3. Card Payments - Acquiring card transactions in Australia
Direct acquirers
Direct acquirers assume all obligations associated with acquiring transactions themselves. These obligations include clearing, settlement, network management, technology and regulatory compliance.
To interface with other card participants, they need to have certain relationships in place:
- RBA settlement account. Direct acquirers must have their own RBA Exchange Settlement Account (ESA), which is used to settle financial obligations arising from the clearing of payments. Once the RBA approves the opening of an ESA account, the acquirer has to become a member of the RBA’s high-value settlement system, RITS. RITS acts like an online banking facility for ESA holders and is used to settle payments on a Real-Time Gross Settlement (RTGS) basis. The RBA publishes eligibility criteria for establishing an ESA.
- AusPayNet compliance. Direct acquirers should consider becoming a member of the IAC. Under its Code Set, the IAC gives participants assurance that their partners meet certain minimum security, interoperability and efficiency standards, including for all point-of-sale technology, ATMs and unattended devices. AusPayNet also manages the AIN-BIN database, which houses all the unique identifiers critical to routing transactions to the right issuers or acquirers. Acquirers and issuers should be part of this database so that other participants can recognise their identifiers.
- Community of Interest Network (COIN). COIN is a virtual private telecommunication network that supports low-value payments (not only cards but also direct entry and cheques). Telstra owns the infrastructure but AusPayNet sets the regulatory framework governing who can connect and what traffic they can send over the network. The COIN is an efficient way for direct payment participants to connect to each other directly and share low-value payment files.
- Card scheme(s). Acquirers need to establish relationships with card schemes, which have their own set of rules and criteria for acquiring transactions on their networks. (American Express and Diners Club acquire their own transactions and merchants will have direct relationships with them.) The schemes may need to configure any acceptance technology (POS and gateway) that acquirers provide to a merchant client to connect to their networks. Once an acquirer has linked to a scheme, the scheme will help establish an Acquirer Identification Number (AIN) from ISO or SA. However, it is then up the acquirer to ensure their AIN is updated in the AIN-BIN database.
- Payment gateways for processing. A payment gateway is used to process card payments for electronic businesses. To acquire online transactions, an acquirer will either need to partner with a payment gateway service or develop its own gateway. There are many payment gateway services available in Australia.
Indirect acquirers
Acquirers can access the card system indirectly by entering a commercial arrangement with a direct acquirer or a service provider. Indirect acquirers still own the relationship with the merchant but outsource some or all of the acquiring services to the direct acquirer or service provider. These services include:
- Sponsorship into the card schemes
- Management of the terminal fleet
- Representation within AusPayNet’s IAC, including adding AINs to the AIN-BIN database
- Transaction processing and routing to issuers
- Settlement of card transactions
- Fraud management solutions
Other considerations for acquirers
In recent years card-not-present (CNP) fraud has grown in line with the increase in online shopping. As part of an industry approach to reducing CNP fraud, card acquirers need to have certain CNP fraud mitigation strategies in place. More information is available here.
Merchant (least-cost) routing allows merchants to work with acquirers to route contactless payments via their preferred network. The RBA publishes guidelines on merchant routing.
