Online payment is now a high priority in today’s marketplace. Businesses want to offer their customers the best solution for digital payments, and customers always seek the best online payment options.
In the USA, about 78% of people prefer online payment for every transaction as per the latest survey.
Offering a smooth payment process is crucial for your e-commerce business. If you want repeat customers while offering a smooth and convenient payment method, it is important for you to have the best payment service provider.
Let’s delve into more information by unwrapping the answer to what a PSP is, its benefits, and examples.
What Are Payment Service Providers (PSP)?
Payment Service Providers (PSPs) refer to third-party companies that enable businesses to accept online payment through a variety of payment options like credit and debit cards, and other applications. They are intermediaries between merchants, customers, and other financial institutes. That is, the business does not require a separate merchant account.
PSP is useful for small businesses that initially step into the market and are looking for a smooth and perfect payment solution. The other name of PSP is Payment Processors and Merchant Service Providers.
Are you satisfied with your understanding of what a payment service provider is? If so, let’s dive deeper into more details.
What Are Numerous Categories of Payment Service Providers?
Numerous kinds of payment service providers are available which are as follows –
1. Payment Cards
Payment Cards are cashless payment methods that are linked to the owner’s account. Popular useful payment cards are debit cards, prepaid cards, and credit cards.
2. In-Person Payment Solutions
Many companies provide in-person payment solutions like Square. These kinds of solutions are ideal for retail businesses.
3. Payment Gateways
A payment gateway is a system that links customer payments to the business’s receiving account. They also integrate the business processes with multiple financial institutions.
4. Online Payment Processing Companies
These are the companies that make the sending and receiving of online payments easy. They also act as a bridge and make the transaction.
How Do Payment Service Providers Work?
A payment solution provider works on a systematic concept. It includes authorization, transaction processing, and settlement. The following steps are involved in its working:
Initialization
Initially, the PSP payment gateway transfers the payment information once the consumer initializes the payment.
Authorization
This is a validation stage where PSP performs authorization. It matches and validates the payment details with customers’ issuing banks to ensure that sufficient funds are available.
Transaction Processing
Once the authorization is done, the PSP transfers the payment from the customer bank to the merchant bank. The PSP works with American Express, Visa, and MasterCard.
Settlement & Payment
PSP deducts the applicable fees and transfers the remaining funds into the merchant bank account.
Other Additional Services
Additional services like analytics, fraud detection, recurring billing for subscriptions, and currency conversion are provided by many payment service providers.
What Payment Service Providers Do?
The main aim of PSP is to simplify payment acceptance for the business. Businesses can easily accept the payment through different modes. Other than that, it performs the following actions:
1. Ensuring Compliance
PSP ensures that the payment process follows the industry standards and compliance with security measures. This eliminates the data fraud risk and ensures the proper storage of sensitive information.
2. Detection and Prevention of Fraud
Payment Service Provider is also helpful to detect and prevent fraud actions with advanced tools. PSP uses machine learning algorithms to detect fraud and any other suspicious activity.
3. Currency Conversion
PSP is also helpful in currency conversion. Thus, it helps those businesses to accept payments from multiple currencies that provide their services and sell products globally. Hence, businesses can avail of payment in their preferred currency without any issue.
4. Customer Support
Payment Service Providers also provide customer support to the business for resolving any kind of query or issue during the payment process.
5. Reporting & Analytics
Businesses can analyze the metrics of customer behavior, transactions, and overall business performance through PSP. This makes it easy for businesses to make the preferred decision and also optimize the payment process.
6. Scalability
Make sure the chosen PSP covers your needs during the changing scenario. It is obvious that once your business grows and expands, the needs will also vary accordingly. So always utilize the PSP which fully fills your needs as per the business expansion and changing market.
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10 Best Payment Service Providers
The top 10 Payment Service Providers are as follows:
1. PayPal
The most popular payment service provider is PayPal which is used by many businesses. It mainly offers credit card processing. The other additional benefits are the Mastercard Program and Customer Credit. It is cost effective for many businesses due to low fees.
2. Stripe
Stripe is the best option for online store business owners. Setting up an account is very easy with this PSP. It offers recurring payment features that allow businesses to get scheduled payments for subscription services.
3. Merchant One
Merchant One system offers a 98% approval rate and 24-hour turnaround. It assigns a dedicated account manager to the business. It offers a vast range of industries including retail, B2B, hospitality, and restaurants.
4. Helcim
It is one of the most transparent PSPs. It provides interchange-plus pricing and publishes its full rates on the website. It offers the best payment gateway solution to the merchants and enables them to accept the credit card seamlessly.
5. Square
Square offers a secured way to accept online payments for businesses. Businesses can download its application and then plug the Square reader into the mobile device. This platform also helps to manage inventory and handline employees’ payroll.
6. Braintree
Braintree is another popular platform that offers quick transaction services for international businesses. It supports 130 currencies and makes it possible for businesses to accept payment in credit card and debit card.
7. Skrill
A European-based payment gateway offers a convenient way to send and receive money in 40 currencies. Skrill holds a valuable position for many businesses around the world. It serves its services to all scale businesses.
8. Authorize.net
It is a subsidiary of Visa, handling a billion transactions in the global marketplace. It makes stress-free payment processing for all business types. The average worth of payments it manages is US$149bn annually.
9. Adyen
Adyen offers the best solution for seamless transactions with scalability and security. Many leading companies in the world choose this PSP to let the transaction flow. This PSP also supports multi-currency and allows businesses to send real-time payouts.
10. Verifone
The core focus of this company was on cashless transactions during its establishment. Still, it offers the best PSP solutions. Many companies trust this platform for their business transactions. Verifone is an ideal solution for customers and merchants to experience hassle-free payment.
What Are the Merits of Using a Payment Service Provider?
Explore the Advantages of Using a Payment Service Provider for Your Business.
1. Securing Online Transactions
Payment solution providers offer a secured transaction through advanced security measures. Monitoring fraud, SSL (Secure Socket Layer), and protecting customers’ payment information are some security measures.
2. Quick & Simple
PSP offers a quick and simple approach to accepting payments for businesses. It saves time and also prevents expenses.
3. Fraud Prevention
Prevention of fraud is possible with PSPs because they use machine learning. They identify fraud activities and block suspicious actions.
4. Refining Cashflow
With PSP, businesses can effectively manage their cash flow. It always ensures that funds are securely transferred to the merchant’s bank account.
5. Seamless Integration with the POS system
Some of the PSPs are compatible with popular e-commerce platforms. This enhances payment processing functionality.
6. Availability of Multiple Payment Options
Business professionals have multiple payment options through PSP. Credit cards, debit cards, ACH transfers are some available options for online payment. Other than that Google Pay and Apple Pay are popular online payment apps.
Payment Service Providers vs Dedicated Merchant Account Providers
The core purpose of PSP and traditional merchant accounts providers is identical which is enabling the business to accept online payments. However, both are different in many scenarios which are as follows –
| Determinant | Payment Service Providers (PSPs) | Dedicated Merchant Account Providers |
|---|---|---|
| Type of Account | Shared account | Individual account |
| Customization | Limited | More tailored options |
| Fees | Flat rate | Flexible and lower rates |
| Support | Shared, sometimes limited | Dedicated, more personalized |
| Account Set up Time | Instantly set without any delay | Setting up an account is long and needs approval |
| Suitable for | PSP is ideal for startups and other small businesses | It is best suited for large and well-established enterprises |
How to Choose a Payment Service Provider?
There are multiple PSPs available, but you have to choose the right payment service provider that fits best your needs. Here are the points to consider when choosing a payment services provider.
1. Comparing Fees and Pricing Structure
Every payment service provider has different fees. Moreover, there are monthly charges, hidden costs, and setup fees.
2. Ensuring Compliance and Security
Check out whether the PSP meets PCI-DSS compliance standards or not. Security features like fraud detection, data encryption and tokenization should be there in PSP.
3. Checking Integration Capabilities
You must confirm that the PSP integrates smoothly with e-commerce platforms, mobile apps, and websites. Always select the PSP which supports easy integration with other softwares.
4. Verifying Customer Support Quality
Never neglect customer support quality whenever you choose a payment service provider. Check what kind of support the PSP is providing. This is one of the important factors whenever you choose a PSP.
5. Consider Recurring Billing
Always prefer the PSP which offers automated recurring billing in case your business relies on the subscription. Choose a tool that allows easy subscription management.
6. Check Reviews
Checking reviews is one of the best solutions if you want to have a better insight into the reputation of anything. This gives a better clue over the experience of other clients with that PSP.
7. Pricing & Fees
Checking out pricing and applicable fees is also an important factor when finalizing the payment service provider. Prices and fees vary and different PSPs have different prices. Monthly fees, setup fees, chargeback fees, and also currency conversion fees are some of the common applicable fees.
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Bottom Line
Payment Service Provider is a core thing for hassle-free online payment. It enables businesses to incorporate smooth online payments. However, you must choose the right PSP for the best outcome.
Many PSPs are trying to offer cutting-edge facilities to make operations simple, effective, and fast. Hope, in the coming time, there will be another advanced concept to revamp online payment.
Frequently Asked Questions
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
