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 act as intermediaries between customers, merchants and card networks or schemes like Visa, Mastercard and American Express enabling merchants to accept a wide range of payment methods.
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 authorise the transaction, settle the funds into the seller’s account, help combat fraud, provide payment processing service and more. 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 and processing electronic payments on behalf of merchants. When a customer makes a card payment, the acquiring bank verifies the transaction details, ensures the availability of funds, and initiates the settlement process. They implement security measures to reduce the risk of fraud and chargebacks, and provide merchants with tools to help effectively manage their payments.
Acquiring banks can be easily confused with other entities like payment processors and issuing banks. In fact, some acquirers act also as payment processors. The two roles are distinct, however. While payment processors provide the technical infrastructure for processing payments, acquiring banks handle the relationship with merchants. They also communicate with both card networks and the customer’s bank (issuing bank) to facilitate settlement of the transaction. Issuing banks provide cards to customers and maintain their accounts. Their role in electronic payments is to communicate whether the customer has enough funds or credit to complete the transaction.
If you’d like to find out more about the differences between payment acquirers and payment processors, we have another blog post coming up.
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 global business accounts. By allowing companies to accept, hold and pay out in multiple local currencies, Airwallex removes unnecessary international transaction fees and forced currency conversions. Where FX is necessary, Airwallex offers market-beating rates.
Take KeepCup, an Australian-based company that manufactures reusable coffee cups and bottles. KeepCup trades in seven countries and uses an Airwallex Global Account to receive and hold money in multiple currencies. Additionally, KeepCup’s 50 employees across the world are issued with multi-currency Airwallex Borderless Cards to make staff spending a cinch.
“Airwallex is more than just an alternative to a bank,” says KeepCup CEO Abigail Forsyth. “It makes things seamless for you internally, and then you can pass these benefits on to your customers.” She says that reduced FX fees, more efficient financial tracking and reconciling and integration with pre-existing backend software are just a few of the benefits of partnering with Airwallex.
Read more about how KeepCup partners with Airwallex or learn more about Airwallex’s pricing structure here.
How to minimise foreign exchange costs in business