Multi-acquiring: why it can be worthwhile using more than one acquiring bank

9 September 2021

multi acquiring Acquiring Bank

There is no cashless payment without authorisation from an acquiring bank that charges a fee for its service. For this service, 43% of merchants have so far limited themselves to working with a single acquiring bank – partly because integrating different acquirers can involve a great deal of effort. In this article, you will learn what an acquiring bank does, why a multi-acquiring strategy is worthwhile for most merchants, and how you can make it easier to integrate new acquirers.

Content of the article

Definition of acquirer: what is an acquiring bank and how does acquirer payment work?

All merchants who offer cashless payments must conclude a card acceptance agreement with an acquiring bank in advance.
This acquiring bank (also known as an acquirer or merchant bank) authorises or rejects a cashless payment based on the validity of the card and the given credit limit.
In this role, the acquiring bank acts as an important buffer between the payment service provider (PSP) and the issuing bank.

Cashless payment: Key market players. POS Software Companies, Payment Terminal Provider, Payment Service Provider, Acquirer and Banks.
Cashless payment: The most important market players.

Find out what roles these and other market participants play in cashless payments and how they interact with each other in our article on cashless payments.

Examples of well-known acquirers in Germany and Switzerland

  • Adyen
  • American Express
  • concardis nets group
  • Elavon
  • Hobex Payment Systems
  • PAYONE
  • Worldline | Six Payment Services

What is the lock-in effect?

A lock-in effect is a situation where customers find it difficult to switch to another provider due to high switching costs or other obstacles. The higher the switching costs, the greater the lock-in effect.

How do acquiring banks benefit from the lock-in effect?

In order to enable their customers to make cashless payments, merchants must provide the technical infrastructure (card terminal and POS system) and also conclude contracts with a payment service provider (PSP) and (at least) an acquiring bank.
In order for cashless payment to function smoothly, these different areas must be coordinated with each other. This creates organisational and technical dependencies that can make it very complicated for merchants to change acquiring banks.
To avoid these complications, merchants often stay with an acquiring bank despite high fees.

What is a multi-acquiring strategy?

In a multi-acquiring strategy, merchants or payment service providers work with several acquiring banks at the same time so that they are independent of any one acquirer from a technical, legal and commercial perspective.
If multi-acquiring is implemented in your own EFT system, cashless payments can always be processed by the acquiring bank that best suits the relevant card or payment type, or that offers the best conditions.

Advantages of multi-acquiring: why it can be worthwhile for merchants to use more than one acquiring bank

Fewer outages

Wenn es auf Seiten einer Acquirer Bank zu einem technischen Störfall oder Betriebsausfall kommt, kann der Betrieb im Fall einer Multi-Acquiring-Strategie trotzdem reibungslos fortgeführt werden.

Greater flexibility

The multi-acquiring strategy gives merchants (and PSPs) greater flexibility to respond to their customers’ payment preferences. This flexibility is becoming increasingly important for merchants as more and more different means of payment (such as smartphones and smartwatches) are being used.

Higher conversion rates

With a multi-acquiring strategy, merchants can accept even more card types and currencies. At the same time, those who have to reject fewer payments automatically benefit from a higher conversion rate. By the way: 85% of merchants who have introduced multi-acquiring confirm that this is the case.

More bargaining power

In addition, a multi-acquiring strategy means that the payment processing can always be specifically entrusted to the acquirer that offers the best conditions.
This competition gives merchants more bargaining power vis-à-vis acquiring banks – and at the same time frees them from the lock-in effect.

What can be done to make the introduction of multi-acquiring simpler?

Merchants who want to introduce multi-acquiring must adapt their payment infrastructure accordingly. When it comes to technical integration, Pepper, the universal connection between payment terminal and POS device, makes it much easier to connect new terminals and thus considerably reduces the effort and expense involved.

How do you keep track of the different fees involved in multi-acquiring?

Several acquirers in parallel – this means that there will also be a variety of different fees (depending on the acquirer contract). The payment analytics centre of the reconciliation software Matchbox helps merchants to keep track of all the structures and fees of the different acquiring banks – and thus optimise their costs.

Summary

An increasing number of merchants are using several acquiring banks at the same time. Despite the initial effort involved in integration, such a multi-acquiring strategy offers a whole range of advantages:

  • Using multiple acquirers increases the likelihood that a payment will go through – ensuring smooth operations.
  • Increasing the number of card types and payment methods accepted increases the conversion rate.
  • Having a choice of acquirer for each transaction results in greater bargaining power on the part of the merchant.
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