Fintech Startup: How to Choose a Payment Service Provider
A payment service provider (PSP) enables you to manage financial transactions domestically and internationally by offering a system that can adapt as your business grows to accept more payment methods and currencies. It plays a significant role in the secure financial management of any company. Therefore, it is only logical that you would want to be sure about choosing a provider you can trust for excellent, dependable, and safe solutions. But how can you select the best service provider for your company? We will show you in this article.
What is a Payment Service Provider (PSP)?
A payment service provider is a third-party fintech company that enables retailers to accept electronic payments in a variety of ways. The methods can include real-time transfers via online banking, mobile banking, bank transfers, direct debit, and different credit and debit cards.
How do payment service providers work?
Payment service providers (PSPs) work as financial and technological intermediaries between merchants and their banks or financial institutions. In other words, they manage the entire process of a transaction between merchants and their customers by working with payment processors and acquiring banks. In that way, PSPs create a seamless online and in-person payment experience for both merchants and their customers.
One of the primary requirements for merchants to consistently develop their operations is to use effective payment processing, even as the need for it is increasing as more people make purchases online. We asked Viktorija Poderenko, Deputy Head of the Acquiring Division at WALLETTO, to share her expert description of how it works.
In both card-present and card-absent environments, making card payments has become a SWIFT and seamless process. From the customer's side, it looks very simple - the customer provides their card information, the transaction is authorised and the payment is complete. This all transpires in a matter of seconds, in spite of the fact that, behind the scenes, quite a lot of communication is actually happening. For example - Payment processors act as an intermediary between the customer's bank and the merchant. When the customer makes a purchase using their card, the merchant sends the transaction details to the payment processor, which the payment processor relays to the issuing bank.
To ensure that everything is carried out as it should be, each participant must fulfil their obligations in the process of card processing.
What is the difference between payment service providers and payment gateways?
Payment service providers and payment gateways are different in many ways. Payment service providers facilitate interactions between payment gateways by working in the background, while payment gateways directly intercommunicate with customers. Also, while payment service providers enable the transfer of financial data between merchant accounts and gateways as well as ensure the proper, efficient, and fast processing of all transactions, on the other hand, payment gateways help connect point-of-sale (POS) systems, card processing platforms and different systems, as well as allow the configuration of the necessary channels for both online and in-store businesses.
How are payment service providers different from merchant acquirers?
There are two factors that differentiate payment service providers from merchant acquirers: how they use the merchant account and their pricing structures. While merchant acquirers provide each customer with their own merchant account, payment service providers pool and manage all of their clients into a single large merchant account. Additionally, merchant acquirers choose pricing depending on the client's transaction volume, industry, business size, and a number of other criteria, whereas payment service providers frequently set the same rate and charge for all clients.
Basic Services of a Payment Service Provider
Generally, a PSP provides three services to businesses: payment and currency processing; financial data security; and transaction reporting. PSPs process a variety of local and cross-border payments made in different forms and currencies, follow high security and safety standards (such as PCI DSS compliance) in the handling of financial data and ensure that transactions are recorded and reconciled more effectively and efficiently, even in real-time.
Factors to Consider When Selecting a Payment Service Provider
When choosing a payment service provider, aside from a licence issued by a recognised and reputable agency or financial authority, there are other important factors a merchant must take into consideration. They are as follows:
The market in which your PSP specialises can have an impact on your company's success. Ideally, you should choose a PSP that is an expert in handling financial transactions for companies in your market. In that way, you will be able to get insights concerning the common payment methods used by your competitors, how the payment process is best organised, and what the financial management expectations of your customers are in the market.
Payment methods and multi-currency support
Knowing the PSPs' online and offline payment options can help you choose which ones best meet the demands of your customers and business. Just the most popular ones will be sufficient, allowing for simpler transactions and a better overall customer experience. You do not need to have a wide variety of them; too many options might be unnecessary when they will not be frequently used.
Furthermore, if you are rendering your services globally, it will be to your advantage if your chosen PSP can support multi-currency payments and cross-border transactions. It will help you build customer loyalty by offering a less expensive payment process, one free of currency conversion fees.
Fees and terms
In order to choose the best payment service provider for your company, you must have a thorough understanding of the monthly costs and applicable commercial terms. Some relevant examples include set-up costs, transaction fees, minimum and maximum transaction thresholds, chargebacks, dispute management fees, currency translation fees, early contract termination fees, and POS terminal fees (for brick-and-mortar stores). If they are unclear, find out the details of any prospective provider's pricing models if they are unclear; you don't want to be surprised by any additional expenses.
It is very important to know the level of data protection that your prospective PSPs can offer your business. Also, consider their security policies and compare them before making a choice. That is how to ease any fears you may have concerning data security and professional compliance. At least, ensure that the PSP is compliant with PCI-DSS regulations.
Risk management tools
Find out how your prospective PSPs assess and manage risk. Also, inquire about the steps they take to assist businesses in avoiding negative consequences such as financial loss and reputational damage. Ask for their risk management policies and procedures and understand how they can help you reduce transactional risks such as delayed payments, failed transactions, technical problems, fraud, chargebacks, etc. Also, find out about the PSP’s position on anti-money laundering (AML) and know-your-customer (KYC) procedures.
For the best user experience, a decent PSP should offer possibilities for retailers to customise their checkout procedure. The more adaptable and customizable your checkout process is, the better the needs of your business and customers can be satisfied in terms of the payment journey. Therefore, check to see whether your possible suppliers can match your consumers' checkout expectations. Additionally, find out the amount of mobile optimization that is possible and what technical support you will be required to provide in the process.
Ask potential payment service providers to describe the expected onboarding procedure. Ask about the schedule and onboarding strategy, the necessary paperwork, the training requirements, and the appropriate level of assistance. Make sure they meet your expectations and needs. Finding out how long it will take to start collecting payments after onboarding is also a smart idea. That is because you want to make sure you can get going right away.
Request a demonstration of the reporting dashboard from prospective payment service providers. Assess the quality of the data it offers and the quantity of information in the messages declined. Transactional data gives your company crucial knowledge and insights that it can use to enhance the payment experience. It is useful to understand the amount, structure, and degree of depth of the reporting that will be offered, as well as how it will interface with your current systems.
Quality and level of support
Find out how much customer service you can anticipate from potential PSPs and select the one that is best for your company. For this, you should enquire about the company's responsive customer service, the accessible contact options, if live chat is offered, the availability of a dedicated account manager, the typical response times, and the escalation process in the event of serious problems. Make sure the payment service provider can provide you with overall peace of mind.
Best Payment Service Providers
To make it simple for you to choose the best PSP you need, we have created a list of them below. They are all registered, licensed, and regulated by reputable financial authorities. Compare them and select the option that best suits your business needs and those of your customers.
DECTA is an EMI that provides a full range of secure and integrated services, including its e-commerce modules and open API, for businesses to process online and in-store payments globally. It is ideal for merchants, traditional banks and neobanks, as well as fintech companies that need excellent solutions for cashless transactions and POS payments. Examples of its customers are Magento, WooCommerce, and MuchBetter.
You can contact DECTA to enable your company to smoothly accept many payment methods, including Mastercard and VISA cards, UnionPay, different m-wallets, PayPal, and Zimpler. It has products for payment acquiring, white-label card issuing, third-party technical processing, and white-label payment gateway. Read our overview of DECTA for more information, including its pros and cons.
Intergiro is an electronic money institution that builds business-shaped banking for modern businesses. With this PSP, your business can hold funds and process transactions in up to eight currencies with unique IBANS; provide unlimited virtual and physical plastic cards to your customers and your team; automate your accounting and payroll, and follow a digital onboarding process with a flexible pricing structure.
Intergiro’s all-in-one financial toolkit can meet the needs of digital businesses, card acquirers, product builders, and PSPs. Under its BaaS model, its dynamic APIs allow merchants to build, adapt, and thrive financially. It is a principal member of Mastercard, VISA, and the SEPA and SWIFT networks. See our detailed and reliable overview of Intergiro for its pros and cons and other useful information.
Satchel is an EMI that provides simple, smart, and secure BaaS and payment solutions for businesses in diverse industries. Entrepreneurs, freelancers, retailers, e-commerce stores, crowdfunding service providers, small businesses, and big companies can trust this PSP for convenient international transfers and payments, currency exchange, and several useful features for full control over their funds and card payments.
Mercuryo is a company that makes business payments easy by providing support for fiat and crypto transactions through its pay-in and pay-out solutions. It provides a wide range of services, including payment processing, fiat and crypto exchange, regulation and compliance, scam protection, server support for transaction processing, and blockchain monitoring for secure payment. More than 170 businesses have gone global with Mercuryo. Examples of its customers are Binance, Nexo, Trust Wallet, and Phemex.
In-store and online businesses of all sizes, even startups, can obtain a portable contactless point-of-sale terminal and efficient payment processing services from Square. It also provides a free innovative small credit card reader that comes with big possibilities and supports iOS and Android smartphones, allowing merchants to accept card payments with ease anywhere.
Square offers several fantastic benefits for businesses. It has an affordable and flexible pricing structure. Moreover, it allows merchants to obtain easy checking and savings accounts, loans, team management and payroll assistance, as well as BNPL service creation to boost online sales. Through its loyalty programme, email and SMS marketing, and messaging hub services, this company allows businesses to build customer relationships while growing their revenues.
Connectum is a global company that specialises in acquiring and payment services. It is a principal member of VISA, Mastercard, and UnionPay. You can get a personal account manager and 24/7 friendly support if you choose Connectum. The technical features this company can offer you include VISA and Mastercard card payment processing; payout on different types of cards; card-to-card payments (P2P); multi-currency processing; 3D-Secure service; e-Invoicing; recurring charges set-up; one-click payments via tokens; and a lot more.
When it comes to flexible pricing, smooth onboarding, and a personalised banking approach to the daily financial operations of businesses, ConnectPay is one of the best in the market. You can get access to all its banking services by opening just one account, which could be a multicurrency account for cross-border payments in different currencies.
This EMI allows its customers to use its API or online banking platform to enjoy an omnichannel approach to payment processing and funds management. They can embed financial services into their product offerings and channels, which will enable them to offer IBAN accounts and provide payment cards to their customers seamlessly on their own digital platforms. It also provides segregated accounts for managers and business owners to separate the funds of their customers from those of their firms.
Furthermore, with ConnectPay, you can receive SEPA and SWIFT payments, enjoy automated reconciliation, use its Payment Gateway API to create customised payment experiences, and get an unlimited number of cards for an IBAN account. For more information, here is our full overview of ConnectPay.
Revolut is a fintech company that provides banking, money transfer, and payment processing services to businesses of all sizes. It allows merchants to pay and get paid without stress from different parts of the world. They can accept card payments, build banking apps, and manage accounts with Revolut Developer.
Revolut enables companies to manage their finances smarter with all-inclusive analytics that come with full visibility. Besides, merchants can connect and offer the Revolut Pay payment method to their customers that may prefer to use it when checking out. Read our Revolut overview to learn more about it.
You need to look for a PSP that can meet the payment needs of your business and your customers. Generally, it should be licensed, rich in services, reliable, secure, flexible, and customisable. Also look for its current customers and partners. The more reputable and well-known these stakeholders are, the higher your chances of selecting a good PSP.
The right way to choose a PSP is to ask some important questions concerning the payment methods it supports, what its onboarding process is like in terms of ease, its level of compliance with international security and risk management standards, how reliable its services are to its current customers (based on their reviews), checkout customisation, quality of customer support, and the affordability of the fees it charges.
The key factors to consider when choosing a payment service provider are as follows: its market specialisation; payment methods and support for multi-currency transactions; fees, pricing, and commercial terms; security standard and data protection policy; risk management tools; checkout customisation; onboarding process; the kind of reporting dashboard it offers; and its level of customer support.
A bank can also function as a payment service provider (PSP) if its licence allows it to go to that extent. However, PSPs are usually not banks because they render specialised services, which makes them better alternatives to banks.
A PSP primarily makes money by charging fees, which are sometimes calculated as percentages of their clients’ transactions plus a fixed charge.
Choose Your PSP Carefully and Thoughtfully!
One of the most important choices you must make for your company is selecting a PSP. If you choose poorly, you will have to deal with a variety of problems. Since that is not what you want, when choosing your PSP, you need to be careful and thoughtful about it.
Remember to prioritise and create a clear overview of the requirements your business has for a PSP while considering all that we have discussed in this guide. Moreover, different PSPs provide different solutions and benefits for their target markets. Some payment service providers are more suited to the needs of your business than others. We hope that you will find a suitable choice among the PSPs discussed in this article.
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