Merchant acquiring is one of the fundamental aspects of
the entire card payment process, but perhaps it has not been given
the attention it deserves. In this article, Ron Kalifa, managing
director of RBS WorldPay, and Francesco Burelli, director of
payments at Deloitte, give a comprehensive overview of the entire
merchant acquiring value chain.

CI: What do we mean by merchant acquiring?

RK: When merchants need to accept credit and debit card payments,
merchant acquiring is the process which enables them to do this.
Merchant acquirers tend to be, though are not always, banks.

The merchant acquiring market for UK card payments involves four
key groups: merchants, acquirers, card issuers and

An effective merchant acquiring service speeds up secure
transactions and opens multi-channel purchasing to a wider customer
base by enabling payments to be accepted over the telephone, on the
internet as well as face-to-face.

Merchant acquiring also enables businesses to automatically
transfer funds, helps to protect them against fraud by recognising
stolen or invalid cards and reduces the amount of cash they handle,
which has obvious security benefits.

Acquirers levy a merchant service charge (MSC) on card transactions
that varies according to: the card scheme such as Visa, MasterCard
and American Express; card type, for example debit, charge or
credit; and transaction type, such as chip and PIN; as well as
other factors. In turn, acquirers pay interchange fees to the card
issuers for each purchase transaction.

The UK is the most mature and largest European market for payment
cards, with over 165 million cards in issue last year. Spending on
plastic in the UK amounted to £354.2 billion ($565.6 billion) in
2006, of which around 10 percent was spent online.

CI: What services do merchant acquirers

RK: The main services provided by acquirers to merchants are the
capturing, authorisation and processing of card payment
transactions. The acquirer then settles the funds back to the
merchant from the cardholder and issuer via the relevant card

The merchant acquirer acts like a large buffer protecting the
merchant from having to familiarise themselves with all the detail
and required changes surrounding the different card schemes and
legislation. They provide a single interface for all card related
matters – regardless of currency, pay all the scheme and issuer
fees on behalf of the merchant and act as an intermediary in the
event of card claims, returns and refunds. In addition, the
merchant acquirer offers the provision of a payment guarantee and
the supply of various support services.

Acquirers are also responsible for providing certified point of
sale (POS) terminals to smaller merchants, or for ensuring that
their stand-alone systems and equipment meet the associated
interface requirements and relevant standards. RBS WorldPay for
example manages an estate of over 260,000 POS devices.

Larger merchants often have their own integrated electronic point
of sale (EPOS) systems with their own POS equipment and are
responsible for their own systems development and maintenance.
Transaction flows are tested by their acquirer to confirm
compliance to technical, security and scheme specifications.

CI: Who are the participants in the typical merchant
acquiring value chain?

RK: There are a number of participants in the typical merchant
acquiring value chain, including the merchant themselves. They
include the: