Acquiring Bank
An acquiring bank is a bank that is used by merchants to
accept credit card transactions. Acquiring banks are often also referred to as
merchant bank. In order for a merchant to be able to accept credit card
transactions online, the acquiring bank sets up a credit card merchant account.
In most cases, merchants cannot connect their websites
directly to the acquiring bank. Instead, an intermediary is used. Such
intermediaries are called payment gateways. A payment gateway can be integrated
into a merchant’s website. The gateway then passes on credit card information
to the acquiring bank, when a customer makes a purchase. The acquiring bank
approves the transaction and credits the company’s merchant account.
Some small merchants are unable to find an acquiring bank
that is willing to set up a merchant account for them. This is often the case
if the merchant doesn’t have a long trading history. In such cases, merchants
may use a third-party biller instead of an account with an acquiring bank. This
cuts down on red tape and allows a merchant to process payments immediately.
