Payment Service Provider
Encyclopedia
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
, bank transfer, and real-time bank transfer based on online banking
. Some PSPs provide unique services to process other next generation methods (Payment systems) including cash payments, wallets such as PayPal
, prepaid cards or vouchers, and even paper or e-check
processing.
Typically, a PSP can connect to multiple acquiring bank
s, 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 on financial institutions and free from the task of 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, fund remittance and fraud protection in addition to multi-currency functionality and services.
PSP fees are typically levied in one of two ways: as a percentage of each transaction or a low fixed cost per transaction.
US-based on-line payment service providers are supervised by the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury
that collects and analyzes information about financial transactions in order to combat money laundering
, terrorist financiers, and other financial crimes.
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
, bank-based payments such as direct debit
Direct debit
A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary...
, bank transfer, and real-time bank transfer based on online banking
Online banking
Online banking allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.-Features:...
. Some PSPs provide unique services to process other next generation methods (Payment systems) including cash payments, wallets such as PayPal
PayPal
PayPal is an American-based global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as checks and money orders....
, prepaid cards or vouchers, and even paper or e-check
Electronic funds transfer
Electronic funds transfer is the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems....
processing.
Typically, a PSP can connect to multiple acquiring bank
Acquiring bank
An acquiring bank is the bank or financial institution that processes credit and or debit card payments for products or services for a merchant. The term acquirer indicates that the bank accepts or acquires credit card transactions from the card-issuing banks within an association...
s, 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 on financial institutions and free from the task of establishing these connections directly - especially when operating internationally.
Furthermore, a full service PSP can offer risk management
Risk management
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
services for card and bank based payments, transaction payment matching, reporting, fund remittance and fraud protection in addition to multi-currency functionality and services.
PSP fees are typically levied in one of two ways: as a percentage of each transaction or a low fixed cost per transaction.
US-based on-line payment service providers are supervised by the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
that collects and analyzes information about financial transactions in order to combat money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
, terrorist financiers, and other financial crimes.