There are different types of banks in the credit card processing industry. The top American credit card banks are Visa, MasterCard, American Express and Diners Card. These credit card banks allow for other banks to become an Acquirer Member within their associations.
Credit Card Industry Developments
Since the first credit cards were issued in the 1940s, the industry has seen tremendous growth in volume and complexity. The challenges of the Internet and e-Commerce have created multiple layers of banks involved in credit card processing. This has improved the variety and speed of services available to the merchant account.
At the top level of the credit card hierarchy are the aforementioned issuing banks. Each of these credit card banks also has its own member associations. Financial institutions are also licensed to be “acquirers” (or “acquiring banks”) of these credit card brands.
An acquiring bank is different from a credit card processor, because the bank also has its own ample asset base. The bank can be involved in risk management pledging its own assets when a merchant account runs into financial difficulties.
Acquiring Member Duties
With the growth of the World Wide Web, the credit card companies have begun to transfer their powers to licensed acquirer members. These acquiring members are required to follow all the guidelines of the credit card association. A merchant account must deal with a variety of credit cards to satisfy consumer demand.
Acquiring member banks can own, control and sponsor various financial transaction systems. The acquiring member has responsibility for verifying the authenticity of a consumer credit card swiped or recorded at a physical or electronic store. Some acquiring banks can even issue their own cards and sell electronic point-of-sale machines.
The acquiring member is responsible for developing business relationships with online merchants. The acquiring member is responsible for providing the line of credit to the business. This has made the entire network of credit card processing much more complicated.
Periodically, credit card associations will review their list of merchant accounts overseen by an acquiring member to determine if it has had too many reversal, refunds or charge backs. Too many charge backs are see as risky and could lead to the credit card companies fining the acquirer member.