The issuing bank is responsible for issuing credit and debit cards to consumers, while the acquiring bank is responsible for processing payment transitions and ensuring that merchants receive their funds. A writer with a keen interest in software and finance, Sam has spent the past several years producing content out of Seville, Spain. There are numerous ways you can help build and maintain good relationships. Issuing banks, on the other hand, are cardholder-facing. However, some merchants may choose to. In addition, during a transaction, after the issuing bank release the money from the cardholder's account, the acquiring bank collects the payment and ensure it gets to the business account. Difference between acquiring banks and issuing banks Whereas acquiring banks are for the people selling, issuing banks are banks that give cards to consumers. Once it receives a payment transaction, an acquiring bankroutes it through the card networks to the issuing bank on the consumer end of the transaction. The acquiring bank is a financial institution that plays a crucial role for the merchant by creating and managing the bank account. Most card-not-present merchants settle all their authorized transactions in one single batch (as opposed to settling each transaction individually). Acquiring Bank: What's the Difference? Both you and the customer would go your separate ways having completed a mutually beneficial transaction. Failing to challenge a fraudulent dispute can be interpreted as an admission of guilt, making you seem irresponsible. Merchant accounts are valuable assets. To understand what the different financial institutions bring to the payment process, it helps to first understand how that process works. Fees are paid by merchants and split between the issuing bank, the acquiring bank, the card scheme, and other intermediaries. Issuing Banks: What Are the Differences? If so, it then authorizes the transaction. Midigator doesnt sleep, so you can! In order to talk about what these two types of banks do, there are some related terms you'll need to be familiar with: When a merchant wants to open an account with an acquiring bank, they first submit certain information proving their identity, their ownership of the business, and business records that the bank uses to determine the level of risk it believes will be associated with handling that merchant's account. If the acquirer deems it a solid case, the bank will credit your merchant account and forward the response to the issuer. On 17 February 2023, the High Court (Nairobi) delivered a judgment in Civil Appeal No. FAQ: What is a chargeback? and the consumers themselves. A Complete Strategy for Payment Dispute Management. It works with merchant's payments and transfers money to their account. Thats all that matters to acquirers and issuers - concrete evidence to prove your case. Acquiring a bank is the key factor in the whole process; without them not a single transaction would be finalized. Check the individual brand articles to learn more. A chargeback response is what happens when the merchant submits a rebuttal to the acquiring bank. Every payment card transaction involves two key players: the issuing bank, representing the cardholder, and the acquiring bank, which represents the merchant. The commission highly depends on the money turnover and business type. The merchant can choose to dispute the chargeback through a process known as representment. Most issuing banks offer regular checking and savings accounts along with credit cards, although it's not uncommon for customers to have credit cards with issuers other than the one they use for banking services. How Chargebacks Apply to Payment Facilitators. View service restrictions on the compliance page. The cardholder claimed a lost or stolen card, indicating a fraudulent charge. GoPay. An issuing bank issues credit or debit cards for consumers and looks into the settlements and transactions done by them. However, their true role in the process is more akin to that of a judge or arbitrator. How Should Merchants Deal With Issuing Banks? Meanwhile, other card brands like American Express and Discover serve as both the credit card network and the issuing bank for their cardholders. If the transaction is approved, the money will be deposited into the merchant's account. American Express and Discover are both card networks and issuing banks. The Simple Way to Accept Credit Card Payments. They can approve applications and keep track of account balances. An issuing bank provides the customer with a credit card they can use to make payments, and handles transactions with the acquirer on their behalf. How Return Policies Affect Chargeback & Dispute Ratios, What you need to know about Chargeback Management Software in 2023, Visa Dispute Monitoring and Visa Fraud Monitoring Programs (VDMP & VFMP), The Best Tips for Credit Card Dispute Fraud Prevention, New Mastercard Merchant Advice Codes for Smarter Retries, A Merchant's Guide to Payment Service Providers. This financial institution acts as a liaison and facilitates the repayment of transactions to merchants. Onboarding is quick and setup is easy all you have to do is sign up for the service and provide some basic information about your business. The network, in turn, forwards it to whichever bank issued the card used in the transaction. Acquiring banks represent merchants, while issuing banks represent cardholders. Kathryn has a working knowledge and years of experience in finance, investments, markets, consumer and business banking, student loans, and more. They simply provide the framework for consistent, regulated usage, plus rules and standards for payments conducted on their network. The issuing banks become responsible for recouping the costs. Acquiring vs. On Monday, October 26, 2009, the former Partners Bank locations will reopen as branches of Stonegate Bank. For example, when a cardholder disputes a purchase, the issuing bank has the right to undo the transaction, take funds directly from your account with the acquirer, and return them to the customer. If the risk factor is deemed unacceptable, the account will not be granted. When a cardholder makes a purchase, the data from that transaction goes to your acquiring bank. The Switch is responsible to send the approval request directly to the issuing bank. In scenarios where merchants accept payments with the help of a payment facilitator, and so do not have merchant accounts of their own, the acquiring bank will be the payment facilitators bank. Acquiring banks are financial institutions that offer merchant accounts to businesses. An acquiring bank is a come-between a seller and a card network. In a nutshell, the issuing bank is the customer's bank and the acquiring bank is the merchant's bank. They are card brands. Thus, acquirers must focus on the bankruptcy potential of the merchants they represent. While the acquiring bank provides a line of credit to offer security to merchants, the issuing bank assumes liability for the customers ability to pay off any outstanding debts. The acquiring bank acts as a middleman between for the merchant when it comes to card networks and issuing banks. Butwhy is that really necessary? After approving a customer, the issuers role includes assessing the cardholders account and ensuring the customer has enough resources to cover the cost of each transaction. Neither. Conclusion. Acquirers and issuers each influence the chargeback process in different ways. Theyll be in a better position to challenge chargebacks for you. Banks can and commonly do hold both roles. To process any credit card transaction, the system needs to send an approval request from the merchants terminal through the card network. Issuing Bank Roles. Maximize your profits and grow your business. Potential gains are weighed against possible future losses. Below outlines the fundamental differences between the two. If you arent sure who to ask, reach out to Midigator. If the acquirer cannot provide some sort of bank-to-bank resolution for the chargeback, they pass it on to the merchant, who must either accept the chargeback (the default option if no deliberate response is made) or fight it through the chargeback representment process. The issuing bank issues a conditional refund to the cardholder and accompanying reason code, which is usually numeric, for the chargeback. It can be difficult to understand the differences between all the players in the transaction process and how they work together. Real-time payment processing and orchestration. Can credit card transactions be processed without an issuer? Pay.com can save you some time and hassle: our user-friendly payment infrastructure allows you to easily accept payments online. Standardization Issuing banks must accept, restrict, or deny card applications based on the credit-worthiness of the applicant. Were on a mission to create an all-inclusive economy with an emphasis on simplicity. It communicates with the customer's bank, called the issuing bank, and resolves issues that arise. How much is your businesss average transaction amount. Here's what merchants need to know about what retrieval requests are and how to respond to them. Worldwide, there are more than 100,000 issuers who provide credit and debit cards to their customers. As a key player in the payment process, an acquiring bank also ensures transaction security. Issuers enable customers to make payments in much the same way. What Makes PFs and Marketplaces Different? Midigator provides the tools and solutions to help prevent & analyze chargebacks before they ever happen. Because of the risk associated with issuing cards, the issuing bank (not the card networks) accept the liabilities and guarantee payment in case of loss or damage. Many different aspects of the payment process will involve these two banks, but where they get most involved is when a chargeback occurs. They are not banks, just a service provider and administrator. Ask if your current payment processing setup is still working or if there is a better alternative that would be more profitable. The issuer enters into a contract with their customer and extends them a line of credit, which the customer can then use to make purchases on credit and pay the issuer back with interest. When you use a payment service provider like Pay.com, you dont have to open your own merchant account. However, there is no universal explanation for those stages and tasks. Without this document, you will not be able to receive money after a transaction is completed. In those situations, there are additional responsibilities for acquirers and issuers. Unique Issuing Project award. As you might imagine, the chargeback process can be very time-consuming and become complicated over time. While the same bank can technically perform both roles, theres a difference in the actions they execute during payment processing. Were always willing to offer guidance and assistance to ecommerce merchants. Acquirers manage communication between credit associations and businesses. The only alternate option would be to process payments through a wallet, like PayPal, Apple Pay, or Android Pay. Acquiring banks and issuing banks are two major players in ensuring money from those transactions gets to where it needs to go. When the issuing bank pays the acquiring bank for the purchase, the transaction is settled. The acquiring bank plays a vital role in your business transactions - making sure you get paid for your products and services. Fees (set-up, monthly, transaction, refund, settlement, currency conversion, Accepted currencies and locations (this is especially important if youre doing international sales or want to grow into that eventually). Issuers are gatekeepers to cardholder payment accounts. However, some merchants may choose to delay settlement. On your end, its the acquiring bank that handles the technical details of the transaction. You can think of an Acquirer as a go-between for all debit and credit card transactions. In return, they collect monthly interest fees as long as the debt remains unpaid. They decide when to grant chargebacks and when to reverse them. The issuing bank is the bank associated with the customer. Top Issuers of General Purpose Credit Cards in the U.S. Of course, the issuing bank doesn't necessarily have the final say in the matter. What is the difference between an issuer and an acquirer? Once the merchant account receives those funds, they are deposited into the business account of the merchants choice. Issuing Bank: Issuing banks serve consumers by providing them with credit or debit cards. The right chargeback management company will not only bring experience and expertise, but will already have ongoing relationships with issuers, acquirers, processors, card networks, and more. If so, the issuer debits the cardholders account once again. This financial institution acts as a liaison and . Learn what an acquiring bank is, how it compares to an issuing bank and a payment processor, and why you need one to accept payments. We believe the challenge of running a business should be delivering great products or services, not managing payment risk. The differences between an acquiring bank and an issuing bank are most evident in the transaction process. If you have specific questions about chargebacks, helps manage risk without the accompanying headaches, feel free to, Responsibilities of Issuers and Acquirers, Chargebacks for Services: Tips for Preventing & Fighting, Sets rules and requirements for merchant accounts, Offers and maintains debit or credit accounts, Issues payment cards to authorized cardholders. There are different players involved in a credit card transaction process and without them, the process can't be conducted. There are a number of different parties involved in a basic eCommerce transaction. The acquirer is a financial institution that has been licensed by local financial regulators and approved by card schemes to process transactions. Known as an issuing bank because it issues cards, this type of bank also partners with card brand networks for payment processing. Dig into the valuable lessons these resources offer. It routes transactions through the card network and accepts payment from the issuing bank once properly processed. The main difference between issuing and acquiring banks lies in who they represent. Acquiring Bank and Issuing Bank - Chargebacks Explained. View open opportunities to join our innovative, tech-driven team. The customer can dispute the settlement by contacting their issuing bank and flagging the transaction. You can choose from a variety of payment methods, including credit and debit cards, ACH transfers, and digital wallets. What are retrieval requests? They make sure the customer has a sufficient balance or enough available credit to cover the transaction cost. In those situations, there are additional responsibilities for acquirers and issuers. As a consumer, understanding the FDIC's role and its protections can . If its denied, your acquiring bank will inform you and let you know the reason. 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