, let’s go back to basics and unravel who does what.

What is an acquirer and who needs one?

An acquirer, sometimes known as the acquiring bank, provides the merchant with a dedicated account where customer payments can be deposited. Every merchant needs an acquirer to give them the basic ability to accept payments – whether online, in-store or both.

While this role has traditionally been taken by banks, there are also a large number of non-bank acquirers, thanks to e-money licences.

What is an acquirer processor and who needs one?

The acquirer processor provides the link between the merchant, the card network (where card payments are involved) and the acquirer. It processes the payments from the merchant, through the acquirer and then the card network (or alternative payment method (APM) such as Paypal) to ensure that the card issuer authorises and settles the transaction. If we look back to the four-party model the acquirer processor handles the merchant and acquirer ‘side’ of the transaction, as opposed to the issuer processor who handles the customer and issuing side of the transaction.

The acquirer and the processor can be the same entity, but they are often not. In fact, this division between acquirer and acquirer processor is increasingly common. The changing nature of payments has led to an evolution in acquiring. From POS devices to online payment gateways to mPOS to new payment types and now even cryptocurrencies have made acquiring more and more complex. As such, providers that can offer acquirer processing across an increasingly fragmented payment ecosystem, and across borders, without the hangover from legacy systems are capitalising.

What separates the acquirer and the processor?

The different roles that these parties perform also mean that they have different responsibilities. The acquirer, as the provider of the merchant’s account, has a direct relationship with the merchant. This means that the acquirer takes on any financial liability, agrees a fee structure with the merchant and is essentially the “face” of the operation, whether the processor is the same as the acquirer or not.

An acquirer processor is, in a way, the “technical” arm of an acquirer whereas the acquirer is the “business” arm. The acquirer processor authorises transactions and receives transaction settlement information. As well as linking the merchant, card scheme or APM and acquirer, the acquirer processor also evaluates whether transactions are valid, approved by the issuer, and also works to minimise fraud and chargebacks. They also create the database of payments, or system of record, that ultimately means everyone is paid.

What's next for acquirers and acquirer processors?

One of our predictions for 2030 was that fintechs would no longer be a separate category from “technology businesses”. Just as we rarely talk about online businesses—every business is online, even if it’s just a Facebook page or Google listing— in the future we will see many non-financial services businesses offering financial services to some extent.

This means many businesses, often small or niche businesses with their own specific needs, will require acquiring services. They will want to accept all payment types and may need to accept different currencies. As new providers of financial services, they will likely want real-time data and analysis, plug-and-play modules that can be replaced if needed, and complete control without any desire to deal with the complications of PCI compliance.

Acquirers with legacy technology will find this shift towards embedded payments increasingly difficult. As the payments ecosystem fragments even further, acquirer processors who have evolved to handle the complexity, in real-time and across borders, stand to win.