Glossary
Full Glossary
An Intro Guide to Payment Service Providers

What are Payment Service Providers?

Making online payments can be confusing. You are probably looking for some reliable information on Google right now. Don't worry, we've got you covered. With this article, we cover everything to know about payment service providers. Payment service providers generally work behind the scenes to process a customer's payment online. However, it is always good to understand the online banking process.

A Payment Service Provider (PSP) refers to merchants who can accept electronic payments via credit cards, debit cards, digital wallets like Apple Pay and Google Pay for both offline and online transactions. They act as mediators between the merchants, customers, banks, and card networks to process the money being transferred electronically.

Overall, with the increase in electronic payments' safety and ease, many companies offer such services. Technically speaking, these companies are third-party merchants that process payments electronically.

A critical difference between traditional merchant accounts and payment service providers is that payment service providers consider merchant accounts as sub-users within the main umbrella account. They provide excellent functionality and reliability by bringing all the financial networks and needs under one umbrella. In short, payment service providers make modern business possible.

Upsides And Downsides Of Using A Payment Service Provider

What Is the Main Function Of Payment Service Providers?

The primary function of online payment service providers is to handle the electronic transaction process from the beginning to the end. They facilitate the merchant's payment process, ensuring that the money from the customer's account is safely wired in the merchants' account. The PSP is paid by merchant accounts to work on their behalf to collect the money.

Payment service providers are primarily used by businesses that rely on electronic transactions. The merchant must choose a service provider that caters to their individual needs and consider the services each payment provider gives. With many companies providing payment services, businesses and merchants can choose from a wide variety of options.

Payment service providers vary in terms of the services they provide. Some offer essential payment services, while others offer various financial tools and support for their clients. Many of them provide security and fraud protection services, financing solutions, and customer service assistance for any queries regarding compliance and operations. It is important to note that not all payment services operate the same.

Some online payment service providers specialize in online payments, while others offer their services for in-store card payments. Therefore, as a merchant client, you need to know the kind of service you need from these payment service providers and invest accordingly. This involves envisioning the future of your business and knowing which way it is headed.

There are two types of shopping carts that you will come across. Remember that both of them have a specific function, and both work well. Your business requirements are critical players in selecting what kind of shopping cart you will want for it. Here are the two basic types of eCommerce carts that you should look forward to depending on your business requirement.

Advantages

There are many advantages and a few key points to remember when using a payment service provider for your business. We listed a few essential points to help you make an informed decision.

  • Payment services work well for small businesses. They offer a high cost to convenience ratio, Micro businesses, pop up shops, and online entrepreneurs benefit hugely from using payment service providers to streamline their financial needs and processes. With payment service providers, companies can drastically reduce their investment in their business's financial aspect.
  • With online payment service providers, merchants can quickly obtain payments from their customers, making the entire transaction process a very smooth and easy process for both parties.
  • Another primary reason for the popularity of payment service providers is the added layers of security and additional financial tools they provide to their merchant clients and businesses.
  • With payment service providers, merchants can often bypass the administrative delays associated with banking systems. The sign-up process for payment service providers is relatively short and straightforward. There is the added protection of not signing any added contracts of shady deals.

Disadvantages

However, it is essential to remember that the payment service provider has its own set of problems.

  • Payment service providers are essentially third-party providers. There are some obvious risks involved with this; third-party apps and services have their terms and vetting processes, which means they can cancel or freeze a merchant account as per their own volition and risk analysis. This can be a shocking and paralyzing decision for any merchant account that depends on the payment service provider for their financial services.
  • Early termination of accounts is a prevalent complaint with merchant clients. However, this can be easily avoided with proper research and knowledge of what each payment service provider offers and what your personal business needs are as a possible client. Businesses that do their research don't face such problems and have a very smooth experience with payment service providers. Most payment service providers give a clear account of their terms and conditions before asking you to sign-up for their service.

Be sure to read up reviews online to see how other businesses have fared with a particular service. Try looking for companies that are similar to yours that use payment service providers. This will help you gauge which service provider to use and how to go about the whole process.

Hopefully, with these tips, you will make an informed decision regarding online payment service providers.

Implementing a Seamless Workflow Between Banks and Payment Providers

How Do Traditional Banking Institutions Work With Payment Service Providers?

Banking institutions and payment service providers work closely to ensure a smooth transaction process for the customer and the merchant. Most customers are linked to the payment service providers via their debit or credit cards, which facilitates the transaction.

From the merchant's end, they enter into contracts with the bank and the payment service provider to create a merchant account. Through this intricate system, the customer and merchant transact electronically. Additional fees are charged by the banking facility and payment service provider to facilitate the transaction.

Overall, payment service providers advertise themselves as a comprehensive package, with wide-ranging networks in the banking system and businesses. They open up e-commerce options for many small and mobile businesses by facilitating ease of transaction and financial services. As a financial tool, payment service providers offer their merchant clients a lot, should they choose to use them.