Payment Acquirer vs. Payment Processor: An Overview

The digital payments industry has been exponentially growing for quite some time. The growth and development of the industry has created a certain depth and complexity in understanding its structure, definition and inner workings.

Even people directly related with the industry often mistake and misinterpret overlapping and similar concepts such as acquiring banks, payment processors, and payment gateway providers. Our goal is to clarify these ideas and create a clear picture of what each of them stands for. By doing so you can actually categorise products and providers under the same umbrella, helping you determine the right demands and expectations for your use case.

So, What’s The Difference Between the Two?

Payment acquirers or acquiring banks act as the intermediary, the middleman between merchants and issuing banks. Essentially, acquiring banks are the financial institutions that process credit card transactions. The reason why most people often mistake an acquirer with a processor is because they are closely linked and part of the same process.

Processors offer the technology and infrastructure for the movement of funds but don’t assume financial responsibility for it. Payment acquirers offer merchants with an account, a line of credit so that the funds can be handled on behalf of the merchant.

Payment processors do not work in isolation as they have no real link or connection to the banking system. Payment processors work in tandem with payment acquirers in order to be able to handle the risk associated with a prospective merchant but also access the necessary merchant bank account. The acquirer is responsible for settling approved transactions whereas the processor is responsible for approving them.