Acquirer vs Issuer
The two banks in a card transaction—one serves the merchant, the other serves the cardholder.
What is Acquirer vs Issuer?
In every card transaction, two banks are involved: the acquirer (merchant's bank) and the issuer (cardholder's bank). The acquiring bank provides the merchant account and processes transactions on the merchant's behalf. The issuing bank issued the card to the customer and is responsible for authorizing transactions and billing the cardholder. Interchange flows from acquirer to issuer, compensating the issuer for providing credit and fraud protection.
Why It Matters
Understanding the acquirer/issuer relationship helps you understand transaction flow and costs. Your relationship is with the acquirer (directly or through a processor). Interchange rates are set to compensate issuers. When disputes occur, both banks are involved. The separation also explains why different cards have different costs—premium issuers charge higher interchange.
Related Terms
Interchange Fee
The fee paid by the merchant's bank to the cardholder's bank on every card transaction.
Merchant Account
A bank account that allows businesses to accept credit and debit card payments.
Payment Processor
A company that handles credit card and debit card transactions between merchants and banks.
Chargeback
A forced transaction reversal initiated by the cardholder's bank, returning funds to the customer.
Frequently Asked Questions
Interchange is set by card networks. Your total rate includes interchange plus the acquirer/processor's markup. You negotiate the markup, not interchange.
Both banks. The issuer initiates chargebacks on behalf of cardholders. The acquirer notifies the merchant and handles representment. Funds flow through both.
Yes. Large banks like Chase and Bank of America have both acquiring and issuing businesses, but they operate as separate units for each function.
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