A merchant acquiring agreement is the contract under which an acquirer agrees to accept a merchant's card transactions, submit them to the card schemes and pay the proceeds into the merchant's bank account. It sets the price of acceptance, when and how funds are settled, who bears the cost of disputes and fraud, and what the merchant must do to keep the service. Most businesses that take cards directly sign one, often as a set of standard terms plus a schedule of fees.
The agreement is the legal basis of a merchant account. It is often a three-party document between the merchant, an acquiring bank that holds the scheme licence and a processor that runs the technology. It differs from a payment service provider agreement, which a merchant signs with an intermediary that itself holds the acquiring relationship.
Merchant acquiring agreement in plain terms
Think of a shop that wants to sell tickets for a concert promoter. The promoter hands over the tickets and agrees to pay the shop a share of each sale, but sets rules: the shop must follow the promoter's procedures, hold back some money in case of refunds, and pay for any tickets it sells to the wrong people.
A merchant acquiring agreement works the same way between a business and the company that collects its card payments. The acquirer agrees to bring in the money from customers' cards and pass it on, minus its fee. In return, the business promises to follow the card companies' rules, keep card details safe and cover the cost when customers successfully dispute their payments.
Key terms of the agreement
- Pricing. Fees may be quoted as a single merchant discount rate, as interchange-plus pricing that passes through scheme costs, or as tiered rates, plus fixed per-transaction, monthly and terminal fees.
- Settlement. The contract states the settlement currency, the account funds are paid into, the delay between transaction and payout, and whether fees are deducted gross or net.
- Reserves and security. The acquirer may hold a rolling reserve, a fixed deposit or a guarantee to cover future losses, and may change it if the merchant's risk changes.
- Chargebacks and refunds. The merchant is normally liable for every chargeback, plus related fees and any scheme fines triggered by high dispute or fraud ratios.
- Permitted business. The agreement describes what the merchant sells, its merchant category code, its trading websites and locations, and forbids processing for any other business.
- Data security. The merchant must comply with PCI DSS and report breaches, and bears costs if card data is compromised.
Underwriting and onboarding
Before signing, the acquirer underwrites the merchant: it checks identity and ownership through Know Your Business procedures, reviews financial statements and processing history, looks at the website and refund policy, and checks industry lists of previously terminated merchants. The findings decide the pricing, reserve and limits written into the contract. A high-risk merchant, such as one selling travel, subscriptions or regulated products, usually faces higher fees, larger reserves, delayed settlement and tighter monitoring. Card scheme rules require the acquirer to keep knowing its merchant after onboarding, which is why agreements let it ask for information, audit the merchant and change terms.
Termination and liability after termination
Acquirers reserve broad rights to suspend or end the agreement, for example for excessive chargebacks, suspected fraud, a change in business, insolvency or a breach of scheme rules. Termination for serious cause can lead to the merchant being added to an industry list such as Mastercard's MATCH, which makes it hard to obtain card acceptance elsewhere. Because chargebacks can arrive months after a sale, the merchant's liability and the acquirer's right to hold reserves continue after the contract ends, often for six months or more.
Regional and regulatory points
In the European Union and the United Kingdom, acquiring is a regulated payment service, so the agreement is a framework contract that must include information required by payment services law. The EU Interchange Fee Regulation (EU) 2015/751 requires acquirers to show the merchant service charge broken down into interchange, scheme fees and their own margin unless the merchant asks for blended pricing. In the United States, acquiring is governed mainly by contract and scheme rules, with the sponsor bank responsible to the networks. Across markets, the agreement must also address card scheme compliance, and merchants selling abroad may need separate terms for cross-border card acquiring or for point-of-sale acquiring at physical sites.