Apayment service provider (PSP) is a third-party company that allows businesses to accept electronic payments, such ascredit card anddebit card payments. PSPs act as intermediaries between those who make payments, i.e.consumers, and those who accept them, i.e.retailers.[1]
They will often providemerchant services and act as apayment gateway orpayment processor fore-commerce andbrick and mortar businesses. They may also offerrisk management services for card and bank based payments, transaction payment matching,digital wallets, reporting, fundremittance,currency exchange and fraud protection. The PSP will typically provide software to integrate with e-commerce websites orpoint of sale systems.[2]
PSPs establish technical connections withacquiring banks and card networks, enabling merchants to accept differentpayment methods without the need to partner with a particular bank. They fully managepayment processing and external network relationships, making the merchant less dependent onbanking institutions.[3]
PSP can also offerrisk management services for card and bank based payments, transaction payment matching, reporting, fundremittance and fraud protection. Some PSPs provide services to process other next generation methods (payment systems) including cash payments, wallets,prepaid cards orvouchers, and even paper ore-check processing.[citation needed]
PSP fees are typically charged in one of two ways: as a percentage of each transaction, or as a fixed cost per transaction.[citation needed]
US-basedonline payment service providers are supervised by the Financial Crimes Enforcement Network (orFinCEN), a bureau of theUnited States Department of the Treasury that collects and analyzes information about financial transactions in order to combatmoney laundering, terrorist financiers, and otherfinancial crimes.[citation needed]
European payment service providers are supervised based on the EuropeanPayment Services Directive.[4]
Each merchant remains responsible for his own actions and must accordingly ensure that the selected provider observes the guidelines, e.g. with regard todata protection. Compliance withPCI DSS guidelines is important. There are four levels of PCI compliance, that must be respected by the PSP. Depending on the volume of transactions as well as other details about the level of risk assessed by payment brands, the payment service provider has to follow higher standards.
The levels are as follows:
As of 2022[update], there were more than 900 payment providers in the world. More than 300 offer services just for Europe[6] and North America. The global payment service provider market is expected to reach $US88 billion by 2027 from $US40 billion in 2019.[7]
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In 2010, thePeople's Bank of China issued administrative measures regarding online non-financial payment services.[8]: 33 These measures retroactively recognized the legal status of online third-party payment platforms likeAlipay.[8]: 33 Prior to the 2010 measures, these services existed in a legal grey area.[8]: 32
