A payment service provider (PSP) is a company that enables businesses to accept online payments – including credit cards, bank transfers, and digital wallets – through a single integration.
Payment service providers play a central role in the payments ecosystem, facilitating electronic payment transactions and enabling businesses to accept a wide range of payment methods.
That’s why, as a business owner, choosing the right PSP is crucial for enhancing the checkout experience, minimising failed payments, and driving revenue growth.
In this article, we’ll cover what payment service providers are, what they do, and the benefits your business stands to gain from using a PSP.
Topics we will discuss include:
- What is a payment service provider (PSP)?
- What do payment service providers do?
- What is a third-party provider (TPP)?
- What is the difference between a PSP and a TPP?
- Services provided
- Target users
- Regulatory framework
- Integration and APIs
- What is the difference between a PSP and a TPP?
- The benefits of using a payment service provider
- How to choose the right PSP for your business
What is a payment service provider (PSP)?
A PSP, or Payment Service Provider, is a company that offers merchants online services for accepting payments.
PSPs enable merchants to accept electronic payments via a variety of payment methods, including credit cards, direct debit, bank transfers, and real-time bank transfers based on online banking.
Examples of PSPs include:
- Adyen
- PayPal
- Stripe
- Mollie
PSPs provide a number of back-office value-added services which make them particularly well-suited for small and medium-sized enterprises (SMEs). Larger merchants are more likely to integrate individual payment methods directly.
Note: Brite Payments is also a PSP as it offers several other payment methods, including iDEAL and Swish, and facilitates payments using its own proprietary payments network, Brite IPN, but it is perhaps better described as a third-party provider (TPP). We’ll cover the difference between PSPs and TPPs later in this article.
What do payment service providers do?
At their core, payment service providers (PSPs) act as the bridge between your business, your customers, and the financial institutions that move money. They connect to multiple acquiring banks, card networks, payment processors, and alternative payment methods so you can accept payments through one centralised platform.
Here are the key functions and benefits of a PSP:
- Payment processing: PSPs handle the full payment flow – from authorisation and capture to settlement – so funds reach your account quickly and securely.
- Support for multiple payment methods: With PSPs you can offer your customers more ways to pay, including credit and debit cards, digital wallets (PayPal, Apple Pay), bank transfers, and even cryptocurrencies (supported by some PSPs).
- Security and compliance: PSPs provide built-in fraud detection, data encryption, and PCI-DSS compliance, helping protect your business and customer data.
- Global and multicurrency payments: Many PSPs let you accept payments in multiple currencies and handle cross-border transactions, making international expansion easier.
- Reporting and analytics: Get access to real-time dashboards and transaction reports, helping you track performance, spot trends, and make data-driven decisions.
- Easy integration: PSPs offer developer-friendly APIs, SDKs, and plug-ins for popular e-commerce platforms, reducing setup time and technical overhead.
By managing these complex processes for you, a PSP frees you to focus on running your business rather than worrying about the mechanics of getting paid.
What is a third-party provider (TPP)?
A third-party provider (TPP) is a company that uses open banking technology to connect consumers and businesses with their bank data in a secure, regulated way.
TPPs are not banks themselves – instead, they act as intermediaries that enable services like:
- Instant payments: Initiating transfers directly from a customer’s bank account.
- Real-time account information: Accessing balances and transaction history (with customer consent).
- Seamless money transfers: Making it faster and easier to move funds between accounts.
By offering these services, TPPs increase competition in financial services and push traditional banks to improve their digital offerings.
What is the difference between a PSP and a TPP?
Although both PSPs and TPPs are essential players, they serve different functions in the financial services ecosystem.
Payment service providers handle the technical aspects of processing payments. PSPs enable merchants to accept electronic payments through various methods, including credit and debit cards, digital wallets, and account-to-account payments.
Third-party providers facilitate interactions between consumers and their financial institutions. They typically operate within the framework of open banking and offer services like account information aggregation and payment initiation.
Let’s take a closer look at some of the key differences between PSPs and TPPs.
Services provided
- PSPs primarily provide payment processing services, enabling merchants to accept and process payments through multiple channels.
- TPPs focus on leveraging bank data and open banking APIs, offering account aggregation and payment initiation services.
Target users
- PSPs facilitate the acceptance of electronic payments, mainly serving merchants and businesses.
- TPPs provide financial insights, payment initiation, and data aggregation services, serving both consumers and businesses.
Regulatory framework
- PSPs are regulated under payment processing standards and regulations, ensuring secure handling of payment information.
- TPPs operate under open banking regulations, such as PSD2 in the EU, which mandate secure access to bank accounts and transaction data with user consent.
Integration and APIs
- PSPs provide APIs and integration tools that enable merchants to incorporate payment processing capabilities into their websites and apps.
- TPPs use open banking APIs to connect with financial institutions and access account information or initiate payments on behalf of users.
Why the distinction matters
Understanding the difference between a PSP and a TPP is important when planning your payment strategy.
Merchants typically need a PSP to accept customer payments across multiple methods.
Businesses or fintechs might use a TPP to access customer bank data, offer account-to-account payments, or provide value-added financial services.
The advantages: How payment service providers can benefit SMEs
As we mentioned earlier, payment service providers are particularly popular with SMEs. For SME owners, utilising a payment service provider offers numerous benefits, particularly for merchants operating online or conducting electronic payment transactions.
PSPs handle the entire payment process, allowing you to focus on other important activities without having to worry about whether you’re able to get paid.
In addition to the advantages of the key functions and features listed above, using a payment service provider also offers the following benefits, from the subscription economy to operational savings:
- Convenience: PSPs offer a variety of payment options through a single platform, eliminating the need for businesses to integrate with multiple payment systems separately.
- Scalability: A PSP can easily scale with your business as it grows, handling increased transaction volumes without significant additional investment on your part. PSPs also offer flexible solutions that can be tailored to your specific business needs, and many can ease internationalisation by providing relevant local payment methods.
- Speed and efficiency: PSPs help improve your cash flow by ensuring fast transaction processing and settlements. Some PSPs also offer instant payments, reducing the time you have to wait for funds to be available in your account.
- Advanced features: Payment service providers offer advanced features such as mobile payment options and one-click payment solutions for returning customers. They also manage recurring payments – a great feature for subscription-based businesses.
- Customer support: PSPs provide dedicated customer support to help you with any issues related to payment processing, account management, and technical troubleshooting. Some providers also offer end-user support, which helps enhance your overall customer experience.
- Cost efficiency: Outsourcing your payment processing to a PSP can save you on the costs associated with setting up and maintaining your own payment infrastructure. Many PSPs also offer competitive transaction fees and flexible pricing models, both of which can be great for small and medium-sized businesses.
How to choose the right payment service provider for your business
Choosing the right PSP is more than a technical decision: it directly impacts checkout experience, conversion rates, cash flow, and growth potential.
Here’s a checklist to help you evaluate PSPs effectively:
1. Supported payment methods
Ensure your PSP offers the payment options your customers prefer – including credit/debit cards, digital wallets, bank transfers, and Buy Now, Pay Later (BNPL) options. More options often mean higher conversion rates at checkout.
2. Currency and international support
If you sell internationally (or plan to), look for a PSP that supports multiple currencies, local payment methods, and currency conversion. This helps you reduce cart abandonment and expand into new markets smoothly.
3. Pricing and fee structure
PSPs may charge flat fees, percentage-based fees, or a mix. Compare pricing models and look for:
- Transparent pricing – no hidden fees
- Competitive rates for your average transaction size
- Volume discounts as your business scales
4. Integration and developer experience
Consider how easily the PSP integrates with your website, e-commerce platform, or app.
- Does it offer easy-to-use APIs, plugins, and documentation?
- How much developer work is needed for setup and maintenance?
5. Security and compliance
Ensure the PSP is PCI-DSS compliant and offers robust fraud detection tools to protect you and your customers.
6. Reputation and reliability
Research PSP reviews and case studies. Look for a provider with:
- Proven uptime and reliability
- Responsive customer support
- Experience working with businesses similar to yours
Tip: Shortlist at least two to three PSPs and run a side-by-side comparison (including test transactions) to see which one delivers the best combination of cost, speed, and user experience.
Choosing the right PSP can significantly impact your company’s performance, customer experience, and long-term growth – so take the time to find a partner that aligns with your strategy.
Want to know more about selecting the best payments method?
Get in touch with our payments experts at Brite to learn more about which TPP or PSP would best suit your business needs. From A2A payments and Pay by Bank to account information services and recurring payments, we have you covered.
