What is acquirer and issuer bank?

In banking and finance sector, two essential terms play significant roles in facilitating transactions: acquirer banks and issuer banks. While their functions may seem complex at first look, understanding their roles is important for anyone involved in financial transactions, whether as a consumer or a business owner. In this article you will learn what acquirer and issuer banks are and how they contribute to the smooth functioning of the financial system.

Acquirer Banks

Acquirer banks, also known as acquiring banks or merchant banks, are financial institutions that work with merchants to enable them to accept payments via credit or debit cards. When you make a purchase using your card, the acquirer bank is responsible for processing the transaction on behalf of the merchant.

Here’s how it works

a) Authorization

When you swipe your card at a merchant’s point-of-sale terminal or enter your card details for an online transaction, the acquirer bank receives the transaction request. It then verifies the transaction details and checks whether you have sufficient funds or credit available.

b) Transaction Processing

Once the transaction is authorized, the acquirer bank processes it and transfers the funds from the cardholder’s account to the merchant’s account. This process involves communication with the card network (such as Visa or Mastercard) and the issuer bank.

c) Settlement

After processing the transaction, the acquirer bank settles the funds with the merchant, usually within a few business days. This involves transferring the funds from the merchant’s account (held with the acquirer bank) to their designated bank account.

Issuer Banks

On the other side of the transaction, we have issuer banks. Issuer banks are responsible for issuing credit and debit cards to consumers and managing their cardholder accounts.

Here’s what issuer banks do:

a) Card Issuance

When you apply for a credit or debit card, the issuer bank evaluates your application, determines your creditworthiness (in the case of a credit card), and issues you a card if approved. The card bears the bank’s logo and branding.

b) Account Management

Once you have a card, the issuer bank manages your cardholder account. This includes sending you monthly statements, processing payments and credits, and handling any disputes or issues related to your account.

c) Authorization

When you make a purchase using your card, the transaction details are sent to the issuer bank for authorization. The bank checks your account status, available credit (in the case of a credit card), and other factors before approving or declining the transaction.

d) Billing and Collections

The issuer bank bills you for your card transactions and any associated fees or interest charges. It also collects payments from you, either in full or in installments, depending on your agreement.

    The Interplay Between Acquirer and Issuer Banks

    In every card transaction, acquirer and issuer banks work together seamlessly to facilitate the process. The acquirer bank ensures that merchants can accept card payments, while the issuer bank enables cardholders to make purchases and manage their accounts.

    Additionally, both types of banks play crucial roles in ensuring the security and integrity of card transactions. They adhere to strict regulatory requirements, implement fraud prevention measures, and invest in technologies to safeguard cardholder data and prevent unauthorized use of cards.


    Acquirer and issuer banks are essential players in the world of financial transactions. Acquirer banks enable merchants to accept card payments, while issuer banks provide cards to consumers and manage their accounts. Together, they form the backbone of the card payment ecosystem, facilitating millions of transactions securely and efficiently every day.

    Understanding their roles helps consumers and businesses alike navigate the complexities of the financial system and make informed decisions about their payment methods.

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