A Payment Service Provider (PSP) is a payment processor that enables you to accept online payments.
What is a PSP?
A Payment Service Provider (PSP), also known as a payment provider or payment supplier in Danish, plays a crucial role in online transactions.
Indeed, it’s the PSP that provides you with a payment gateway for accepting online payments.
The payment gateway acts as your payment window on your webshop, allowing you to accept a wide range of payment methods such as VISA cards, Apple Pay, and invoice payments.
A PSP also facilitates interactions between businesses and financial actors handling the actual flow of money, including card acquirers.
To accept online payments, you need to enter into an agreement with both a PSP and a card acquirer. The PSP takes care of your payment gateway, while your card acquirer processes your acquiring agreement.
You can also choose a payment provider that combines both the payment gateway and acquiring services for you.
Therefore, a PSP is an essential player in running your webshop and achieving success in your e-commerce endeavors. You must ensure that your PSP meets your needs for payment methods, countries, currencies, and more.
Most Payment Service Providers offer both local and global payment methods and accept payments in various currencies – making them a secure and efficient way to accept payments from customers around the world.
Below is an example of how a PSP acts as a link between your webshop and the financial actors.
How does a PSP work?
When a customer makes a purchase using a payment card or another online payment method such as e-wallets, it’s the responsibility of the PSP to handle the transaction and ensure a secure and correct completion of the payment.
The process begins when customers are ready to pay. They are redirected to a payment window managed by the PSP.
After the payment is completed, they are taken back to the business’s website.
Some PSPs have a dual function, serving both as a payment gateway and as acquirers. This means they manage both the transfer of payment information and the actual transaction of funds.
If a PSP only functions as a payment gateway, a separate acquirer takes over the role of processing payment transactions.
The acquirer receives the payment details from the PSP, completes the payment, and subsequently transfers the money to the business’s account.
What are the benefits of a PSP?
There are numerous benefits to using a PSP. Technically, it’s possible to run a webshop without one, but this can make the process more complicated and potentially less secure.
Without a PSP, you would have to handle payments manually, which is both time-consuming and risky.
Using a PSP automates many payment-related tasks such as refunds and subscription payments, saving time and minimizing the risk of errors.
PSPs enable you to accept payments from customers all over the world, across different payment methods, significantly expanding your business potential.
Overall, a PSP makes it easier, safer, and more efficient to process payments in your webshop, allowing you to focus on other important aspects of your business.
What is the difference between a payment gateway and a PSP?
Although a payment gateway and a PSP both play crucial roles in the online payment process, their functions are distinct.
A payment gateway is a product offered by a PSP. It acts as a secure intermediary between your webshop and the payment system. The primary function of the payment gateway is to authorize and process payment transactions by transferring payment data from the customer to either a PSP or a bank.
A PSP is the actual company that offers this gateway, along with other related services. Beyond including a payment gateway, a PSP handles the entire spectrum of the payment process.
This includes transaction processing, security measures, and often additional services such as fraud control, currency conversion, and compliance adherence.
In short, a PSP ensures the completion of the payment itself, while the payment gateway ensures a secure transfer of payment data between the customer and the PSP.