What it means
When a customer taps a card in a shop, several parties are involved. The cardholder's bank is the issuer, Mastercard operates the network that carries the messages, and the acquirer is the institution that holds the merchant's account and receives the money on the merchant's behalf.
The acquirer provides the merchant with the means to take payments, such as card terminals or an online gateway, and it checks and routes each transaction through the network for approval. It then settles the funds into the merchant's bank account, usually after a short delay and after deducting fees.
Fees are layered. The interchange fee goes to the issuing bank, the scheme fee goes to Mastercard for use of its network, and the acquirer adds its own margin, called a markup, which covers its costs, risk and profit.
Acquirers also carry risk. If a merchant goes bust after taking payments for goods not yet delivered, or if customers dispute transactions and the merchant cannot refund them, the acquirer may be liable for chargebacks, so it checks new merchants carefully and may hold back some funds as a reserve.
Merchants can choose between a traditional bank acquirer and a payment service provider that bundles acquiring with software. The fees can be a blended percentage or an itemised structure, and comparing the total cost per sale is more useful than comparing headline rates.
A merchant selling in several countries may need acquirers that support local payment rules and currencies. It is worth asking about settlement times, support quality and dispute handling, not only price, because a cheap service that holds funds for a week can cost more in lost working capital.
In practice
Real-world examples.
Example
A cafe signs a contract with a bank acquirer and receives card terminals. At the end of each day the acquirer settles the Mastercard sales into the cafe's account, less fees. The owner reconciles the deposits against the till report every Monday morning.
Example
An online store compares two acquirers. One quotes a flat 2.0% per transaction, while the other quotes an itemised 1.5% interchange plus 0.2% markup and scheme fees, and the store works out which is cheaper at its volume. On $40,000 of monthly sales, a difference of 0.3 percentage points is worth $120 a month.
Example
A travel agency takes deposits months before trips. Its acquirer asks for a rolling reserve of 5% of sales because customers could dispute charges if a trip is cancelled. The agency's finance manager includes the held funds in her cash forecast so she does not overstate liquidity.
Formula
Calculation
Net settlement = Card sales - (Interchange + Scheme fees + Acquirer markup)
A shop takes $100,000 of Mastercard sales in a month. The illustrative interchange rate is 1.5%, the scheme fee is 0.15% and the acquirer markup is 0.30%, so the total fee rate is 1.5% + 0.15% + 0.30% = 1.95%.
Interchange = $100,000 x 1.5% = $1,500, scheme fees = $100,000 x 0.15% = $150, and markup = $100,000 x 0.30% = $300. The total fee is $1,500 + $150 + $300 = $1,950, so net settlement = $100,000 - $1,950 = $98,050, and the effective cost of accepting cards is 1.95%. A merchant should compare this all-in figure, not the markup alone, when judging offers from different acquirers.Case study
Seen in the real world.
Harbour Bakery is an illustrative, fictional chain of six shops that took about $60,000 a month in card payments through a single acquirer on a blended rate of 2.4%. The finance manager noticed that fees were rising faster than sales and asked for an itemised statement.
The statement showed that most of the cost was a fixed markup and a monthly terminal rental, while the interchange and scheme fees were a smaller portion. By collecting quotes from two other acquirers on a transparent interchange-plus basis, she found an offer that would reduce the effective rate to about 1.9%.
On $60,000 a month, a reduction of 0.5 percentage points saves $300 a month, or $3,600 a year. In this illustrative story the bakery switched acquirer, after checking that the settlement time and customer support were at least as good as before.
Watch out
Common mistakes.
- Comparing acquirers on the headline rate alone, without adding terminal rental, minimum fees and chargeback charges.
- Assuming Mastercard itself sets the merchant's final price, when the acquirer decides its own markup.
- Ignoring the settlement delay, which affects the merchant's cash flow, especially for small businesses that pay suppliers and wages within days.
Questions
People also ask.
What is the difference between an acquirer and an issuer?
The acquirer serves the merchant and receives the payment, while the issuer serves the cardholder and provides the card and credit or funds.
Does Mastercard act as the acquirer?
No, Mastercard operates the network and sets the scheme rules, while acquirers are banks or payment companies licensed to join the network and approved to sign up merchants.
What is a chargeback?
It is a dispute process in which the cardholder's bank reverses a payment, and the acquirer may recover the money from the merchant, often with an additional dispute fee.
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