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parties-acquirer-issuer.md

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Parties: Acquirer, Issuer

Acquirer (merchant acquirer or acquiring bank)

  • = the financial institution that handles your merchant account so you can accept credit or debit cards.
  • roles:
    • Merchant Accounts Maintenance - your acquirer will offer and maintain your merchant account, setting rules and requirements and recording and maintaining account activity e.g. deposits and withdrawals.
    • Authorization requests: When a customer pays by card, the acquirer receives the information from the card issuer and then forwards any authorization requests.
    • Settlement: When the transaction is cleared and processed, the acquirer receives the funds, pays the card issuer the associated interchange fee and deposits the remaining funds into your account.

Issuer (issuing bank)

  • = customer facing part of the payment chain and is the bank that issues the credit or debit card.
  • members of the card scheme, such as Visa and Mastercard, but they can also operate as both issuer and card scheme as in the case of Amex.
  • roles:
    • Issuing cards: As their name suggests, an issuer handles card applications and issues users with a payment card.
    • Running accounts: They also offer and maintain the debit or credit accounts, setting card spend limits, recording transactions, issuing statements, taking repayments and monitoring for fraud.
    • Card authorization: Issuers manage the ID and security processes and authenticate transactions, receiving and sending data to the relevant card schemes and payment gateways to approve or decline cardholder transactions.
    • Releasing funds: Once a transaction is approved, the issuer releases the funds to the merchant’s acquiring bank.
    • Rewards: Many issuers also allow consumers to earn loyalty points or cashback from purchases made with payment cards.

Resources: