Algorithm of Card Acquiring for Online Business

Accepting card payments online has become so popular and usual that we don't even think of how this process works behind the scenes. However, it is not as simple as it seems. Card acquiring involves several participants, each responsible for their own part of work, making the entire process possible. The synchronization of all these participants ensures seamless payment flow, which is so necessary for all businesses. Why have we decided to raise this topic?

We are convinced that payment sector is highly important at mostly each business and you need to understand the nuances of various payment methods. This will help you better comprehend the entire financial system, find ways to optimize and improve it. If you are a payment manager, business owner, COO, or another C-level, you may need to enhance your expertise to deliver better results, optimize company expenses, and build stable partnerships with PSPs. This is exactly what Monoup helps with! During a consultation with us, you can get answers to your questions, solve current issues, and forget about payment problems. To leave a request, use the feedback form or drop us an email.

Meanwhile, let's delve into some theory of card processing.

What is Card Acquiring?

Acquiring literally means “acquisition,” in this case, of funds from a card. This is the process underlying the actual deduction of funds from payment card intended for goods or services. In simple terms, card processing (credit or debit) represents how companies process payments made using payment cards. When a customer swipes, inserts, or taps their credit card on a POS terminal to make a purchase, the transaction goes through several stages that can guarantee the payment is approved and transferred from the customer's account to the merchant’s account. The same happens online, when the buyer pays not in person but using a website or virtual terminal.

As we have said before, acquiring is a complex process involving several main participants:

• Cardholder (customer);
• Business (merchant);
• Payment gateway (helps initiate the payment but does not directly participate in the money flow);
• Processor (receives information from payment gateway and establishes communication between the card scheme, acquirer, and issuer. The processor and payment gateway can be the same company sometimes);
• Card payment system or card brand (e.g., Visa, Mastercard, AMEX) that sets the rules and provides the infrastructure for the customer's card.
• Issuer (bank that issued the customer's card. Sometimes it is also called the cardholder's bank);
• Acquirer (the bank that collaborates with payment system or merchant directly to process transactions. The acquirer receives transaction information from merchant and contacts the issuer for authorization, essentially doing all the work of money deduction).

All these participants are required in the card payment process, as it’s impossible without any of them. Each is indispensable, although the format of interaction and the number of involved legal entities can vary. Sometimes there can be even more participants, than we have listed, if the process includes various intermediaries, aggregators, anti-fraud tools, and other services. But this set is a must-have and is always present.

The process has evolved into what we know today quite some time ago, and although such a structure may seem too crowded, on the other hand, it ensures the competitiveness of payment services and their quality. After all, it is quite rare for one entity to function equally well in different roles for long time. When the workload increases it becomes even more challenging. Additionally, different stakeholders encourage innovation, favorable cooperation terms, and prevent any single entity from creating a monopoly.

Although Visa and Mastercard might argue here, as their services have long covered most of the world, and in many countries, they have, in fact, acquired monopoly status. However, thanks to the other market participants, it is possible to exert pressure on these payment systems and regulate their pricing and fees. Plus, there is always room for competition, which Europe vividly illustrates by taking steps to develop its own payment system.

Card acquiring is an important part of modern payment processing, and although there are already many alternative payment methods (wallets, transfers, and mobile systems), cards remain leading choice. Therefore, most merchants should organize card payment processing on their website but do so effectively for all parties.

How to Save on Payment System Fees

Acquiring, besides being one of the most complex payment solutions, is also one of the most expensive. There is a whole list of expenses in acquiring, as all participants want to earn. If we talk about gaming industry, the prices of payment solutions are much higher than for less risky businesses, and the question often arises: how to optimize these costs and truly save money?

Don’t expect that you can minimize costs too much due to the unstable stance of the payment market in iGaming and similar industries. But there is definitely room for optimization. To create a quality and cost-effective structure, we recommend:

• Using local payment systems for emerging markets. This approach will allow you to get more favorable prices for payment solutions, as it reduces the factor of resale or aggregation. Additionally, the solutions themselves can be more stable due to direct cooperation with their owners. You will learn about all updates firsthand and communicate directly with the provider.
• Implementing routing and cascading. Both of these technologies can reduce costs for unsuccessful payments (especially if you pay fee for declines) and decrease the time for a customer to complete a successful payment. Proper routing is the process of selecting the appropriate payment gateway for customer, including a set of important factors: country, card type, user level of trust, transaction size, various restrictions. If you consider all these factors in advance, it is highly likely that the first payment attempt will be successful, and the user will not have to make several attempts and go through a series of failed payments. This is both a saving and a good reputation for your website. Cascading, in turn, will smooth the transitions from unsuccessful attempts to successful ones and select the appropriate gateway for a repeat payment. All this can work automatically in real-time according to pre-arranged settings or even using AI technologies during the transaction flow.
• Connecting anti-fraud systems that will help detect fraud in advance and effectively combat it. This will significantly save your cost on chargebacks or possible fines from payment systems, which can amount to tens of thousands of dollars. Such situations are rare, but sometimes one unwanted transaction creates problems worth a substantial amount. In this case, it is easier to invest in protection and not allow such risks at all.

These approaches will create the foundation that will ensure a safe and comfortable transaction flow for user and an optimized cost structure for merchant. You also need to always look for ways to improve existing systems, use new technologies, and apply best practices in the industry.

Depending on your business and markets where you operate, there may be additional opportunities for optimizing payment processes or, conversely, limitations. To successfully navigate this environment, you also need to pay attention to AML legislation and stay within the rules of working with your customers' personal data. It is important to remember that payments are not some separate thing that needs to be managed. Payments are part of your business, and just as they affect all processes, all your processes affect them. Creating the right combination of all factors is your main task. You cannot build quality payment processing without first creating an equally high-quality system for customers acquisition and retention. After all, if website visitors are not interested in it or do not find what they came for, payment approval rate is unlikely to be high, even if you have everything set up. Only a structure with the right elements can give you the expected result.

At Monoup, we deal with analytics of individual cases on payment approval rates and help optimize payment processes in many industries. Reach out to learn more.