What is card acquiring & how it affects your payment processes

When you’re scaling a digital business, your payment system should be a strategic asset, not just a back-end necessity. One of the most overlooked aspects of this is card acquiring.

Card acquiring involves working with banks, card networks, and PSPs to process card payments. While it may sound straightforward, a poorly configured card-acquiring system can lead to high processing costs, lowered payment conversions, and lost sales.

At Solidgate, we see businesses continually face challenges when it comes to payment optimization, especially when they treat card acquiring as a “set it and forget it” service. This oversight costs them money, eats into profit margins, and creates friction in the payment process, ultimately slowing growth.

In this article, we’ll break down how card acquiring works, why it’s a pivotal aspect of your payment strategy, and how you can leverage it to scale your business more efficiently.

What is card acquiring?

Card acquiring is the backbone of payment acceptance. It’s the system that facilitates the movement of money from your customers’ accounts into your business account after a card payment is made. This process involves several key players, including acquiring banks, card networks (Visa, Mastercard), and payment gateways, each performing distinct roles to complete the transaction.

Role of acquiring banks

Acquiring banks work as the main go-between for merchants and the card networks. These banks hold the merchant account where your card payment money gets deposited, and they’re responsible for making sure your business follows all the payment industry rules.

The acquiring bank does more than just process transactions. They review merchants before approving them, monitor transaction patterns for suspicious activity, and ensure businesses comply with Payment Card Industry Data Security Standards (PCI DSS). This oversight protects both you and the payment system from fraud and security problems.

Key components of card acquiring

The card acquiring ecosystem involves several important players, each with specific roles:

• Merchants (you): Accept card payments and integrate payment processing systems.
• Acquiring banks: Hold the merchant account and manage payment flows.
• Card networks (Visa, Mastercard): Create the payment rules and facilitate transactions.
• Payment gateways/payment orchestrators: Act as the middleman between your business and acquiring banks, ensuring secure transactions.

The card acquiring process at a glance

Understanding how acquiring card payments works requires following the transaction from initiation to completion. Each stage of the acquiring process involves critical touchpoints that can impact both costs and performance.

• Cardholder initiates payment: The payment process begins when the customer decides to make a purchase and provides their card details at checkout. This can happen in various ways, depending on the method of payment. At this stage, the cardholder’s bank is not yet involved, but the payment information is captured and ready for transmission.
• Merchant submits payment details: Once the cardholder’s payment details are collected, your online checkout sends the transaction data to your acquiring bank via a payment gateway. This step involves encrypting the card details to ensure they are securely transmitted, protecting sensitive customer information from potential threats during transmission.
• Acquiring bank authorizes and communicates: The acquiring bank then processes the transaction, forwards the information to the relevant card network, which then routes the transaction to the issuing bank, which is the customer’s bank, to check whether the payment is authorized. If the payment passes all these checks, the issuing bank sends an authorization approval back through the card network to the acquiring bank. If there’s a problem, such as insufficient funds or fraud suspicion, the transaction is declined.
• Payment approval or decline: The acquiring bank receives the authorization response. The system then either approves or declines the payment based on the feedback from the issuing bank. This information is sent to your payment system, allowing the customer to see whether their payment was successful.

Once the transaction is approved, the settlement begins, transferring the funds from the customer’s account to your business’s account, typically within 1–3 business days, depending on your acquiring bank’s policies.

Creating a card acquiring strategy for cost and performance

Creating a scalable card acquiring strategy goes beyond just selecting the right acquiring bank or PSP. It involves understanding how different elements of your payment process can impact both costs and overall performance. At Solidgate, we’ve helped businesses optimize every step of the process, from transaction fees to payment conversion rates, to drive better payment performance.

To succeed, you must evaluate how each component of your payment process, including transaction fees, payment speed, fraud prevention, and settlement times, impacts your ability to scale.

Transaction fees in card acquiring, and how to minimize them

For any scaling business, it’s critical to understand the true cost of payment processing. What feels like a few cents or dollars here and there compounds over time and can cost up to 3% yearly.

Here’s what you’ll typically pay:

• Interchange fees: Set by card networks, interchange fees are usually the largest chunk of the cost. The trick is that businesses with high transaction volumes can negotiate better rates with acquiring banks. If you’re processing over $100K/month, it’s time to talk directly with your acquiring bank about reducing your interchange fees. If you’re high-volume with a low chargeback ratio, you have leverage.

• Service charges: Those are the fees your acquiring bank charges for handling your payments. This might include monthly account fees, per-transaction costs, and extra charges for things like fraud protection. You should be reviewing these every six months. If you see costs creeping up without value to show for it, it’s time to look for alternatives like payment orchestration, which can help streamline fees across multiple providers.

• Assessment fees and additional costs: Things like chargeback fees, PCI compliance costs, and penalties that can pop up if something goes wrong or if you exceed certain transaction limits. These are smaller, but they add up, leading to unexpected expenses. Chargeback fees, for example, are a major blind spot for many merchants. Implementing fraud detection and pre-authorization strategies to reduce disputes is often cheaper than fighting an avalanche of chargebacks.

Don’t treat payment fees as a given; review your transaction fees regularly and negotiate better rates as your transaction volume increases. Multi-PSP setups also give you the flexibility to route payments to the most cost-effective provider, based on the type of transaction

The efficiency and quality of your card acquiring setup directly impact multiple aspects of your business operations, from customer satisfaction to how much money you make.

Navigating multi-PSP setups in card acquiring

As your business expands globally, card acquiring becomes more complex. You’ll need to support various local payment methods and manage multiple payment service providers (PSPs) across regions, each with its own acquiring processes, fees, and risks. 

A multi-PSP setup can be the solution, but without the right infrastructure, it can add unnecessary complexity and inefficiency to your payment ecosystem.

• Choosing the right PSPs: Different regions have different preferences for payment methods. From local card schemes to alternative payments like PayPal or Alipay, it’s critical to support the methods your customers want. When scaling globally, ensure your payment stack supports local acquiring. For instance, in Europe, SEPA Direct Debit is a preferred method. In Asia, WeChat Pay is ubiquitous. Local acquiring will significantly improve authorization rates.
• Integrating PSPs with payment gateways: The challenge of handling multiple PSPs is that disjointed systems can lead to errors, delays, and a fragmented customer experience. Each PSP and acquiring bank has its own system, and if these aren’t properly integrated, you’ll face operational inefficiencies. That’s why using payment orchestration platforms to consolidate all PSPs has become a go-to strategy for many high-growth businesses. 

A proactive approach to fraud prevention

While acquiring banks monitor transactions for fraud, they are often reactive, not proactive. They provide basic fraud monitoring but also rely heavily on merchants’ systems (such as fraud detection and 3D Secure) to proactively protect against fraud. You are the first line of defense.

To successfully manage fraud, integrating fraud detection throughout your whole payment system is critical. Implementing technologies like dynamic fraud routing, adaptive 3D Secure 2.0, and network tokenization helps protect sensitive customer data without affecting your approval rates.

Dynamic fraud protection

Chargeback management is another part of the equation. Excessive chargebacks are not only costly in terms of fees or lost sales; they can harm your relationship with acquiring banks and lead to serious processing issues. Reducing them requires smarter payment strategies and dedicated tools like prevention alerts and automated dispute representment.

Using real-time data to optimize card acquiring systems

Without real-time data analytics, you’re left guessing about the performance of your payment system, which acquiring banks or PSPs are the most cost-effective, or whether you’re overpaying for processing.

Payment analytics dashboard in Solidgate HUB

For example, you can use real-time data to:

• Monitor payment success rates: Track authorization rates by payment processor, acquiring bank, or region. If a particular bank is consistently declining transactions or has slower authorization times, this data allows you to adjust the flow in real-time, ensuring that you’re always routing payments through the best-performing provider for that specific transaction.
• Optimize transaction costs: With real-time data, you can monitor interchange fees and service charges across multiple PSPs and acquiring banks. This helps you make strategic decisions about which PSP or bank to use for specific transaction types, ensuring you’re always paying the lowest fees possible.
• Track fraud patterns: Integrate fraud detection systems with real-time analytics to instantly flag suspicious transactions and route them through more secure acquiring channels.
• Improve decision-making: Use real-time data to adjust your acquiring strategy dynamically, selecting the best payment methods and providers for each region and customer base.

For example, if you expand into a new region and see that local payment methods like SEPA in Europe or Alipay in China have higher success rates than global card networks, you can switch to those methods in real-time to improve authorization rates and customer experience.

Influence on payment speed and authorization 

When you’re scaling, time is money. Faster transactions not only lead to higher conversion rates but also boost customer satisfaction and ultimately drive more sales.

The speed at which transactions are processed directly affects both your customer experience and your operational efficiency. In industries like retail and online subscriptions, a fast and seamless checkout process can be the deciding factor between a completed purchase and an abandoned cart. Customers expect quick, hassle-free transactions, and any delay can hurt your conversion rates.

Additionally, while authorization times are typically fast, many businesses overlook the settlement time, which can take days or even weeks. This lag in fund transfer can significantly impact your cash flow. By selecting the right acquiring partners, you can optimize settlement speeds to improve liquidity.

Establishing direct relationships with acquiring banks often leads to faster settlement times, and for businesses processing large volumes, negotiating for same-day settlement can provide a substantial cash flow advantage.

How to choose acquiring services?

When choosing acquiring services, consider the following factors to ensure they align with your business’s scale and future growth:

• Transaction volume – How many payments you process each month affects what rates you can negotiate
• Average ticket size – Larger transactions might qualify for better processing rates
• Customer preferences – Make sure you can accept the payment methods your customers prefer
• Business growth plans – Choose services that can grow with your business

High-volume merchants might benefit from working directly with acquiring banks, while smaller businesses often find payment service providers more cost-effective and easier to work with. Make sure to regularly review your acquiring arrangement to ensure that your payment processing continues to meet your growing business needs:

• Regularly check your payment processing costs to find potential savings
• Compare rates from different acquiring banks and payment processors to make sure you’re getting competitive pricing
• Invest in a modern payment stack that supports current security standards and customer preferences, including EMV chip readers, contactless payment acceptance, and mobile payment options.
• Monitor your transaction data to spot patterns that might indicate fraud or processing problems. 

Use this information to work with your acquiring bank or payment provider to put appropriate security measures in place and optimize your payment flow.

FAQ 

What hidden costs should businesses expect when using card acquiring services?

Beyond standard processing fees, businesses should budget for chargeback fees, PCI compliance costs, monthly account maintenance fees, and potential penalties for high-risk transactions. Some acquiring banks also charge for additional services like fraud protection tools or detailed reporting.

What are the benefits of using a direct acquiring model over an indirect one?

Direct acquiring typically offers lower processing costs, faster settlement times, and greater control over the payment process. Merchants also receive more detailed transaction data and can often negotiate better terms based on their transaction volume and business profile.

How can I improve my card acquiring process to reduce costs and enhance customer experience?

Focus on implementing modern payment technology that supports fast authorization times and multiple payment methods. Regularly review your processing rates and negotiate with providers based on your transaction history. Additionally, invest in fraud prevention tools to reduce chargebacks and maintain good standing with your acquiring bank.