Guides
Acquirer vs issuer: what the acquiring bank and the issuing bank each do
The issuer is the bank that gives the cardholder a card and approves or declines each payment from that card. The acquirer is the bank or licensed institution that signs up the merchant, sends its card payments to the card scheme and settles the funds to the merchant. Every card payment has both: the issuer works for the customer, the acquirer works for the merchant.
What is the difference between an acquirer and an issuer?
Both are payment institutions in the same card network, but they sit on opposite sides of the payment. The issuing bank represents the cardholder; the acquiring bank represents the merchant. The card scheme, such as Visa or Mastercard, connects them and sets the rules both must follow.
| Aspect | Issuer (issuing bank) | Acquirer (acquiring bank) |
|---|---|---|
| Whose bank | The cardholder's | The merchant's |
| Main job | Issues cards, approves or declines each payment, bills the cardholder | Accepts card payments for merchants and settles funds to them |
| Role in authorisation | Makes the decision: approve or decline | Forwards the request to the scheme and returns the answer to the merchant |
| Main risk | Cardholder credit and fraud on its cards | Merchant risk: chargebacks, refunds and merchant failure |
| How it earns | Receives interchange from the acquirer on each payment | Charges the merchant a merchant service charge that includes interchange and scheme fees |
| Role in chargebacks | Raises the chargeback on behalf of the cardholder | Receives the chargeback and passes it to the merchant |
What does an issuing bank do?
An issuing bank, or card issuer, opens the cardholder's account and issues debit, credit or prepaid cards on a scheme's network. When the card is used, the issuer checks the balance or credit limit, runs its fraud checks, may ask for strong customer authentication such as 3D Secure, and approves or declines the payment.
After the payment, the issuer debits the cardholder's account or bills the credit card, handles cardholder complaints and starts chargebacks when a cardholder disputes a payment.
What does an acquiring bank do?
An acquiring bank, or merchant acquirer, underwrites the merchant, opens a merchant account and accepts card payments on its behalf. It routes each authorisation request to the right card scheme, receives the issuer's answer, and later clears and settles the funds to the merchant, net of fees.
Because the acquirer is liable to the scheme for its merchants, it monitors fraud and chargeback ratios, can hold reserves and can close accounts. High-risk merchants such as iGaming operators usually need acquirers that explicitly accept their industry. More detail is in our acquirer glossary entry.
Acquiring bank vs issuing bank: a side-by-side comparison
Acquiring bank and issuing bank are the longer names for the acquirer and the issuer. The table puts their jobs next to each other for one online card payment. Many large banks run both businesses, but in a given payment each side acts for a different customer. For a fuller definition of the merchant side, see the glossary entry on the acquirer.
| Question | Issuing bank (issuer) | Acquiring bank (acquirer) |
|---|---|---|
| Whose bank is it? | The cardholder's: it issued the card | The merchant's: it signed the merchant up for card acceptance |
| What does it decide? | Approves or declines each payment and runs authentication such as 3-D Secure | Whether to accept the merchant, its business type and risk level |
| Where does the money go? | Debits the cardholder's account or credit line and pays the scheme | Receives the funds through the scheme and settles them to the merchant minus fees |
| Interchange | Receives it | Pays it, and recovers it from the merchant in the merchant service charge |
| Disputes | Raises the chargeback on the cardholder's behalf | Passes it to the merchant and returns any evidence |
| Main risk it carries | Credit risk and fraud on its cards | Merchant risk: refunds and chargebacks the merchant cannot cover |
How do the issuer and the acquirer work together in a card payment?
A single online card payment passes through both banks in a few seconds for authorisation and over the following days for settlement.
- Customer pays The cardholder enters card details at checkout; the merchant's gateway or processor sends the payment to the acquirer.
- Acquirer forwards the request The acquirer sends the authorisation request to the card scheme.
- Scheme routes to the issuer The scheme identifies the issuer from the card number and passes the request on.
- Issuer decides The issuer checks funds, fraud signals and authentication, then approves or declines.
- Answer returns The response goes back through the scheme and the acquirer to the merchant, which completes or rejects the order.
- Clearing The merchant captures the payment and the acquirer submits it for clearing through the scheme.
- Settlement The issuer pays the scheme, the scheme pays the acquirer, and the acquirer settles to the merchant minus its fees.
Who pays interchange, the issuer or the acquirer?
Interchange flows from the acquirer to the issuer on each card payment, and the acquirer passes it on to the merchant inside its fees. The card schemes publish the interchange rates, but regulation can cap them.
In the European Economic Area, the Interchange Fee Regulation (EU) 2015/751 caps interchange on consumer debit card payments at 0.2% and on consumer credit card payments at 0.3% of the transaction value. Commercial cards and payments with cards issued outside the EEA can fall outside these caps.
How do issuers and acquirers handle chargebacks?
The issuer starts a chargeback when its cardholder disputes a payment, citing a scheme reason code. The acquirer receives it, debits the merchant and collects the merchant's evidence. If the merchant contests, the acquirer sends the evidence back to the issuer, which decides; unresolved cases can go to the scheme for arbitration.
This is why chargeback fees are charged by the acquirer or payment provider, not by the issuer, and why the acquirer cares about your dispute ratio.
Where do gateways, processors and orchestration fit?
A payment gateway captures payment data and sends it on; a processor handles the technical messaging for an acquirer or issuer. Neither replaces the acquirer's licence and settlement role. Many merchants use more than one acquirer to cover markets and keep a backup.
OrsunPay is a payment orchestration platform that connects you to licensed payment providers; it does not process or hold funds itself. It connects the acquirers and providers you contract through one API, routes each payment to the one that fits the card and market, and shows results in one place. For pricing see the pricing page.
Frequently asked questions
Is the issuer the customer's bank or the merchant's bank?
The issuer is the customer's bank: it issued the card and decides whether to approve each payment. The acquirer is the merchant's side: it accepts card payments for the merchant and settles the money to the merchant's account.
Is the acquiring bank the same as the merchant's bank?
Not always. The acquirer is the institution that contracts the merchant for card acceptance and settles card funds. It pays those funds into the merchant's business bank account, which can be held at a completely different bank. Some merchants use one bank for both.
Can the same bank be both issuer and acquirer?
Yes. Many large banks issue cards to consumers and also acquire payments for merchants. In a given payment, though, the roles are separate: the issuing side acts for the cardholder and the acquiring side acts for the merchant, even when both sit in one group.
What is the difference between an issuing bank and an acquiring bank in a decline?
Most card declines come from the issuing bank, which may refuse for insufficient funds, suspected fraud or failed authentication. The acquirer can also reject a payment, for example if the merchant account is restricted, but usually it only passes on the issuer's answer.
Does the acquirer or the issuer receive the interchange fee?
The issuer receives interchange. The acquirer pays it to the issuer on each payment and recovers it from the merchant in its fees. In the EEA, Regulation (EU) 2015/751 caps it at 0.2% for consumer debit and 0.3% for consumer credit card payments.
Is a payment gateway an acquirer?
Not by itself. A gateway transmits payment data; the acquirer holds the merchant relationship with the scheme and settles the funds. Some providers offer both in one contract, which is why the terms are often mixed up.
What is an example of an issuer and an acquirer in one payment?
A shopper pays an online store with a debit card from their own bank. That bank is the issuer: it checks the balance and approves the payment. The store's card acceptance contract is with an acquirer, which sends the request through the card scheme and later settles the money to the store's account.