Which entity is described as the 'merchant bank' in payment card transactions?

• A. Acquirer
• B. Issuer
• C. Processor
• D. Cardholder

Answer: (A)

In card payment terms, the “merchant bank” is the acquirer. The acquirer is the bank or financial institution that signs a contract with the merchant to enable card acceptance, maintains the merchant account, and handles the flow of funds from cardholders’ banks to the merchant. When a payment is made, the acquirer submits the transaction through the card networks to the issuer for authorization, and, once approved, settles the funds to the merchant’s account (minus the processor’s and network fees).

The issuer is the cardholder’s bank that issued the card and funds come from that bank if the transaction is approved. The processor is the party that routes the payment data and manages communication between the acquirer, networks, and issuer. The cardholder is the consumer who holds the card.