Why it’s essential that merchants use acquirer agnostic PSPs

By Philip Plambeck, Managing Director, UK, Computop

Philip Plambeck

In today’s fast-paced digital landscape where choice is fundamental to the customer experience, retailers are seeking payment solutions that offer flexibility, cost-efficiency, and seamless transactions. The ability to process card payments quickly, smoothly, and securely is paramount for any business that aims to provide exceptional service at the checkout. This is where the importance of using an acquirer-agnostic payment service provider (PSP) comes into play.

An acquirer-agnostic PSP offers a distinct advantage by giving retailers access to multiple acquirers, allowing them to optimise transaction routes for better reliability, a broader range of payment methods and potentially lower fees. This flexibility ensures uninterrupted payment processing, mitigating the risks associated with downtime or technical issues that may arise from relying on a single acquirer.

Avoiding Exclusivity: Fostering Competition and Better Terms

One of the key benefits of using an acquirer-agnostic PSP is that they will already have fostered healthy competition among the various entities they are integrated with, allowing retailers to take advantage of improved terms. This is perhaps why so many retailers have opted to engage in this way in recent years. A report from Edgar and Dunn in 2021 found that 57% of merchants globally were already engaging with multiple acquirers and among those that were using a single acquirer, 40% planned to move to multiple acquisition within 12 months.

Acquirers, the financial institutions responsible for processing and settling card transactions, can offer varying rates and conditions based on factors such as transaction volume, industry, and risk profile. An acquirer-agnostic PSP can therefore leverage this competition to negotiate favourable terms for its merchant clients, empowering them with control, resilience, and improved financial outcomes.

Uninterrupted Payment Processing: Mitigating Risk and Ensuring Continuity

The impact of downtime or technical glitches during a payment transaction should not be underestimated, with consequences for merchants ranging from lost sales and dissatisfied customers, through to reputational damage. The role of a PSP with an acquirer agnostic global payment gateway is to mitigate these risks and ensure continuous payment processing.

When a PSP has access to multiple acquirers, it can seamlessly reroute transactions through alternative channels if one acquirer experiences disruptions or forced maintenance periods. This redundancy and failover capability ensures that customer transactions are processed without interruption, which provides merchants with peace of mind but also ensures consistency and reliability for the customer.

Optimised Transaction Routing: Leveraging Rules-Based Routing

Acquirer-agnostic PSPs, such as Computop, employ sophisticated rules-based routing algorithms to optimise transaction processing. These algorithms take into account various factors, such as transaction type, currency, geographic location, and as I said previously, risk profiles, to determine the most optimal acquirer for the transaction.

By leveraging local processing capabilities, PSPs can route transactions through acquirers located closest to the merchant or customer, minimising latency and potential connectivity issues. This approach not only enhances the overall transaction experience but also helps reduce costs by cutting cross-border fees and leveraging regional acquirer rates where applicable.

The Process: From Retailer to Acquirer to Settlement

To better understand the mechanics of acquirer-agnostic payment processing, let’s explore the typical flow of a transaction:

1. Transaction initiation – The retailer initiates the process at the point when a customer presents their card at the retailer’s storefront, whether physical or online.
2. PSP receives transaction: The retailer’s PSP receives the transaction details from the retailer’s online shop or point-of-sale system.
3. Rules-based routing: The PSP’s platform or gateway applies a set of predefined rules to determine the most optimal acquirer for the transaction, considering factors like location, currency, and risk profile.
4. Acquirer processing: The transaction is routed to the selected acquirer for authorisation, settlement, and funding.
5. Retailer funding: Once the transaction is successfully processed, the funds are credited to the retailer’s account, typically within a predetermined settlement period.

By leveraging this process, acquirer-agnostic PSPs can ensure efficient and cost-effective transaction processing while providing merchants with the flexibility and resilience they need in today’s competitive business environment.

The Benefits of Local Acquiring

In addition to optimised transaction routing, acquirer-agnostic PSPs often offer connections to local acquiring capabilities, allowing transactions to be acquired within the same country or territory as the merchant or customer – within the EU would be an example.

This approach brings several advantages. Firstly it can cut fees. By acquiring transactions locally, retailers can often avoid costly cross-border fees typically associated with international transactions, leading to lower overall costs. Local acquiring also helps merchants to comply with regional regulations and data privacy laws, minimising the risk of non-compliance and the associated penalties. Thirdly, it can improve transaction speeds and reduce the likelihood of false declines due to geographic or currency mismatches, which has the knock-on effect of improving the customer experience.

By embracing an acquirer-agnostic approach, PSPs empower retailers with the flexibility, resilience, and cost-efficiency they need to win in the fiercely competitive retailer space. As retailers continue to prioritise seamless customer experiences and optimised financial outcomes, the importance of acquirer-agnostic payment service providers will only continue to grow.