PSP (Payment Service Provider).
A Payment Service Provider(PSP) is a good example of a crucial third-party payment provider. This comes in handy if you want to accept debit or credit card, mobile or contactless wallet payments within your business. But how does a PSP work? PSPs work with acquiring banks to manage the payment process from start to finish. This involves the following steps:
- Using the card or a device, the customer attempts to make a payment
- As the transaction data is sent to the acquiring bank, the payment process is initiated
- The transaction data is sent through the credit card network which in turn forwards it to the bank where the customer's card originated
- The customer's issuing bank verifies that there is enough money in the account to approve the transaction and passes it on to the credit card network
- The credit card network passes this information to the acquiring bank, which informs the PSP
- The PSP shares whether the transaction has been approved or rejected with the customer and merchant
- When the payment is authorized, the issuing bank sends the money to the credit card network, which in turn forwards it to the acquiring bank. The acquiring bank then deposits this from the PSP
Types of PSPs
There are two categories of PSPs: collecting PSP and switching PSP. A collecting PSP collects all online purchase proceeds from different payment attributes and acquiring banks. All these proceeds the collecting PSP sends to the merchant as one payment. The merchant has the PSP as a single point of contact for a contract, point of contact and disbursement. A switching PSP only takes care of the technical part of the transaction. This process is much more complicated for the merchant because it results in multiple points of contact.
Using a PSP has the following benefits for a business:
- Less administration
- Be able to accept more payment methods
- Be able to accept more types of currencies
- A more secure transaction process
