How to understand acquirer processing fees

Payment acquirers, also known as acquiring banks and merchant acquirers, provide a vital service to any business that accepts electronic payments. They facilitate the authorisation of card payments and the transfer of funds from the customer's bank account to the merchant’s account. They also take on the risks of card fraud, disputes, and chargebacks. 

This function comes at a cost, which varies from acquirer to acquirer. By understanding in detail the range of fees that acquirers can charge and what services are being paid for, businesses can ensure they choose the right acquirer for their needs, while saving money by avoiding unnecessary costs. 

What are acquirer processing fees?

Acquirer processing fees are charges imposed by a payment acquirer for the services they provide in handling electronic payments. You might also hear them referred to as acquiring fees or merchant service fees.

When merchants and businesses accept credit and debit card payments, acquirers help to authorise the transaction with the customer's bank, settle the funds into the seller’s account, and help combat fraud. Acquirer processing fees cover these services, and are typically based on a percentage of the transaction amount (known as the discount rate) or a combination of a fixed per-transaction fee and a percentage of the transaction value. The specific fee structure may vary depending on the acquirer and the terms negotiated with the merchant. 

Acquirer processing fees are a key component of the overall cost of accepting card payments and are an essential consideration for businesses that use card payment processing services.

The importance of acquiring banks in payment processing

Acquiring banks play a vital role in the payment ecosystem by facilitating electronic payments on behalf of merchants. When a customer makes a card payment, the acquiring bank plays an important part in verifying the transaction details, ensuring the availability of funds, and initiating the settlement process. They also implement security measures to reduce the risk of fraud and chargebacks. 

Acquiring banks can be easily confused with other entities like payment processors. Which is unsurprising, because acquirers and payment processors work in tandem, and some acquirers (such as Airwallex) also offer payment processing services. The two roles are distinct, however. While payment processors provide the technical infrastructure for processing payments, acquiring banks establish and maintain a merchant's account and handle the relationship with merchants. They also communicate with both card networks and the customer’s bank (the card issuing bank) to facilitate settlement of the transaction into the merchant's account.

Factors influencing acquirer processing fees

The type of business and industry you operate in can significantly impact the processing fees you pay. Some industries are considered higher risk by acquirers and may face higher fees. High-risk businesses often include those with a history of chargebacks, such as online gaming or travel agencies.

Acquirer processing fees are also influenced by factors like the type of card your customer uses, such as credit or debit cards, and other payment methods accepted, such as Apple Pay and Google Pay. Customer’s geographical location makes an impact, as well as whether they are making the payment in-store or online.

Strategies to minimise acquirer processing fees

To minimise acquirer processing fees, first you need to do regular fee audits to see where your money is going and what costs stand out. Shop around and compare offers from multiple acquiring banks and payment processors, and use these offers as leverage in negotiations with your current or new provider. You may also have leverage if your business processes a high volume of transactions; this may entice acquirers to offer lower rates. 

There are a few other ways to reduce the cost of acquirer processing fees. Consider bundled services from the same company, such as payment gateway access, payment processing, and merchant acquiring, which may offer savings. Discuss the possibility of fixed fees, which can provide more predictability if transaction volume varies. There are professional consultants who can provide advice or negotiate on your behalf, and periodically review your rates and renegotiate regularly to ensure you are getting the best possible deal. 

How Airwallex can help reduce acquirer processing fees

Airwallex is a financial technology company that offers competitive payment processing and acquiring services on a global scale. By allowing companies to settle payments and pay out funds in multiple currencies, Airwallex can help businesses cut out unnecessary foreign exchange (FX) fees. Where currency conversion is necessary, Airwallex offers market-beating rates.