A payment service provider (PSP) is a third-party company that assists businesses to accept electronic payments, such as
credit cards and
debit cards payments. PSPs act as intermediaries between those who make payments, i.e.
consumers
A consumer is a person or a group who intends to order, or uses purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
, and those who accept them, i.e.
retailers
Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...
.
Some of the most renowned PSPs are:
*
Adyen
Adyen is a Dutch payment company with status of an acquiring bank that allows businesses to accept e-commerce, mobile, and point-of-sale payments. It is listed on the stock exchange Euronext.
Adyen offers merchants online services for merchan ...
*
PayPal
PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper ...
*
Stripe
Operation
PSPs establish technical connections with
acquiring bank
An acquiring bank (also known simply as an acquirer) is a bank or financial institution that processes credit or debit card payments on behalf of a merchant. The acquirer allows merchants to accept credit card payments from the card-issuing bank ...
s and card networks, enabling merchants to accept different
payment methods without the need to partner with a particular bank. They fully manage
payment processing and external network relationships, making the merchant less dependent on
banking institutions.
PSP can also offer
risk management services for card and bank based payments, transaction payment matching, reporting, fund
remittance and fraud protection. Some PSPs provide services to process other next generation methods (
payment systems
A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make its exchange possible.Bia ...
) including cash payments, wallets,
prepaid cards
A stored-value card (SVC) is a payment card with a monetary value stored on the card itself, not in an external account maintained by a financial institution. This means no network access is required by the payment collection terminals as funds ...
or
vouchers, and even paper or
e-check
Electronic funds transfer (EFT) is the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of b ...
processing.
PSP fees are typically charged in one of two ways: as a percentage of each transaction, or as a fixed cost per transaction.
US-based online payment service providers are supervised by the Financial Crimes Enforcement Network (or
FinCEN), a bureau of the
United States Department of the Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...
that collects and analyzes information about financial transactions in order to combat
money laundering, terrorist financiers, and other
financial crime
Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one's own personal use and benefit. Financial crimes may involve fraud ( cheque fraud, credit card fra ...
s.
European payment service providers are supervised based on the European
Payment Services Directive.
Types
There are three categories of payment service providers:
* Payment institutions: enterprises holding a licence specifically for providing payment services.
* Exempt payment service providers: organisations exempt from the licence requirement under the Exemption Regulation.
* Banks and electronic money institutions: organisations authorised to act as a payment service provider under their licences, to the extent permitted under those licences. They are excepted from the licence requirement for payment service providers.
Security
Each merchant remains responsible for his own actions and must accordingly ensure that the selected provider observes the guidelines, e.g. with regard to
data protection. Compliance with
PCI DSS
The Payment Card Industry Data Security Standard (PCI DSS) is an information security standard used to handle credit cards from major card scheme, card brands. The standard is administered by the Payment Card Industry Security Standards Council a ...
guidelines is important. There are four levels of PCI compliance, that must be respected by the PSP. Depending on the volume of transactions as well as other details about the level of risk assessed by payment brands, the payment service provider has to follow higher standards.
The levels are following:
* Level 1 – Over 6 million transactions annually;
* Level 2 – Between 1 and 6 million transactions annually;
* Level 3 – Between 20,000 and 1 million transactions annually;
* Level 4 – Less than 20,000 transactions annually.
Market size
There are more than 900 payment providers in the world. More than 300 offer services for Europe and North America. The global payment service provider market is expected to reach ~ $88 Bn by 2027 from ~ $40 Bn in 2019.
See also
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Payment gateway
A payment gateway is a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. The ...
*
E-commerce payment system
An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for offline transfer, also known as a subcomponent of electronic data interchange (EDI), e-commerce payment systems have become incre ...
*
Payments as a service
*
Payment processor
A payment processor is a system that enables financial transactions, commonly employed by a merchant, to handle transactions with customers from various channels such as credit cards and debit cards or bank accounts. They are usually broken down ...
*
Unified Payments Interface
Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used ...
References
{{Payment service providers