A payment service provider (PSP) offers merchants online services for accepting electronic payments by a variety of payment methods including credit card, bank-based payments such as direct debit (GlobalCollect), bank transfer, and real-time bank transfer based on online banking. Some PSPs provide unique service to processes other next generation methods (E-Payment Providers) including eWallets (PayPal), Cash (Western Union), prepaid cards or vouchers, and even paper or e-check processing.
Typically, a PSP can connect to multiple acquiring banks, card, and payment networks. In many cases the PSP will fully manage these technical connections, relationships with the external network, and bank accounts. This makes the merchant less dependent of financial institutions and establishing these connections directly - especially when operating internationally.
Furthermore, a full service PSP can offer risk management services for card and bank based payments, transaction payment matching, reporting and fund remittance and fraud protection in addition to multi-currency functionality and services.
PSP fees are typically levied in one of two ways. Either as a percentage of each transaction, sometimes accompanied by an annual or monthly standing charge, or as a larger annual or monthly standing charge and a low fixed cost per transaction.
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