Merchant Acquirer: What It Is And How It Works For UK SMEs
In this guide, we'll show you step by step everything you need to know about a merchant acquirer and how you can evaluate your current setup.
January 6, 2026
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Every business in the UK needs to accept credit cards, and those that do not accept credit cards are living in the 19th century. If you are a business that sells online or a business that needs to invoice customers, you rely on card payments being settled in a timely fashion. A card payment for most people is a simple transaction, but there are all sorts of moving parts beneath the hood, and a merchant acquirer is an important one. Small businesses interact with merchant acquirers without realising it, especially when using all-in-one platforms like Stripe or PayPal. But what exactly does a merchant acquirer do? What exactly is being acquired and by whom?
What is a merchant acquirer?
A merchant acquirer is the bank or financial firm that makes card payments, works for your business. When a customer pays by card, the acquirer checks the payment with the customer’s bank, moves the money, handles chargebacks, and then pays the funds into your account. For example, if a café uses an all-in-one card terminal, there is still an acquirer behind the scenes taking on the risk if a payment is disputed. That risk is why acquirers run checks when you sign up and follow strict Visa and Mastercard rules.
Merchant acquirers take financial risk on behalf of your business. They underwrite you as a merchant, allowing you to process and absorb potential losses linked to fraud or chargebacks. That risk is why they run checks when you sign up and why every acquirer must comply with card scheme rules from Visa, Mastercard, and the rest.
How does a merchant acquirer fit into card payment processing?
When a customer taps, inserts, or enters their card details online, the acquirer steps in. It takes the transaction information and requests approval from the issuer, the customer’s bank. If the issuer approves, the acquirer returns an authorisation message to the merchant, and the sale completes. This process happens in roughly one to three seconds.
The acquirer’s job during that time includes:
- Validating transaction data
- Applying fraud and risk checks
- Forwarding information securely
- Returning the approval status
Examples of merchant acquirer companies in the UK
The UK has several major merchant acquirers, each offering different pricing and levels of support. Traditional acquirers focus on underwriting and settlement, while newer fintechs like Stripe, Square, and Shopify Payments bundle acquiring, processing, and gateway services into one platform, giving SMEs a simple way to start taking card payments quickly.
Below is a comparison of five major UK acquirers and how they typically support SMEs.
Merchant acquirer vs payment processor: Key differences
The terms acquirer and payment processor are often used interchangeably, but they are different roles.
A merchant acquirer handles the financial side of card payments: underwriting the merchant, managing settlement, and absorbing risk.
A payment processor handles the technical side: routing transactions, encrypting card data, and connecting gateways to issuers and acquirers.
SO:
The processor moves the data; the acquirer moves the money. Merchant acquirers and payment processors work closely together, but they handle different parts of a card transaction. The acquirer manages the financial side, risk, settlement, and merchant underwriting, while the processor manages the technical side: routing data, encryption, and communication with card networks.
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Key differences
Merchant Acquirer
- Handles the financial side of each transaction, including settlement and chargebacks.
- Underwrites the merchant and carries financial risk for fraud or disputed payments.
- Holds the merchant account where funds sit before being released to the business.
- Communicates with card networks and issuers to authorise payments.
- Sets settlement schedules (e.g., same day, next day, or multi-day).
Payment processor
- Routes encrypted card data between merchant, acquirer, network, and issuer.
- Manages the technical flow: tokenisation, 3D Secure, PCI compliance, and fraud checks.
- Does not take on financial risk, focuses only on transmitting and validating data.
- Returns instant approval or decline messages during checkout.
- Often bundled with the gateway by modern providers (e.g., Stripe, Square).
Many individuals do not understand these differences because many payment platforms provide both of them. Providers like Stripe, Square, and Shopify Payments act as both acquirer and processor, bundling underwriting, settlement, gateway services, and dispute management into one dashboard, so the distinctions are less visible to small businesses.
Real-world example
A UK ecommerce SME processes £50,000 per month in card payments. Using a traditional setup (Barclaycard as the acquirer and Worldpay as the processor), their approval rate averages 94%, fees total around £505, and settlement takes two days.
With an all-in-one provider like Stripe, approval rates increase to 97%, fees are higher at £700 per month, but settlement is one day faster. Even after fees, the business receives £1,305 more cash sooner (£47,800 vs £46,495), improving liquidity despite the higher blended pricing.
1. Fees paid
This table compares how much the business pays in acquirer, processor, and blended fees each month under the two setups.
2. Settled value each month
This table shows how much approved volume the business processes and how much net cash it receives after fees in each setup.
3. Cash-flow timing impact
This table highlights when the cash actually lands in the business account and how much extra arrives sooner under the all-in-one setup.
Do SMEs need both an acquirer and a processor?
Yes, but SMEs don’t need to think about them separately. In practice, many use an all-in-one provider that bundles the acquirer and the processor together. Behind the scenes, there are different roles, but for the business, it usually feels like a single service that just lets card payments work.
Acquirer vs issuer vs merchant: Understanding the roles
To understand where the merchant acquirer fits, it helps to see the three core parties involved in a card transaction.
The merchant
The merchant (your business) collects payment details and sends the transaction request through a gateway or payment terminal. The merchant is responsible for providing accurate data and complying with PCI requirements.
The issuer
The issuer is the customer’s card provider, usually a bank or fintech such as HSBC, Monzo, or Barclaycard. It decides whether a transaction is approved by checking available funds, running fraud checks, confirming the card is active, and verifying any required authentication steps.
The acquirer
The acquirer sits on the merchant’s side of the transaction. It works with the card networks to request approval from the issuer, then settles funds to the merchant.
Together, merchant, issuer, and acquirer form the essential triangle of every card payment.
Why merchant acquirers matter for small and growing businesses
Merchant acquirers do a lot of the heavy lifting that keeps payments moving. For SMEs, the right acquirer can improve approval rates, reduce fraud exposure, and accelerate cash flow.
How do merchant acquirers impact transaction costs and speed?
Acquirers influence both how much a transaction costs and how quickly funds reach the business. Pricing varies based on risk profile, transaction type, and volume, which is why two merchants can see very different fees for similar payments. Speed also differs. Some acquirers settle funds the same day or next day, while others batch settlements over several days, especially for newer or higher-risk merchants. Faster settlement improves cash flow and gives SMEs more predictability when covering supplier payments, payroll, and other operating expenses.
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Choosing the right merchant acquirer for your business
Finding the right merchant acquirer isn’t just a technical decision—it shapes how quickly you get paid, how much you spend on fees, the types of cards you can accept, and how smooth your checkout experience feels to customers. For many SMEs, the goal is a setup that’s reliable, predictable, and doesn’t require constant maintenance. With that in mind, there are a few areas worth exploring before you decide.
Pricing structures to compare
Acquirers price their services in different ways, and the model you choose can significantly affect your monthly costs. Interchange-plus pricing is transparent but can vary because interchange rates differ by card type. Blended pricing offers a single, predictable rate, but it’s harder to break down because the individual fee components aren’t visible.On top of that, you may come across extra charges such as:
- Fees for handling chargebacks
- PCI compliance or non-compliance fees
- Terminal rental
- Cross-border or higher-risk surcharges
The right choice often depends on your card mix. If you take a lot of commercial or premium credit cards, transparent pricing may save you more in the long run. If you want predictability and minimal admin, a blended rate might make sense.
What to check in terms of integrations and onboarding
Compatibility and onboarding speed can make or break your experience, especially if you’re setting up payments for the first time. Some acquirers can approve new merchants in a day, while others require more detailed underwriting and can take longer.
It’s also worth checking:
Whether your e-commerce platform or POS system integrates directly
Whether a separate gateway is required (which can add cost and complexity)
If the acquirer supports alternative payment methods, such as digital wallets or instalment options
Considering all-in-one providers vs traditional acquirers
Not every business needs the same level of control or complexity. All-in-one providers like Stripe, Square, and Shopify Payments bundle acquiring, processing, gateway services, and fraud tools into one package. For many smaller or newer businesses, this simplicity is exactly what they need: fast onboarding, predictable pricing, and a single dashboard to manage everything.
On the other hand, traditional acquirers can offer more competitive rates and deeper customisation, especially once your turnover grows. They may also be the better fit for businesses in sectors where card usage is high, such as hospitality or travel. If you’re processing larger volumes or want to negotiate bespoke pricing, a dedicated acquirer can offer more flexibility.
Pairing the right acquirer with iwocaPay’s trade credit (B2B BNPL) can help UK SMEs improve cash flow by getting paid upfront while offering customers flexible terms. This is particularly useful for businesses issuing invoices, where traditional card payments are expensive and slow to settle.
Article Sources
- UK Finance – Payments Industry Guides
- Financial Conduct Authority – Payment Services Regulations
- UK.GOV – Credit, debts and related services: credit and related services: credit and other payment cards - introduction and operation
- Payment Systems Regulator – Market review into card-acquiring services
