Who pays acquirer fees?

Acquirer fees are primarily paid by businesses (merchants) that accept credit and debit card payments from their customers. These fees are a core component of the overall costs associated with processing electronic transactions.

Understanding Acquirer Fees

A payment acquirer, also known as a merchant acquirer or acquiring bank, is a financial institution that processes credit and debit card transactions on behalf of a merchant. They act as a bridge between the merchant, the card networks (like Visa or Mastercard), and the cardholder's bank (issuing bank). For providing this essential service, acquirers charge various fees.

These fees are typically bundled together into what merchants refer to as "card processing fees" or "merchant service fees." While the acquirer is responsible for the initial payment of certain fees to other parties in the transaction chain, they pass these costs, along with their own service charges, directly on to the business.

Components of Acquirer Fees

Acquirer fees are not a single, flat charge but rather a combination of several different costs. The business effectively covers all these components:

• Interchange Fees: This is often the largest component of transaction processing costs. Every time a transaction is made via a card scheme (Visa, Mastercard, etc.), the acquirer pays the cardholder's bank an interchange fee. The business then pays this interchange fee back to the acquirer as part of its card processing fees. These fees are set by the card networks and vary based on factors like card type (e.g., rewards, debit), transaction type (e.g., online, in-person), and industry.
• Scheme Fees: These are fees charged by the card networks themselves (e.g., Visa, Mastercard, American Express, Discover) for using their infrastructure, branding, and services. Like interchange fees, acquirers pay these fees to the networks and pass them on to the merchant.
• Acquirer Markups/Processing Fees: This is the acquirer's own profit margin and service charge. It covers their operational costs, risk management, fraud prevention services, customer support, and the technology required to process transactions. This can be structured in various ways, such as a percentage of the transaction value, a flat per-transaction fee, or a monthly service fee.
• Payment Gateway Fees: If a business uses a separate payment gateway provider (especially common for online businesses), there might be additional fees for this service, though sometimes the acquirer provides the gateway directly.

How Businesses Incur Acquirer Fees

Businesses typically pay acquirer fees through a monthly statement or a deduction from their daily settlements. The pricing models can vary, impacting how these fees are itemized and understood:

• Interchange Plus Pricing: This model separates the interchange fees and scheme fees from the acquirer's markup. For example, a business might see a rate quoted as "Interchange + 0.30% + $0.10." This offers transparency, showing exactly what the card networks charge versus what the acquirer charges.
• Tiered Pricing: Under this model, transactions are grouped into different tiers (e.g., qualified, mid-qualified, non-qualified) based on factors like card type and transaction method. Each tier has a different processing rate, which bundles interchange, scheme, and acquirer fees. This can be less transparent as the specific breakdown of costs is not always clear.
• Flat-Rate Pricing: This offers a simplified approach with a single percentage rate for all transactions (e.g., 2.9% + $0.30 per transaction). While easy to understand, it often means businesses pay more for lower-cost transactions where interchange rates would typically be lower.

Ultimately, while the acquirer manages the flow of funds and the initial payment of certain fees, it is the business that bears the financial cost of enabling card payments.

Understanding these fees is crucial for businesses to manage their operational costs and choose the most suitable payment processing partner. For more information on payment processing, visit resources like Payment Processing Explained or Merchant Services Basics.