{"id":7476,"date":"2022-09-08T08:34:56","date_gmt":"2022-09-08T08:34:56","guid":{"rendered":"https:\/\/devlight.io\/?p=7476"},"modified":"2024-07-26T19:35:16","modified_gmt":"2024-07-26T17:35:16","slug":"what-is-a-psp","status":"publish","type":"post","link":"https:\/\/devlight.io\/blog\/what-is-a-psp\/","title":{"rendered":"What is a PSP – all you need to know"},"content":{"rendered":"
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\n Table of contents
\n \n <\/svg>\n <\/span>\n \n <\/svg>\n <\/span>\n <\/div>\n
\n \n What is a Payment Service Provider?\u00a0<\/span>\n <\/a>\n \n How does the PSP work?<\/span>\n <\/a>\n \n Types of PSPs<\/span>\n <\/a>\n \n Payment Service Providers vs Merchant Service Providers<\/span>\n <\/a>\n \n Pros of PSP<\/span>\n <\/a>\n \n Cons of PSP<\/span>\n <\/a>\n \n Final thoughts<\/span>\n <\/a>\n <\/div>\n <\/div>\n\n<\/div>\n\n\n
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The invention of the Internet and spreading it among the masses has become a big leap all over the world, but especially in the world of business. Small businesses that decades ago couldn\u2019t dream of expanding over the borders of their local market now can right away go selling stuff to people from another corner of the world. And the PSP is one of the things that make it available.<\/p>\n\n\n\n

Through the years online payments are becoming more and more convenient for people. <\/p>\n\n\n\n

Statista states, that during 2020 only 3% of customers in Spain chose to use cash on delivery.<\/a> 98% of users prefer different types of online and card payments. <\/p>\n\n\n\n

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There are plenty of options one can choose: paying via debit card, credit card, e-wallet, cash card, etc. And one of the most important aspects of online payments, no matter what type of them you are using, is security. This is a vital part of any modern business that sells products or services. If you can\u2019t guarantee the security and quality of your payments how can you ensure the quality and efficiency of your products or services? Payment is one of the first experiences your customer goes through before using the product and it is the essential part of the experience, that can ruin the impression in case something goes wrong. And in case everything goes smooth at this stage, it is much easier to retain current customers and acquire new ones. <\/p>\n\n\n\n

So, to be short, the more convenient and versatile ways of online payments you suggest, the more satisfied your customer gets, and the more customers will choose to stick with you. But maintaining a wide variety of payments can cost a lot including all kinds of support, infrastructure building, security issues, and labor. That`s where PSPs (Payment Service Providers) are entering the game. Let\u2019s take a closer look at them, what they are, what they do, and how can they make your business perform better. <\/p>\n\n\n\n

What is a Payment Service Provider? <\/strong><\/h2>\n\n\n\n

A Payment Service Provider (PSP) is described as a third-party company that enables business owners to accept online payments securely.  Businesses that accept all types of online payments can be PSP users: from credit and debit cards to bank transfers and e-wallets. PSPs are responsible for assuring a safe and secure way of money transfer from the buyer to the seller. <\/p>\n\n\n\n

Each of these businesses could of course use a usual merchant account but that would be much more expensive due to constant support costs and other fees. While a merchant account would be separate for each merchant individual, PSPs act like an umbrella for numerous merchants. They all become a part of one single account, with a subaccount for each individual customer. As they all share one account, they also share all the costs and fees and it makes PSP much cheaper, while security and risk management remain at a high level.<\/p>\n\n\n\n

Once you decide to stick with PSP and sign up for cooperation, you no longer need to worry about online payment transactions. All the responsibility is on the PSP side. From the moment the user initiates the payment to the moment the business gets its money through the payment gateway to their bank account \u2014 everything is secure and safe that is guaranteed by the Payment Service Provider. They connect a broad range of acquiring banks with multiple cards and payment networks, to get the smoothest and most secure payment experience for both sides.<\/p>\n\n\n\n

To see how PSP works we will need to go through an example of a basic online transaction. We will start from its initiation and end with funds being transferred to the business merchant account. <\/p>\n\n\n\n

How does the PSP work?<\/strong><\/h2>\n\n\n\n

It all starts with one button \u2014 PAY.<\/p>\n\n\n\n

The client enters his card details and presses the button, and after that PSP enters the room.<\/p>\n\n\n\n

Verification<\/h3>\n\n\n\n

PSP verifies customer card details, sends transaction requests to the payment gateway, and checks if the card has sufficient money on the balance to pay for the purchase. The payment processor is the tool that helps PSP go through this stage.<\/p>\n\n\n\n

Initiation<\/h3>\n\n\n\n

Customer card details are verified and PSP knows he has a sufficient amount of funds on his account? Great. Now PSP initiates the transfer of funds from the customers’ bank to businesses acquiring bank onto the merchant account.<\/p>\n\n\n\n

Notification<\/h3>\n\n\n\n

Once the payment is approved by both customer\u2019s issuing bank and acquiring bank, each side will be notified <\/strong>about the completed payment.<\/p>\n\n\n\n

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But there can be problems in this flow. Card details could be invalid or fund insufficient. In these cases, PSP will terminate the payment and act as described above \u2014 send a status notification to both sides about failed payment. <\/p>\n\n\n\n

Each this step will not only facilitate the payment process but also ensure the safety and security of the transaction of funds. There are a lot more advantages of PSP than that, and we can dive deeper into them soon. <\/p>\n\n\n\n

Types of PSPs<\/strong><\/h2>\n\n\n\n

There are three different types of PSP. They differ in fees, contracts, and payouts but still cat quite alike. Let\u2019s take a closer look at them and discover which one suits better for which kind of merchant.<\/p>\n\n\n\n

Distributing PSPs<\/h3>\n\n\n\n

Distributing PSPs build connections to variable payment methods and maintain them. Thus, they remove technical obstacles for e-commerce merchants. If you will choose this type of PSP, your business will have the facility to accept several types of payment methods.<\/p>\n\n\n\n

Distributing PSPs will suit those merchants who want to offer their customers only a few payment options. <\/p>\n\n\n\n

Collecting PSPs<\/h3>\n\n\n\n

In a world where there would be no PSP, merchants had to receive a separate settlement for each payment method they accept, and each separate settlement would consume sufficient time and cost. Having a lot of separate settlements would be unprofitable and inefficient for a business. Thankfully we live in a world with collecting PSPs that can combine all payments from divergent payment methods into one settlement, reducing time and money consuming and simplifying payment reconciliation. <\/p>\n\n\n\n

Collecting PSPs are a great choice for businesses that offer a lot of online payment methods. <\/p>\n\n\n\n

Aggregating PSPs<\/h3>\n\n\n\n

Aggregating PSPs deviate a little bit from collectors and distributors in a different way. What differentiates them from collectors is the ability to contract with the payment companies on behalf of numerous merchants. And from distributors, they differ because of their ability to collect funds on their own internal account, power to settle the merchant\u2019s bank account, and negotiate the terms of the payment. <\/p>\n\n\n\n

Aggregating PSPs would be favored by merchants who prefer not to contract with banks, financial institutions, and other companies that provide online payment methods.<\/p>\n\n\n\n

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