Acquirer vs Issuer: the Key Difference Between an Acquiring Bank and an Issuing Bank in Card Payment Processing

Multi-billion credit/debit card transactions are processed every year, and acquiring banks and issuing banks are the two driving forces, ensuring money from these transactions gets to the intended destination. Any business that collects payments for services or goods must understand these important systems and how they function in the transaction process. So, what’s the difference between an acquiring and issuing bank? Find answers to these questions and more in this guide.

What Is an Acquiring Bank?

As a business accepting digital payment, before you can accept online payments from your customers, you will have to sign a contract with a reputable financial institution to design and maintain your business merchant’s account. This is crucial because, without signing this contract, you cannot process any credit and debit card transactions or receive payments after they are completed.

To give a simplistic definition, an Acquiring bank is any financial institution in charge of processing debit and credit card payments on behalf of the vendor or merchant. Each time a cardholder initiates a purchase, the acquiring bank routes the transaction through the appropriate card network to the issuing bank, which is solely responsible for authorizing or declining the payment. If the transaction is approved, the funds are settled to the merchant’s account — either in batch cycles or, with modern platforms, instantly (T+0) to support faster liquidity.

How Does an Acquiring Bank Work?

When the customer gets to the checkout to complete their purchase, the transaction begins with a payment gateway such as Paykassma, which is liable for the acquiring transaction authorization and the data encryption to ensure that the data along with the red are safely transmitted.

Once the payment gateway has initiated the process, the acquiring bank then collects the transaction data from the merchant and transfers it to the appropriate card association. In this case, the card association includes Visa, Mastercard, Discover, and American Express, to name a few. The card association, alongside the issuing bank (the customer’s bank), authenticates this information and confirms the transaction’s authenticity by verifying that the card is still valid and has enough funds to complete the transaction.

Once the transaction is approved, the card brand network and the issuing bank would send their approval to the Acquiring bank to credit the funds to the merchant account. The fund transfer between accounts is often done at a regular rate.

What Are Issuing Banks?

Issuing banks is quite the opposite of acquiring banks as it is working with the cardholder, or one can say it is the customer’s bank. They issue payment cards to various authorized consumers; hence, the name. Like acquiring banks, they are likewise connected with one or many card brands, which are also called card associations.

While card networks like Visa and Mastercard appear on cards, they are not issuers. Actual issuing is done by licensed banks that partner with these networks. However, these card brands don’t usually work directly with consumers. They rather let issuing banks handle those relationships for them. So, in any online transaction, the issuing banks play the role of middle-man between the card network and the customer.

Issuer vs Acquirer: Key Differences and Role in Credit Card Transactions

As we mentioned earlier, both acquirer and the issuer play an important role in the payment process. However, they are different banks and have different roles.

Acquiring Bank Roles

The role of an acquiring bank is to see to it that businesses get merchant accounts and are authorized to process debit or credit card payments on their behalf. Acquirers typically rely on third-party payment processors or gateways to handle the technical aspects of transactions, while they focus on merchant account management and settlement. They work in tandem with third-party processors more typically and then serve as a middleman between the business, the card network, and the processor. In addition, during a transaction, after the issuing bank release the money from the cardholder’s account, the acquiring bank collects the payment and ensure it gets to the business account.

Issuing Bank Roles

Issuing banks provide credit or debit cards to consumers and are responsible for evaluating the cardholder’s account, approving transactions, and handling billing and disputes. This is because card networks are not heavily involved in individual transactions. All they do is provide the framework for regulated and consistent use plus rules and standards for payments happening on their network. So, the issuer checks the cardholder’s account and makes sure the customer has substantial resources to complete the transaction.

Responsibilities of Issuers and Acquirers

The responsibilities of issuers and acquirers vary. Here are a few of them in the list below.

Are Merchant Acquirers the Same as Card Networks?

In the world of digital payments, it's easy to confuse the roles of acquirers and card networks — especially since both are essential to processing card transactions. However, these entities serve very different functions in the payment ecosystem.

Card Network vs Acquirer: Clarifying the Confusion

An acquirer, or acquiring bank, is a financial institution that enables businesses (merchants) to accept credit and debit card payments. It manages the merchant account, receives transaction requests, and ensures the funds are settled into the merchant’s account once a transaction is approved.

A card network, on the other hand, is the infrastructure that connects acquirers and issuers. Think of card networks as highways for transaction data — they transport payment information from the merchant’s bank (acquirer) to the customer’s bank (issuer) and back again. They also define the rules, standards, and fees for participating banks.

Card networks do not issue cards or hold customer funds. They facilitate communication and transaction routing.

Visa, Mastercard and Their Roles with Acquirers and Issuers

Visa and Mastercard are the two most widely used card networks globally. They don't directly issue cards or acquire payments—instead, they partner with licensed banks.

• When you see the Visa or Mastercard logo on a payment card, it means the card is processed through that network.
• The card issuer (for example, HDFC Bank, ICICI Bank) provides the card to the consumer.
• The acquirer (for example, Axis Bank, Paykassma’s partner banks) enables the merchant to accept it.
• The card network (Visa/Mastercard) routes the transaction between the two.

This layered structure ensures speed, security, and global interoperability across millions of merchants and billions of transactions.

Acquirer vs Issuer: Final Thoughts

Even though they perform different roles and have varying responsibilities, acquiring banks and issuing banks are crucial to digital transactions involving credit and debit cards. So, businesses that accept payment through cards need to have a system in place to ensure that there is an easy handover whenever a customer initiates a transaction at the point of sale. We believe that this guide gives you an insight into what differentiates an acquirer from an issuer.