How to take on more PSPs without breaking your back-office

Emre Eryilmaz
Emre Eryilmaz

Holidaying abroad is meant to be fun, exciting, relaxing, and an all-round positive experience. However, historically, holding the incorrect currency in your country of choice would put an end to all of that. This was true no matter how far you travelled – even if you crossed over from Scotland to England, below the border, Scottish Pounds were not acceptable. It wouldn’t matter how much money a customer could offer; the trader would be able to refuse.

Nowadays, it is a different story. Money can be traded via infinite methods, including PSPs (payment service providers), and these often facilitate various currencies. As a result, when it comes to trading, the power now lies with buyers rather than merchants because if one trader doesn’t have the means to accept their payment, another inevitably will.

On paper, it might therefore seem as if new payment methods such as PSPs have taken the initiative away from merchants, but that is anything but true. PSPs are in fact increasing the number of customers that merchants can work with and delivering many more benefits. Yet, as always, the rule of there being “too much of a good thing” also applies to PSPs if implemented without proper planning. Let's therefore explore what measures companies should put in place to make the most of using multiple PSPs and why this is necessary.  

What is a PSP?

A PSP offers a collection of electronic payment services. Primarily, this is based on allowing businesses to offer customers the ability to easily pay for goods or services via a variety of payment methods through just one connection.

In addition, many PSPs now also offer their own payment gateways, merchant accounts, and currency conversion services so that regardless of what currency a consumer pays in, merchants receive payment in their desired currency.  

Evidently, PSPs produce a lot of benefits and, as such, are incredibly popular with merchants across the globe. In fact, in 2023 there were 1,981 PSPs in the UK alone, with the average gambling operator working with roughly 15.

Why should you increase your range of PSPs?

Although a big selling point of PSPs is the adoption of multiple payment methods through just one provider – instantly simplifying the number of relationships that merchants must manage – more often than not, firms decide to work with multiple PSPs. Despite this increasing the number of integrations they must manage, it is still a lower amount than if they were to work with no PSPs. Some reasons for doing this include:

Improving customer experience

Attracting customers and persuading them to part with their money is difficult enough; no merchant therefore wants a deal to break down at the point of payment. Unfortunately, this can happen too often if customers are not presented with their preferred payment method at checkout.

To ensure that this situation doesn’t arise, merchants can seek to set up APIs with infinite amounts of payment methods. However, this is costly, time-consuming and requires a lot of maintenance. In contrast, a single PSP can ensure that with just one provider, customers are instantly given a wider range of payment options, improving their experience. With multiple PSPs on board, this reciprocal relationship continues to grow.

Reducing passive churn

Increasingly, cards or wallets are becoming preferred over bank accounts to pay for SaaS subscriptions such as Spotify. Although this increases security and convenience, the payment methods must be both up-to-date and provided with adequate funds for renewals to successfully take place. If not, payments fail, and after a set amount of time, subscriptions will be cancelled regardless of whether or not subscribers want this to be the case.

This is known as passive churn – when a subscription ends for reasons other than a subscriber purposefully terminating their contract. A common example is when a card expires. However, this can be overcome with PSPs attempting for a payment to be made by another method should an initial one fail.  

Discovering the best PSPs for your operations

PSPs might seem as though they have all the answers for the payment operations of a business; however, just like how every business is unique, so too is every PSP. As a result, it can take time to figure out which PSP is truly the best fit for your company.

With a selection of PSPs working in tandem, comparison of important factors such as payment fees and chargeback fees can take place to help discover which PSP works best. It is worth noting though that this isn’t the easiest of tasks to achieve due to the reports that PSPs produce being notoriously difficult to decipher. However, after PSP data is automatically imported and reconciled in the likes of Aurum, the platform becomes a collaborative space not only for exception management but also for data manipulation, visualisation and analysis to take place, providing businesses with the means and insights to critically assess the performance of their PSPs.  

Overcoming technical issues

Digital payments usually happen nearly instantaneously. That is when they’re operating smoothly. However, that isn’t always the case. After all, cyber-attacks are on the rise and the prospect of a server failing is always possible, no matter how many precautions are put in place.

As a result, just like how customers shop around before making a purchase, merchants should also make sure to not put all of their eggs in one basket when it comes to PSPs. Ultimately, by working with a wide variety of PSPs, merchants are protecting themselves against any potential issues with an array of backups to select from. If one PSP declines a payment, another can step in to pick it up and make sure the transaction completes.

Safely navigating geopolitical tensions

It’s not only technical reasons which can lead to payments failing via some PSPs. Sometimes payment technology can also get caught up in the crossfire of international disputes. Typically, this has affected the likes of SWIFT; however, there is nothing to say that in the future some PSPs could become blacklisted in certain countries or that they could revoke working with a list of currencies.

Once more, it is therefore wise to have a diverse collection of PSPs in operation to ensure that if the worst should happen, payments can still take place.

How do PSPs impact back-office operations?

Whilst PSPs offer many benefits to customers and merchants alike, the impact they can have on financial back-offices can be very different, especially if multiple are adopted. For instance, PSPs:

Increase volume

Given that one of the main reasons merchants work with PSPs is to increase the number of customers they can take payments from, it should come as no surprise that transactional volumes typically grow after adopting PSPs. This is all well and good so long as investment has also taken place in back-office operations such as reconciliation. If not, merchants will be taking more money but also taking a risk of breaching regulations and being unable to correctly close their books.  

Fortunately for The Tote, they pre-empted this increase in transaction volume as they transitioned their operations into online betting by adopting Aurum, ensuring that their back-office was able to cope with their growth.

Quote from Management Accountant of The Tote, explaining that as their company scales and adopts new payment options, she is confident that Aurum Solutions will support them.

Increase complexity

On the surface, PSPs reduce complexity by giving customers a clear interface for making payments via a range of methods, and businesses the ability to receive funds through one source. However, with an increasing amount of transactions via different methods landing in firms’ back-office due to this, by the law of averages, complexity is bound to go up.

For instance, by allowing more currencies to be paid with and various payment methods to be used, back-office professionals will be faced with two challenges. Firstly, reconciling values which are affected by FX rates and shown as different currencies on different systems. Secondly, the varying processing and settlement times of different payment methods that they now facilitate. Complications such as these can make reconciliation and finding cash positions a lot more complex.

Charge fees

PSPs charge fees to operate. Commonly these are applied per transaction but can regularly fluctuate. As a result, firms can struggle to know how much they are actually paying PSPs, especially when chargeback fees are included. Once more, accurately reconciling overall figures becomes complicated, risking drastic consequences such as poor forecasting, misinformed budgeting and failure to comply with regulations.

How to adopt more PSPs without breaking your back-office

Not implementing PSPs is extremely rare these days among merchants. This is not because payment leaders wish for their peers in finance to struggle; it is because a resolution to the aforementioned challenges exists – automated reconciliation.

For example, with Aurum’s automated reconciliation platform, no volume of transactions is too high. Moreover, it doesn’t matter if just one PSP is bringing in lots of transactions, or a whole selection of them, thanks to Aurum possessing over 600 ready-to-go APIs. As a result, businesses can take on as many PSPs as they wish, with the peace of mind that they can reconcile all the millions of transactions that pass through them in minutes, with no manual intervention.

Best of all, Aurum is data-agnostic. This means that intel from any PSP is welcome within the platform to be reconciled, manipulated and visualised. Plus, the flexibility of Aurum extends into its capability for bespoke reports and dashboards to be created. Ultimately, Aurum therefore takes care of the overwhelming but repetitive outputs of multiple PSPs and makes analysis of it attainable.

Servicing your Payment Service Providers

The payments landscape is continually changing due to new innovations but arguably none have had a bigger impact than PSPs. However, despite the many benefits they can generate, it appears that they are approaching their very own moment of reckoning; in late 2023 GoCardless revealed that 66% of firms are planning to reduce their numbers of PSPs.

Various reasons are behind this potentially shocking decision, but the wish to ease pressure on operations was the most popular. It therefore appears as though payments innovation is being punished for a lack of investment in back-office operations. Yet – as highlighted in this blog – even if back-office operations in certain companies haven’t undergone transformation, back-office technology has.  

To match your investment in PSPs, look no further than the ultimate matching software - Aurum’s automated reconciliation platform. Book a demo today.

Emre Eryilmaz
Emre Eryilmaz

Business Development Manager

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