Acquirer vs Issuer: what’s the difference?

It’s Monday morning, and you’ve arrived at your favourite little coffee shop to get your caffeine fix. $5.20 says the barista. You tap your card or smartphone on the POS terminal, and within seconds, the transaction is approved and you’re soon enjoying your extra hot strong latte and you’re on your way to the office. 


But did you know, there’s a lot that goes on behind-the-scenes to approve or decline your purchase? It’s not as simple as just a tap and pay!  


There’s four different parties involved in paying for your coffee: The Merchant (Coffee Shop/business),  The Scheme e.g. Visa or Mastercard; the Issuer (the institution that issued you with the card to tap and pay and that extracts the money from your bank account to pay for your coffee) and the Acquirer (they normally own the POS machine and they accept the money from the Issuer to give it to the merchant).


Let’s look at the role of Acquirers and Issuers in greater detail.


Acquirers and Issuers defined


An issuer is a financial institution like a bank or entity that has the necessary capability and licensing requirements to issue a payment card, working with card networks such as Visa or Mastercard. 


Institutions with the relevant issuing licences can issue credit cards, debit cards, prepaid cards or gift cards. In the case of a credit card, an issuer assumes the risk of granting credit to the cardholder. As such, issuers assume the risk relating to the cardholder’s creditworthiness. In the event of customer chargebacks, the issuer helps determine the authenticity of the claim and if the transaction merits reversal.


On the other hand, acquirers are financial institutions which move money from the issuer to the merchant to enable the merchant to be paid. In other words, the acquirer ensures that the transaction is processed by routing the money from the issuer to the merchant account.


Typically, an issuer is a separate financial entity or institution from an acquirer. This means that payment gateways need a processor to support card payments.


However, some service providers offer both issuer and acquirer functionality. If you transact with a service provider like Novatti, you benefit from its capability as both a merchant acquirer and card issuer. This is advantageous as it overcomes transaction routing risks while also enabling merchants to enjoy low transaction costs.


How does the issuer and acquiring loop work?


As you may have thought, the payment process occurs in a feedback loop, starting from the cardholder and the facilitation of payment by the acquirers. Assuming you are making a payment at a merchant store, this is how the process occurs:


1. As a customer, you present your card for payment at a point-of-sale terminal and tap or swipe to initiate the transaction.

2. The payment processor picks the transaction and sends it to the acquirer.

3. The acquirer submits the transaction information to the card network (Visa).

4. From here, the card network communicates with the issuer, who determines if the user has enough funds or is allowed to transact.

5. The card network returns the feedback (approval or decline) from the issuer to the acquirer.

6. If the feedback is positive (approval), a transaction is completed, and money moves from the issuer to the acquirer and is subsequently deposited to the merchant account.


Due to custom-built solutions, acquirer merchant services are made easy with an end-to-end payments company like Novatti. The card network features comprehensive APIs that enable merchant acquiring services. There is also technical support for terminal or financial reconciliation queries.


The additional benefit of using Novatti’s merchant payment services is that there are multiple checkout options. Merchants can select the checkout option that suits their business via Hosted Payment Fields, Dedicated Hosted Payment Page, iFrame, API_do_url, or Direct Post.


Security and transparency in merchant acquiring services


With the growing cases and sophistication of payment fraud, experts have recommended heightened surveillance, compliance, and training to counter risks. But as a cardholder, how can you tell if these security measures are enforced?


As a merchant, it is important to select an issuer that adheres to industry standards when it comes to compliance. Our strong partnership with Visa is evidenced through our extensive licensing – both as a Principal Visa Issuer in Australia and Associate Member in New Zealand. In addition, our payments are processed on a Level 1 PCI DSS system, which ensures maximum security and confidence for consumers. 


Transparency is also a key factor to consider. As a cardholder or merchant, one of the greatest aims is to keep transaction costs low. Since card issuers, networks, and acquirers charge varying fees, merchants should consider the fees associated with payments processing. These fees should be known to merchants as part of their decision making process.


For a card service like Novatti, you are assured of transparent and low fees. Our fees are at a rate of 1.75%, with  an additional 25 cents and 45 cents for domestic and international transactions respectively. Merchants can also view online and offline sales through a data-rich dashboard for business analytics and cost control.


To learn more about how Novatti can help you solve your payment pain points, get in touch with one of our payments experts at [email protected]

Zoe Teal

Zoe Teal

Senior Business Development Manager, ANZ

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