For new and established businesses alike, taking payments can be time consuming and complicated. There are loads of features that make your life easier, but setting them all up is a pain and pricey.
That’s where payment service providers (PSP) come into play.
In this post, I’ll explain what a PSP is, what they do, the benefits of using one, examples of real PSPs, how to decide if you need to use one, and how to choose one.
What is a payment service provider (PSP)?
A payment service provider is a company that caters primarily to small businesses, allowing them to take payments from customers. They help keep payment processing costs low for small businesses by combining 10,000s of businesses under one mega merchant account. Individual very high-volume businesses can negotiate low processing fees, so PSPs can do the same with the combined processing volume of these many businesses.
What does a PSP do?
The main role of a PSP is to manage your customer’s payment transactions from start to finish. The payment process looks like this:
- Customer attempts payment - their details are sent to the acquiring bank.
- The credit card network receives the details and sends transaction details to the issuing bank.
- The issuing bank approves or rejects the transaction, lets the credit card network know, and then passes this information to the acquiring bank.
- The acquiring bank lets the payment service provider know the outcome, and they let the customer and merchant know.
- The issuing bank sends the funds to the credit card network who passes them to the PSP’s merchant account, to then be released to the merchant.
In addition to providing payment processing, a PSP performs many other roles including:
- Providing a payment gateway for secure online payments.
- Currency conversion.
- Security and compliance - ensures their systems are compliant with PCI DSS regulations.
- Fraud detection and prevention.
- Reporting and analytics.
- Customer support for your business.
They are a one-stop shop for all your payment processing needs, simplifying everything for small businesses.
What are the benefits of a PSP?
Using a PSP is a no-brainer for many new and small businesses. The benefits include:
- Almost immediate account approval - no long-winded sign up process. Get up and running to take payments in no time.
- Low or no monthly costs - PSPs negotiate drop-bottom prices with the banks, so they don’t need to charge high monthly fees.
- Easy integration with software and hardware - PSPs can seamlessly integrate your payment processing with your current POS software, hardware, and online checkouts.
- Security and compliance - PSPs have your back with fraud detection/prevention measures, and by adhering to PCI DSS regulations.
- Reporting - PSPs provide reporting on your transactions and customer behaviour so you can plan business moves more easily.
- Customer support - PSPs are known for their excellent customer service. If your business is having issues with your payment processing, it’s easy to get in touch with them.
What are some examples of PSPs?
Some well-known PSPs include:
Should I use a PSP?
If you are a new or small business with lower turnover, you should definitely consider using a PSP.
PSPs can secure you lower transaction fees than if you arranged a merchant account, payment gateway, and everything else on your own.
They are also a one-stop shop, covering payment processing, fraud detection, reporting, and more, saving you time and energy.
If your business is more established with a higher turnover, you are best organising your payment processing yourself rather than going through a PSP.
How do I choose a PSP?
When choosing a PSP, you need to consider both your current and future needs. Some specific things to consider include:
- Cost - what is your budget and what are the different PSPs charging in terms of monthly costs and transaction fees? How do their charges match up to the different features they offer?
- Flexibility - if you operate seasonally or only take payments sporadically, will the PSP accommodate this?
- Speed - how long does it take for funds to settle into your business bank account? Some payment processors work more swiftly than others.
- Existing infrastructure - how can the PSP work with the existing payment infrastructure you have? Would you need to make big changes or can they work with what you have?
- Scalability - do you see your business expanding in the coming years? How soon? Does the PSP cater to businesses of that size? Or would you need to start over with a new company?
- Reviews - check out their reviews from real customers. Any red or green flags?
Conclusion
Using a PSP simplifies payment processing and more for your business.
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