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Is PayPal an Acquirer?

Published in Payment Processing 2 mins read

While PayPal is not an acquiring bank in the traditional sense, it functions as a comprehensive payment processor that enables businesses to open merchant accounts and accept online payments, thereby fulfilling a role that might otherwise be handled by a dedicated acquirer.

To accept online payments, a business needs a merchant account. This crucial step can typically be achieved through one of two primary avenues:

  • Acquiring Bank (Merchant Acquirer): An acquiring bank is a financial institution that processes credit and debit card transactions on behalf of a merchant. They maintain the merchant's bank account and are responsible for moving funds from the customer's bank to the merchant's account. These banks are often referred to directly as "acquirers" or "merchant acquirers."
  • Payment Processors (like PayPal): Alternatively, businesses can obtain a merchant account and process payments through certain payment processors. PayPal falls into this category. It simplifies the complex payment ecosystem by providing a platform that allows businesses to accept various online payment methods without necessarily establishing a direct relationship with a traditional acquiring bank. In essence, PayPal acts as an intermediary, providing the necessary infrastructure and services to facilitate online transactions and enable businesses to secure merchant accounts, much like an acquirer would.

Therefore, while PayPal itself is classified as a payment processor, its services allow businesses to achieve the fundamental goal of an acquirer: processing online payments and managing the associated merchant accounts.