What is a PSP

A payment service provider, commonly referred to as PSP, is an institution that allows companies to process online payment transactions. The primary purpose of PSP is to facilitate the business entity in processing online payments by debit and credit cards, as well as incorporating payment systems like e-checks.

Payment service provider features and scope

A payment service provider is a party that enables payments from the merchant to the bank, thus establishing the structure of a payment gateway for the merchant. This payment gateway is vital for any business entity that wishes to transact payments through the internet, including credit and debit card payments.

The scope of the PSP further expands to protecting different risks involved in transacting online payments. Due to the high risk of conducting online payments, the PSP software assists in protecting banks and the card holders against fraud payments.

In order to legally function as a payment service provider, it is an important step to obtain the relevant PSP license. The PSP license is issued in order to ensure that the entity abides by the laws and regulations of the jurisdiction in which they operate. In addition to this, the PSP will be required to obtain PCI compliance so that it is allowed to offer payment processing to merchants.

After the PSP has obtained the necessary license, the party must obtain, integrate and implement the necessary PSP software to process online payments conducted by the merchant. The software and gateway requirements are dependent on which payment solutions the company intends to provide. The Payment Service Provider fee is levied in either a specific percentage of each transaction made online or through a set cost of each transaction.

To learn how to become a payment service provider, please view our PSP section.