Bank Acquiring

Acella carefully chooses technologies suited to managing a banks acquired merchants and systems that were primarily designed as a merchant management platforms. In many respects, an acquiring platform is just like an IPSP platform with extra backend facilities to connect to the actual merchant bank accounts.

Fundamentals of Merchant Acquiring

Once a bank has obtained a license from Visa, Mastercard and others to acquire merchants, they must then obtain BINs either directly or via another sponsoring bank. A BIN (Bank Identification Number) is typically a 6 digits number to uniquely identify a bank on card processing platforms. It appears as the first 6 digits on a credit/debit card, and it’s also a field in a merchant account setup.

Banks can either directly petition for one or more BINs they wish to directly control, or more commonly make an arrangement with a bank that already has BINs to sponsor them in some way, kind of like leasing them.

Once that is in place, an acquiring processor must be obtained. These are analogous to IPSPs in the Internet world, they connect and process funds transfers for BINs, and typically also provide connectivity for terminals and software. Such processors usually only work directly with Visa licensed banks to acquire, and are regional much like Visa regions. Many banks utilize multiple acquiring processors to give their direct customers more flexibility.

Software then integrates and directly connects to the acquiring processors.

Directly Connected Merchants

For some banks, allowing their customers to directly connect to the acquiring processor with their own software is an option. Those banks get daily activity reports from the processor, and that’s about it.

In the case of merchants with risk, which is all merchants really, the sanctions available to the bank are things like holding batches, and requiring substantial deposits. Because there is a relationship, any losses the bank incurrs can be reimbursed.

For some merchants, directly connected sometimes makes sense. If they have extremely custom software needs it can be made available on a per-case basis, however we’ve not yet come across a merchant that, from the bank’s perspective, wouldn’t benefit from software, like Acella provides, in between.

Perils of Direct Connect

Managing merchants and their risk is like managing any other credit risk for a bank. Visa and Mastercard will always hold a bank responsible for the merchants it acquires. Any fines, penalties, chargebacks or other sanctions directed from Visa/Mastercard at a merchant potentially leaves the bank vulnerable if there are not substantial deposits held to cover them.

Merchant account surety is about controlling the relationship on the front and back ends. If you allow merchants to directly connect, you can’t see what they’re processing, all you see are batches of deposits. You can see credit card numbers and amounts, but that is it.

Usually the first sign of trouble with a direct connect merchant is when Visa notifies you that the merchant is in a high risk monitoring program and possible fines have been withdrawn. Most banks have little choice at that time to either terminate the relationship, or require greater deposits.

Should a merchant choose and be allowed to direct connect, they must write or purchase software to manage the connection and go through major extra hoops in PCI compliance (security auditing). We can provide that software to merchants with good conscience who wish to ensure they follow the rules and to make their lives easier. Unfortunately many merchants will just purchase software that just processes credit cards, and doesn’t look out for their risk interests. The disconnect between bank and merchant only grows wider.

Advantages of Intermediate Platform

By placing a smart platform between the merchant and the processor, the bank gains an incredible amount of information regarding the merchant and how and what they are selling.

By proactively monitoring merchant accounts before they get into trouble, the bank can accept a wider range of merchants confident that the risk is more manageable.

When you force merchants to disclose what and how they market and sell, you can head off compliance problems and mitigate fines/penalties.

Platforms that we provide save merchants time and money by providing a platform they would normally have to purchase and maintain. Integration to the backend of Visa via a processor is complex and requires certification. New software releases are required all the time for updated specifications from these processors. It’s much more cost effective to centralize the platform for all merchants.

Essentially it’s all about proactive control. When you have more control, you can control more risk and see what is happening more quickly.

How we Manage Merchants

From the very beginning Acella’s goal was to assist banks to manage an unlimited amount of separate merchants in one software instance. By doing so, information in aggregate for risk purposes was easily available.

From the bank’s perspective, once the decision to issue a merchant account has been made, the gateway platform is configured with the BIN and account number, and it does the rest based on pre-setup risk controls.

Merchants may then directly integrate into the gateway platform. This is a simple integration compared to that of a processor, and the bank can also offer other types of accounts in one place, such as ACH processing.

All CS systems are built right in to the gateways that we provide. We also provide web interfaces for your customers to do much of the work on their own, and we also provide comprehensive interfaces for customer service reps to finish the job. Everything is fully permission based, and an email interface is built right into the software, so your CS reps. can just login and get started.