What is Local Acquiring? 

Local acquiring, or local processing, is a card processing method in which the merchant acquirer is based in the country where the payment is made. This allows businesses to process transactions as if they were based in the same country as the customer, even if they are not. EU rules cap consumer credit card interchange at 0.3% only when the card issuer and the merchant’s acquirer are both in the EEA.

SaaS businesses prefer local processing due to:

• reduced costs
• higher authorization rates
• important element in global expansion.

Local acquiring operates similarly to regular acquiring but requires establishing relationships with local acquiring banks.

Local acquiring involves processing customer debit and credit card payments through an acquiring bank located in the same region as the issuing bank.

• Step 1: The customer makes a purchase. The payment is sent to the local acquiring bank for authorization and confirmation.  
• Step 2: The local acquiring bank informs the card network and the issuing bank to complete the transaction. 

Within the payment ecosystem, acquiring and payment processing are two different but interconnected operations.

• Acquirers manage merchant accounts and perform fund transfers
• Acquirers take care of merchant onboarding and handle settlement accounts.
• Payment processors communicate with all the parties involved in a transaction about the details of the payment.
• Payment processors take care of the technical aspects of the transaction, such as arranging for the transmission of information about the transaction.

The acquirers are paid through the merchant discount, usually a percentage of each transaction, whereas the interchange fees flow from the acquiring bank to the issuing bank (Visa).

Local acquiring brings several advantages for SaaS and software businesses seeking to expand internationally.

If your business operates in more than one country and includes cross-border transactions, local acquiring can process these transactions most effectively.

Local acquiring is particularly useful for companies that engage in e-commerce, SaaS services, online games, and digital products in environments that feature stringent regulations and payment infrastructure.

Think about using local acquiring if your company conducts many cross-border deals or needs to improve the customer experience in particular international markets.

A SaaS company can use local acquiring for processing payments. This method increases the probability of authorization, reduces the number of payment failures, and also reduces cross-border fees. EU caps of 0.2% for consumer debit and 0.3% for credit cards apply only where the merchant’s bank and the issuing company are based in the EEA (GOV.UK).

When it comes to improving conversion rates and the flow of income, in particular for SaaS companies and subscription-based businesses, these factors go a long way. In addition, local acquiring allows businesses to enhance the customer experience by offering local payment options.

Global events and other external factors have a far-reaching effect on the performance of businesses located in a particular area since they include factors like the regulatory environment, the economy, and market dynamics.

These factors can affect the performance of businesses, including:

• the authorization rate
• the time it takes to complete a transaction
• the effectiveness of the local card processing.