Modern eCommerce is powered by a range of sophisticated processes that often remain hidden to the end-user. While most of this digital infrastructure is what enables us to have transactions at the speed of an Internet connection, it is underpinned by a system that often remains obscure even to those that depend upon it.
Two terms, in particular, provide some amount of challenge for people who aren’t involved with digital transaction processes and these are acquiring banks and issuing banks. Though payment processing depends on the interactions between these two, most people don’t know what the difference is between issuing banks and acquiring banks.
What is an Acquiring Bank?
Often referred to as the acquirer or the credit card bank, a merchant’s agreement with an acquiring bank or set of banks enables the merchant to receive funds from the completion of a transaction. Without the merchant’s agreement with an acquiring bank, the merchant cannot receive funds from a completed transaction.
In every online transaction that occurs, there are four primary parties present: the cardholder, the online shop, the acquirer, and the card-issuing bank. Acquiring banks are connected to the largest payment operators including Visa, MasterCard, American Express, Discover, JCB, and China UnionPay. When a consumer buys something from a merchant, the acquirer contacts the card network to which the consumer’s card belongs to see if there is sufficient credit available for the transaction. If the amount is available, it is then charged to the account and sent through the acquiring bank’s processing network to settle the transaction for the merchant.
What Does an Acquiring Bank Do for Businesses and B2C Merchants?
When someone initiates a transaction online, the acquiring bank acts as the middle man and that entails several different things. For one, acquiring banks protect financial information from third-parties that shouldn’t have access to it. They also ensure that transactions are free from fraud. The main methodology that governs these processes is determined by the Payment Card Industry Data Security Standard (PCI DSS), an international agreement on security standards for card payments.
What is an Issuing Bank?
Issuing banks provide credit cards to consumers. Issuing banks also provide authorization when a customer initiates a transaction using the credit card. The issuing bank is also sometimes referred to as the cardholder’s bank. It is partnered with payment networks, such as Visa or Mastercard. The primary role of issuing banks is to provide consumers with a line of credit. When a consumer initiates a transaction, the issuing bank deducts the amount of the transaction from the credit line assigned to that account and pays the acquiring bank. The issuing bank also provides customer service in partnership with the card’s network.
The Differences Between the Two.
The acquiring bank assumes responsibility on behalf of the merchant, the issuing bank assumes responsibility on behalf of consumers. Both conduct specialized KYC (Know-Your-Customer) processes to minimize their risk and determine creditworthiness. When there is a dispute, the issuing bank contacts the acquiring bank to settle the matter.
Digital Banking uniting it all.
There are a number of advantages of Monneo’s digital banking services that we have successfully deployed among our ecommerce clients who are operating in various, industries and working with European acquirers.
Above all there is the fact that we do understand specific business needs and very custom solutions our clients may need to propel their business operations forward.
Our services have proven over the years as a reliable and secure tool of digital banking solutions to companies operating in sectors like e-commerce, health and beauty, skill games, subscription-based businesses, online dating, and many others.
If you want to learn more about the benefits of opening a Virtual IBAN and digital banking account with us, use the contact form below to send us all of your questions.
Our application procedure takes just a few minutes. No physical presence of the client is required. All you need to do is complete our online application form.