Acquiring Vs. Issuing Banks: What Are the Differences?

Acquiring vs. Issuing Banks: What are the differences? What is each one's role when processing a payment? How does the entire online transaction process work? These are the questions that will be answered in this article.


Acquiring Bank and Issuing Bank overview

How does your hard-earned money get to you? On the surface, the entire online payment process seems pretty straight forward: your customer falls in love with one of your products, places it in the shopping cart, proceeds to checkout, pays with a credit card and boom! The money is available in your account right away.

Behind every online payment, however, there are a few key players that work hard to make the transaction happen. Most notably, the acquiring bank and the issuing bank are key actors in online payment processing.


All about Acquiring Bank

What is an Acquiring Bank?

As e-commerce , before you start accepting online payments on your website, you must sign an agreement with your acquirer. Without this document, you will not be able to receive money after a transaction is completed.

There are three parties involved in every credit or debit card transaction: the seller, the customer and, sitting in between them,  the acquiring bank. An acquiring bank (sometimes referred to as “acquirer” or “credit card bank”) is an institution that has the Cards Schemes authorization to process a transaction so by signing a contract with the acquirer, a merchant can process credit and debit card transactions.

Acquirer’s role in payment processing

You can think of an Acquirer as a go-between for all debit and credit card transactions. Acquirers manage communication between credit associations and businesses.

As a key player in the payment process, an acquiring bank also ensures transaction security. On your behalf, it will handle the transaction process using the most up-to-date security systems and constantly evolving technology.

Because all online transactions come with a risk of fraud and sensitive information breach, every acquiring bank follows very strict guidelines laid out by the Payment Card Industry Data Security Standard (PCI DSS).

In the unlikely event of fraud or data breach, the acquiring bank will take responsibility for the compromised transactions.


All about Issuing Bank

What is an issuing bank?

An issuing bank (also known as issuer) is another key player in the payment process.

In the simplest terms, an issuing bank is a financial institution that provides credit and debit cards to customers on behalf of big card networks like Visa, MasterCard, Discover, and American Express. Worldwide, there are more than 100,000 issuers who provide credit and debit cards to their customers.

When you make a payment with a card, the funds are transferred from the issuer bank to the acquirer.

What’s the role of an issuing bank?

In any given online transaction, the issuing bank plays the role of a middle-man between the consumer and the card network.

Despite a common misconception that card networks like Visa and Mastercard issue debit and credit cards, it’s the banks and credit unions who actually issue the card on behalf of the credit card networks.

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.

If a cardholder is not able to pay off his or her debts, then it will be written off by the issuing bank. The issuing banks become responsible for recouping the costs.

In the transaction process, the issuer is responsible for customer authentication and for making sure that the cardholder has enough funds to cover the transaction.

The issuing bank is also in charge of approving and denying credit card applications, collecting payments from the cardholders and providing customer support.


How does the transaction process work?

Depending on the country where the transaction will be made the payment flow may be a little different, but will always have the participation of an Acquirer and Issuer bank. In Latin America, for example, is no different, each country has its own specificity.

Here is how the entire transaction process happens in Brazil and Mexico from the perspective of the Acquiring and Issuing Bank.

Transaction flow in Brazil

Transaction flow in Mexico


The main points of interaction

If you’re in a business that involves card transactions, educating yourself the entire payment process is very important. There are different players involved in a credit card transaction process and without them, the process can't be conducted. 

To facilitate the transaction process it is possible to involve another player, the Payment Processor that already has connections with acquiring and issuing banks besides of knowing the market regulatory environment, this way you can make card transactions without worries.


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