Cash Discount Program Term - Acquiring Bank

Term – Acquiring Bank

Some times referred to as an acquirer – this entity is fully responsible for the handling of card transactions for merchants. In short, they ensure the smooth execution once a cash discount program payment is made whether by an in-store payment, a phone order payment, or even an online payment.

Here is a step by step process on how it all works:

1 – The customer makes a payment – A transaction is initiated via a debit or credit card.

2 – The transaction receives authorization. The payment system which consists of either a physical terminal, virtual terminal, or integrated POS, sends the transaction details to the acquiring bank which asks for authorization. The bank who issued the card (known as the issuing bank) will ensure that the transaction is legitimate. Simultaneously ensuring there is funds available for the purchase.

3 – An authorization response is transmitted to the acquiring bank from the issuing bank. This is a critical step in the process as the transaction wither receives the approval or denial.

4 – The transaction settlement can now occur if the transaction was approved. The acquiring bank will direct the funds into the merchant account according to their policy’s. However, the merchant will not receive 100% of the charge as any fees associated with credit card processing will be taken out of the charge.

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5 – The merchant payout step now happens. As hinted, the acquiring bank will generally hold the funds for X amount of time. This can range from a few hours to a few days. Of course, major holidays where banks are closed will prevent funds from getting transferred until after. At this stage, the acquiring bank will deduct its fees in addition to covering any sort of chargebacks.

Summary: The acquiring bank is the middle man in the transaction who stands in the middle between the merchant and cardholder’s bank. It is their sole job for securely and efficiently managing the card transaction process.