What is a Payment Service Provider or PSP?
Enabling businesses to accept payments
Payment Service Providers (PSPs) or Payment Gateways are a necessity for online merchants and businesses looking to monitize on the sales of goods and services sold online. PSPs enable e-commerce merchants and online businesses to accept local, regional and global payment methods and currencies. They process transaction data captured online from shoppers and buyers to the appropriate financial institution, present the outcome to both buyer and merchant in real-time, and - in case of an approval - settle the funds to the merchant's or business' bank account.
Role of a Payment Service Provider
Payment Service Providers or Payment Gateways provide the technology - a 'transaction processing platform' - to merchants and businesses to accept payments over the internet. The PSP's processing platform sits between the merchant's webshop or business application and the platforms of financial institutions that serve specific payment methods (e.g. creditcards, wallets, cryptocurrencies) or payments solutions (e.g. subscription billing, pay-by-invoice). Their platform exchanges transaction data with financial institutions like banks and other financial solution providers to get approval for purchases made at (mobile) websites and in apps, and for (recurring) billings.
More than transaction processing
Besides transaction processing, PSPs often provide additional services like fraud prevention, currency conversion, financial reporting and customer data insights.
The merchant or business typically pays the PSP or gateway a fee for the processing of the transaction and a fixed or variable commission costs per succesful payment. Most PSPs offer both standard pricing and custom pricing to their customers (pricing is generally determined by transaction volumes, turnover and growth potential).