PSP companies act as bridges to connect buyers and merchants for a smooth and safe transaction experience. These online payment service providers enable e-stores to offer various one-touch payment options to their buyers, from bank transfer card payments to wire transfers. You must have experienced their smooth transaction services if you've ever done e-shopping.
This blog post will walk you through the basics of online payment service providers and discuss the best PSP solutions available in the market.
What is a payment service provider?
Payment service providers are third-party fintech apps that connect a merchant bank with the buyer bank to smoothly and securely complete payment transactions.
They perform complex tasks behind every e-commerce transaction, like currency changes, account verification, etc., to ensure a seamless experience for the shoppers and buyers. They allow merchants to focus on their business instead of dealing with different financial institutions to manage transactions. They simplify the merchant's life by minimizing external work and facilitating buyers with seamless payment processing.
Benefits of partnering with a payment solution provider
Let’s have a brief overview of the key advantages an eCommerce store can enjoy by collaborating with a PSP company,
- 24/7 operations – teaming up with a payment solution provider enables e-stores to operate round the clock without the hazard of bank timings.
- Enhanced security – online payment service providers prioritize the level of security measures ensuring the protection of financial information. It gives peace of mind to both customers and e-stores.
- Scalability – PSP solutions are flexible enough to accommodate a start-up and multi-billion e-store chain in the same style. It means you don't need to worry about transaction management and security with the rapid growth of your business.
- Real-time processing – payment solution providers process transactions in real-time. It helps e-stores achieve customer satisfaction by providing a speedy and smooth checkout experience.
- Global reach – PSP companies often support different languages and currencies, opening doors to the global market for e-businesses.
- Diverse payment options – PSP companies offer various payment options, from bank transfers and card payments to smart e-wallets. This inclusive approach can give a significant boost to the conversion rate.
- Easy integration – PSP solutions need minimum technical knowledge for integration to eCommerce platforms, making them a good-to-go choice for e-merchants.
- Data insights – most PSP solutions have analytics tools that can help you understand customer purchasing patterns, which can be valuable for making decisions.
- Customer confidence – e-Stores can earn credibility by providing a famous and credible PSP solution. Customers are likelier to trust and complete their purchases when they see familiar and secure payment options.
- Efficient customer service – many online payment service providers offer support for transaction-related issues. This efficient problem-solving improves the customer experience, promoting loyalty.
By leveraging the strengths of a payment solution provider, your e-commerce business can benefit in many ways. It's not about facilitating transactions but improving the shopping experience for your customers while driving growth for your business.
Types of payment service providers
The role of digital payment service providers is pivotal in driving the wheel of eCommerce. These PSPs can be broadly categorized into distributors, collectors, and aggregators. Each category comes with certain benefits when it comes to facilitating digital payments. Let's have a brief view of all.
Distributors are designed to address the challenges faced by e-commerce merchants in particular. By establishing and maintaining connections with payment methods, distributors ensure that online stores can efficiently accept various electronic payments. Skrill is an example of such a provider, known for its infrastructure that supports various payment formats and enhances transactional capabilities for e-commerce platforms.
Collectors are specialized in consolidating transactions. They streamline the settlement process by combining all payments into an account, making it easier for merchants to reconcile their financials. It could be overwhelming and economically impractical without Collector PSPs to manage settlements for each payment method individually. PayPal is a well-known example in this category; it simplifies accounting and financial management for businesses.
Aggregators' hybrid model differentiates it from other online payment service providers. They are not limited to accepting payments from various payment methods. Instead, they used to negotiate contracts with different payment methods on behalf of the merchants. Stripe is a notable example of an aggregator payment service provider. It simplifies merchants' financial operations by taking the responsibility of negotiating with different payment methods.
All these digital payment service providers play a role in improving the efficiency of transactions in the marketplace. By understanding their functions, merchants can navigate the payment landscape more effectively by selecting solutions that align with their business model and meet customer needs.
An overview of the best payment service providers
The payment service providers market is highly competitive; the number of PSPs is increasing, and finding the best solution for a business is challenging. Let's have a quick overview of the best payment service providers for a better understanding,
PayPal does not require any introduction; its 431 million active users across the globe make it an attractive choice for merchants. It is known for its robust security measures, compatibility with major debit or credit cards, and affordability.
PayPal is leading the digital payment providers market with a 41% market share. Businesses can't ignore it because of its affordability, user base, and market size.
This Ireland-based fintech company stands 2nd in the chart with 21% of the market share. According to a Statista report, Stripe processed transactions worth 817 billion in 2022. This hints at Stripe's popularity and market size.
Stripe supports a range of payment methods, including card payments, Google Pay, Apple Pay, Alipay, WeChat Pay, and many more. It uses powerful machine learning modules to block unauthorized access and beat fraud. Its flexibility and security make it a go-to choice for businesses of all sizes.
Authorize.Net has been running the show since 1996 in the PSPs market. It has processed 1 billion transactions worth USD 149 billion in 2022. These tremendous stats hint at the popularity and acceptance that ranks it among the best online payment services.
It facilitates merchants to process payments via debit and credit cards, but its capability to support direct bank transfers makes it exceptional.
Square entered the limelight by offering the mobile credit card payment processing option in 2009. Today, it is not only limited to payment processing but also supports merchants in inventory management, analyzing sales reports, digital receipts, and much more.
Square has captured a considerable market share by adopting an innovative approach. In 2022, Square processed 4B transactions worth USD 186.5B.
Adyen provides a solution for managing payments, guaranteeing a transaction process across various online, in-app, and in-store platforms. It proves a sigh of relief for start-ups and small businesses as it does not charge any monthly or annual subscription fee. Adyen used to charge merely €0.11 + a certain amount per the chosen payment method on every transaction.
It is particularly beneficial for businesses looking to expand since it supports a range of payment methods and currencies worldwide. This Dutch Fintech PSP processed €767.5 BN billion in 2022, revealing why it ranks among the best online payment services.
Braintree is part of the PayPal family; it offers payment services that are almost similar to PayPal's. It accepts known debit cards, credit cards, PayPal, Venmo, Google Pay, etc. They used to charge 2.59% + $.49 per transaction for cards and digital wallet transactions. The charges may differ depending on the payment method and business size.
PayPal Braintree integration lets merchants enjoy data security, fraud-preventing tools, Reporting features, and payment services. It also encourages merchants to pay directly from Braintree Hyperwallet to their vendors or freelancers globally.
Dwolla is an incredible payment processing platform known for facilitating account-to-account transfers. It enables businesses to send or receive directly from their customer's bank account. Merchants can enjoy this feature by integrating bank transfers into their mobile/web eCommerce platforms through Dwolla API. It also offers white-label branding options to businesses looking to develop custom features. Merchants can engage with Dwolla's developer team to develop any custom feature.
Skrill is another popular Payment service provider, enabling consumers to make online payments globally since 2001. It works in the same fashion as PayPal. It processes payment options like card payments, digital wallets, and wire. Currently, Skrill is providing services in up to 40 countries, and the list is continuously growing.
Pay by Bank and Skrill Crypto make it a different and attractive choice for merchants and consumers. Skrill instant bank transfer solution is linked with 3k+ banks globally; it lets consumers send money directly from their bank accounts. Similarly, Skrill crypto allows consumers to purchase or withdraw their funds as cryptocurrency. These incredible features minimize the cart abandon ratio and enable merchants to open doors for various groups of audiences.
Payment service providers are the backbone of the digital economy; their rule is pivotal in running e-businesses. After going through this article, you might better understand PSPs; still, choosing the one for your business can be confusing.
It's not only about prices; you may consider many factors while partnering with a payment processing solution. We recommend considering security, simplicity, availability in your chosen country and currency, customer support, and pricing. You need to analyze these factors, your business size, and your niche to choose the best PSP that makes your business and customer life easy.