What is a PSP? Payment Service Providers explained

Payment Service Providers (PSPs) have become essential players in today’s digital economy. They act as intermediaries between merchants and consumers, simplifying the process of electronic payments, ensuring transactions are processed quickly, securely, and efficiently. In this guide, we’ll break down what a PSP is, the types of PSPs available, and how they benefit businesses. 

What is a Payment Service Provider?

A Payment Service Provider (PSP) is a company that offers businesses the ability to accept payments from customers, typically through online or mobile channels. PSPs enable merchants to accept various forms of payment, such as credit/debit cards, bank transfers, and digital wallets, by connecting them to multiple financial institutions and payment networks.

The role of a PSP is to facilitate secure, fast, and accurate payment transactions between customers and merchants. They handle the technical, regulatory, and security aspects of the payment process, allowing businesses to focus on their core operations while ensuring compliance and security.

What does a Payment Service Provider do?

A payment service provider is responsible for the following key steps:

1. Transaction authorisation: Upon receiving customer payment credentials from a payment gateway, the PSP contacts the customer’s bank or payment network to verify and authorise the payment.
   
   
2. Payment processing: Once authorised, the PSP processes the payment and transfers the funds to the merchant’s account.
   
   
3. Confirmation: The customer and merchant both receive a confirmation of the transaction, completing the process.
   
   

In addition to handling the technicalities of transactions, PSPs often provide added services, such as fraud protection, currency conversion, and reporting.

Types of Payment Service Providers

There are several types of Payment Service Providers (PSPs), each offering different services tailored to various business needs:

• Traditional PSPs: These are established providers that offer basic payment services such as credit card and bank transfer processing. They are well-suited for businesses that have straightforward payment needs, such as small to medium-sized retailers.
  
  
• Integrated PSPs: These providers offer more advanced features, such as integration with accounting and ERP systems, making them ideal for businesses that need more complex payment infrastructures. These PSPs often provide tools for managing subscriptions, recurring billing, and inventory management, making them a popular choice for businesses with diverse transaction needs.
  
  
• Specialised PSPs for ecommerce: These providers are focused specifically on the needs of ecommerce businesses, offering features such as recurring billing, multi-currency support, fraud prevention, and seamless integration with ecommerce platforms. Examples include PayPal, Stripe, and Adyen, which cater to businesses looking to optimise their online payment processing systems.
  
  

Examples of Payment Service Providers

Some of the most popular PSPs include:

• Stripe: A well-known integrated provider, offering features like subscriptions, invoicing, and global payment support.
  
  
• PayPal: One of the most widely used online payment platforms, supporting various payment methods like credit cards and digital wallets.
  
  
• Square: A provider that enables both online and in-person payments, offering features like inventory management and point-of-sale systems.
  
  

When selecting a PSP, businesses should consider factors such as:

• Fees and transaction costs: Different PSPs have different pricing models, so it’s important to choose one that aligns with your business’ budget and transaction volume. Moreover, fees can fluctuate over time and sometimes businesses can be caught unaware by such changes. With Aurum's fee checking module though, they can keep on top of any changes, and protect their revenu stream.
  
  
• Security and compliance: PSPs should comply with payment regulations, such as PCI DSS standards, to protect customer data and prevent fraud.
  
  
• Support for multiple currencies: If your business operates internationally, choose a PSP that supports multi-currency transactions and global payment options.
  
  

Benefits of Using a PSP for Businesses

PSPs offer several advantages to businesses:

• Security and compliance: PSPs handle the complexities of payment security, protecting both your business and customers from fraud and data breaches. They ensure compliance with the necessary regulations, such as PCI DSS and GDPR, to keep both parties safe.
  
  
• Currency considerations: PSPs provide multi-currency support, which allows businesses to cater to international customers by offering local payment methods and currency conversions. This can expand the customer base and help businesses enter new markets.
  
  
• Multiple payment methods: PSPs enable businesses to accept various payment methods, from credit/debit cards to digital wallets and even direct bank transfers. This flexibility allows businesses to offer convenience to their customers, which is essential for maintaining customer satisfaction.
  
  
• Transaction reporting and reconciliation: PSPs offer detailed reporting features, helping businesses monitor transaction data, identify discrepancies, and streamline financial reconciliation. This can reduce the time spent manually tracking payments and ensure accurate financial records.

Ultimately, many merchants work with multiple PSPs, so despite the benefits they offer, managing them all can be challenging. Yet there is a way to manage multiple PSPs without breaking your back office. Find out how in our guide here.

Aurum Solutions’ PSP Reconciliation

At Aurum Solutions, we offer tailored solutions to simplify PSP reconciliation for businesses of all sizes. Our platform provides a range of features designed to enhance your payment processing and ensure financial accuracy:

• Automated data import: Automatically extract, transform and load transaction data from multiple PSPs thanks to our library of APIs and SFTPs with over 200 PSPs. This saves finance teams time and ensures they have up-to-date records for reconciliation whilst reducing manual work.
  
  
• Multi-currency support: Manage transactions in multiple currencies due to our platform ingesting a live-feed of FX rates, helping businesses cater to a global audience and keep their finances accurate.
  
  
• Comprehensive fee analysis: Analyse transaction fees across different PSPs and payment methods, to track costs and optimise their payment strategies.
  
  
• Improved reporting capabilities: Gain insights into payment processing with detailed, customisable reports. This helpsbusinesses identify trends, monitor performance, and improve financial management.
  
  
• Broad integration: Seamlessly integrate with existing accounting systems and payment platforms to optimise reconciliation, ensuring consistency and accuracy across all payment data.

These features collectively help businesses streamline complex payment infrastructures, reduce manual work, and improve financial accuracy, ultimately boosting operational efficiency.

Conclusion

Payment Service Providers (PSPs) are key to simplifying payment processing for businesses, enabling them to accept a wide range of payments securely and efficiently. By choosing the right PSP, businesses can improve transaction processing, ensure compliance, and offer customers a smooth payment experience.

However, with the ability to increase transaction volumes plus add the complexity of fees, it is important that businesses complement their PSP adoption with the use of an automated PSP reconciliation solution like Aurum Solutions’. That way, they can manage payments more efficiently, whilst ensuring financial accuracy and compliance across multiple platforms.

Get in touch today to book a demo and discover how Aurum’s PSP reconciliation software can streamline your payment processing and help you achieve financial efficiency.