A Payment Service Provider (PSP) is a company that assists businesses and banks in processing various online payments. These payments can be conducted through various channels, including credit cards, bank transfers, electronic wallets, and more.
The PSP acts as an intermediary between the buyer, the seller, and the bank, ensuring convenience and security in payment transactions. The terms “electronic payment processor” and “electronic payment provider” are also commonly used in this context.
In European countries, the operations of payment service providers are governed by the European Payment Services Directive (PSD2).
In other words, a payment service provider acts as a middleman between the purchaser making the payment, the seller receiving it, and the bank facilitating Internet acquiring (you can learn more about Internet acquiring in our article). Essentially, the role of a PSP is to facilitate online payments for its customers.
PSP Features
Generally, a payment service provider engages with multiple acquiring banks and diverse card payment networks. It oversees the processing, management, and archival aspects of payments, while also handling relationships with external networks. This arrangement allows businessmen to be less dependent on specific banking institutions.
Additionally, leveraging the services of electronic payment providers opens access to an expanded array of payment services. These companies can extend offerings such as invoicing services, support for multiple currencies, real-time currency conversion, and robust risk management for their clients.
Ensuring payment security is a crucial responsibility of payment service providers. To achieve this, a variety of anti-fraud tools are employed, including encryption, data access control, tokenization, regular network testing, and others. Adhering to the paramount global standards of PCI DSS (Payment Card Industry Data Security Standard) serves as a guarantee for secure payments.
Payment service providers typically charge for their services using one of these two models: a fixed fee per transaction or a percentage of the transaction amount. Additionally, there may be charges for connecting third parties to the processing system.
PSP licence
To legally provide payment services, a company requires a payment licence. The categories and requirements for such licences vary depending on the country and the types of services offered.
In the European Union (EU) and the European Economic Area (EEA), the authority to provide payment services is conferred through a Payment Institution Licence.
The issuance and granting of such licences are handled by national regulators in the country where the PSP is registered. The requirements for obtaining a licence vary depending on the jurisdiction and the type of services provided.
