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Installing a payment terminal in a store stimulates an increase in sales by 20-30%. This is because consumers prefer to pay for your purchases by cardthis contributes to an increase in impulse purchases compared to cash. Most people usually have one or two cards with larger amounts, while cash is usually used only for occasional expenses, such as travel or emergency purchases. Banks often offer joint programs with stores and cashback systems, which encourages consumers to spend money on their cards.
What is acquiring
For acceptance card payments acquiring terminals and intermediaries are needed to route payments from customers' cards to the seller's account. Acquiring is an automated process of accepting payments from a card of any bank to the merchant's current account. Technically, acquiring also includes cash withdrawals through ATMs, especially if the card issuing bank is different from the bank that operates the ATM through which the withdrawal is made.
Who needs acquiring and what for
Acquiring is necessary for any store or business, especially those with high sales and large transactions. A large sales volume leads to additional collection costs and increases the risks associated with storing large amounts of cash. Implementing acquiring helps to reduce these costs and minimize risks through electronic payment processing.
Acquiring types
The most common way to accept payments is through a POS terminal. The process is as follows: the terminal reads data from the magnetic stripe or chip of the card and sends it for verification. The bank that issued the card either confirms the payment and debits the card or rejects the transaction. Although the merchant receives a payment confirmation usually 10-20 seconds after entering the pin code, the actual money is credited to their account in the next few days due to slow bank transfers. However, if the issuer and acquirer are the same entity, the money can be credited to the merchant's account as early as the next banking day.
Mobile acquiring is a combination of a smartphone and a card reader. A special banking application on the smartphone controls the reader and immediately encrypts payment data. Currently, you can do without a reader if both the seller and the buyer have NFC chips on their smartphones. The process is as follows: the seller enters payment data in the app and scans the buyer's card. The buyer enters the pin code on the keyboard in the app, and then both parties wait for payment confirmation. In principle, there are no major differences, except that the smartphone does not generate a receipt.
Internet acquiring is the most common way to pay for services online. It functions similarly to conventional acquiring for individuals, except that instead of reading information from the card, the customer enters the details on a special page. Instead of a PIN code, the payment is confirmed by a one-time password sent by the issuing bank via SMS or in the personal account of the banking application. Internet acquiring is cheaper because the merchant does not need to buy or rent terminals, pay for setup and repair. However, Internet acquiring is only suitable for purchases in online stores, as manual entry of details takes more time and is less secure than conventional card reading.
Details about how acquiring works
Acquiring is the process of accepting and processing payments using plastic cards (credit, debit, and other), which includes several stages:
- Initiating a payment: The customer chooses a product or service and decides to pay for it with a plastic card.
- Data entry: In the case of physical acquiring (in stores, restaurants, etc.), card data (number, expiration date, CVV code) is entered into the POS terminal by the merchant or the customer. In the case of online acquiring, the customer enters their card details on a secure page of the store's website.
- Authorization: The acquiring system sends a payment authorization request to the issuing bank (the bank that issued the card). The bank checks the card details and whether the customer's account balance is sufficient to make the payment.
- Confirmation or rejection: The issuing bank decides whether the transaction can be processed and sends a response (confirmation or rejection) to the acquiring system.
Write-off of funds: If the payment is approved, the funds are reserved in the customer's account and await debiting.
Receiving confirmation: The merchant or acquiring system receives confirmation of successful or unsuccessful completion of the transaction.
Completion of the transaction: If the transaction is successful, the funds are debited from the buyer's account and transferred to the seller's account. In case of an unsuccessful transaction, the funds remain in the buyer's account.
Notifications: In case of a successful transaction, the buyer and seller can receive a notification about the completed transaction.
This is a general acquiring process that can vary depending on the payment systems used, the type of transaction, and other factors.
Selecting an acquirer and connecting. How funds are credited
The first step to connecting acquiring is to prepare the company, including registration as an LLC or individual entrepreneur, if it has not already been done, and collecting the necessary documents. The bank may request a certificate of account availability or offer to open a new account for accepting payments, as well as require photos of the premises where the terminal will be installed. Then you need to sign a contract and connect the equipment that needs to be configured.
For an online store, the bank may require a fully developed and secure website, a personal account, a formalized payment, delivery and return policy, and a privacy policy.
When choosing an acquirer, it is important to consider the terms of work. Some acquirers may offer minimal fees, for example, 1.5%, but their terms may be inconvenient for customers. Others may charge up to 4%, but provide a high level of service for both the store and customers. Therefore, the choice of an acquirer is to find a company that offers low fees and high quality service.
Indeed, for most of the working day, merchants and banks exchange only payment information, not money. This is exactly what cashless payments are for. At the end of the working day, the merchant summarizes all transactions and sends them to the acquirer. This final invoice contains all transactions and card numbers from which payments were made. The acquirer, in turn, sends information about the purchases to the issuing banks whose cards were used for payment. The issuers then transfer the corresponding amounts to the merchant's bank account. This usually takes 1 to 3 business days. Thus, the money is not actually transferred directly, but rather information about the transactions is exchanged, and later banks perform financial transactions based on this information.