A basic question, rather: Isn't acquiring bank the one where merchant account is, where the payment is settled? A merchant bank is used for large loans (and underwriting) and is not used for everyday card payments.
In that case, having a blockchain rail will not eliminate the acquiring bank because, essentially, it is the destination for the merchant's money.
The acquiring bank here is the bank that is receiving the money on behalf of the merchant. It isn't the final destination or the merchant's "business account." This is the acquiring bank of the payment gateway that receives the funds.
So look at it this way:
The merchant signs up with a PA (lets say razorpay). The PA gets a terminal for the merchant from a bank.( this is the acquiring bank - which is the merchant @ icici, or merchant @ hdfc). This allows the merchant to accept the money and the money gets transferred from the customer to the acquiring bank pool account. This account is owned by the acquirer and NOT the merchant.
From here, the money is transferred to the PA escrow account, and then from THAT account, the money is settled into the merchant business account. That is how current payment flows are defined.
In a blockchain flow, the customer and the merchant account (the merchant biz account) are on the blockchain, with all systems having all visibility of the same, so middle players such as the acquiring bank (which holds the pool account) and the PA escrow account are not needed.
This is so well written and super interesting. Love the work
Thank you for reading!
A basic question, rather: Isn't acquiring bank the one where merchant account is, where the payment is settled? A merchant bank is used for large loans (and underwriting) and is not used for everyday card payments.
In that case, having a blockchain rail will not eliminate the acquiring bank because, essentially, it is the destination for the merchant's money.
Slight nuance here.
The acquiring bank here is the bank that is receiving the money on behalf of the merchant. It isn't the final destination or the merchant's "business account." This is the acquiring bank of the payment gateway that receives the funds.
So look at it this way:
The merchant signs up with a PA (lets say razorpay). The PA gets a terminal for the merchant from a bank.( this is the acquiring bank - which is the merchant @ icici, or merchant @ hdfc). This allows the merchant to accept the money and the money gets transferred from the customer to the acquiring bank pool account. This account is owned by the acquirer and NOT the merchant.
From here, the money is transferred to the PA escrow account, and then from THAT account, the money is settled into the merchant business account. That is how current payment flows are defined.
In a blockchain flow, the customer and the merchant account (the merchant biz account) are on the blockchain, with all systems having all visibility of the same, so middle players such as the acquiring bank (which holds the pool account) and the PA escrow account are not needed.