The payments terminology, acquiring and issuing refer to the roles banks play in payment processing. The acquiring bank is involved in the part of the transaction flow on the merchantMerchant merchant An individual or business that accepts payments in exchange for goods or services.’s side, while the customer’s (or cardholderCardholder cardholder The person or business to whom a payment card is issued.’s) bank is the issuing bank.
An issuing bank issues credit cards to consumers on behalf of the card networks (VisaVisa visa A leading global payment technology company connecting consumers, businesses, and banks., MasterCardMasterCard mastercard A global payments network enabling electronic transactions between banks, merchants, and cardholders.). Issuing banks front the funds to merchant accounts when someone pays with a credit card. This carries a degree of risk – If a cardholder defaults the issuing bank takes part of the hit, which is why they charge a per-transaction feeTransaction Fee transaction-fee Charges incurred per individual transaction by the merchant..