Learn all about Payment Service Provider
The FinTech Industry is making swift progress as new innovations and technology-oriented solutions make financial transaction quick, secure, and efficient. The nascent industry has birthed quite a sizable number of acronyms, such as PSP, PA, PG, and more. These acronyms are frequently used by everyone in the industry, and it is understandably a little confusing for industry newbies and business owners/stakeholders to comprehend. We will begin with a basic understanding of payments, in general.
The word ‘Payment’ is a comprehensive term in the world of finance. It is more than just a simple financial transaction between a customer and a vendor. Payment includes business operation processes such as recurring payments, payouts, payrolls, lending services, neo banking, invoice subscriptions, social commerce, payment links, and more. Payment Service Provider (PSP) consolidates all these Payment Services as an all-in-one solution for businesses irrespective of the size and sector. Here is a quick read detailing Payment Service Provider and how it differs from Payment Gateway and Payment Aggregator.
Payment Ecosystem- Role of PSP
In the FinTech industry, Payment is not a simple and straight forward transaction between a customer and vendor. There are several essential elements such as Payment Gateway (PG), Payment Aggregator (PA), Payment Service Provider (PSP), and more that facilitate the payments. To have a clear understanding of PA and PG, you can have a quick read of our blog on the Payment Aggregator- A complete guide.
Payment Service Provider enables merchants to access a broader financial infrastructure that can collect and manage payments and cash flow in a simple and efficient manner. Payment Service Provider is a third-party authorized financial entity that facilitates financial transactions between two parties. The payment settlement may be between customers & merchant using Payment Gateway, vendors & merchant using Payouts, employees & employer using Payrolls, and more.
What are the benefits of using a Payment Service Provider?
The use of Payment Service Provider streamlines the cash flow of a business. Payment collection via. Multiple payment modes, issue payouts, collect recurring payments, etc. The major advantage of using a PSP for Payment processing in a business is more than just boosting sales numbers with accepting payments from multiple payment modes.
Payment Service Provider takes care of the entire payment process keeping it fast, smooth, and secure. This aids in driving important business decisions with ultimate ease as payment collection and disbursement along with risk management is taken care of to streamline the cash flow of your business. Also, the Payment Aggregator provides your business with a sub-merchant account. This translates to the reduced hassle that comes with obtaining a merchant account of your own.
Payment Service Provider Vs Payment Aggregator Vs Payment Gateway
Do all these FinTech jargon sound remarkably similar and their roles/functions seem to overlap? That is because it does. All of these are parts of a broader financial structure that enables smooth and efficient payment process for both customers and merchants alike. According to Reserve Bank of India (RBI) guidelines, each component and its role in processing payments are as follows:
Payment Gateway is an entity that provides technology infrastructure to route and facilitate processing of online payment transactions without any involvement in handling of funds. (The latest circular by RBI requires every Payment Gateway to comply as a Payment Aggregator)
Payment Aggregator is an entity that facilitates merchants to accept payments via. various payment instruments, from customers. It facilitates merchants to connect with acquirers to receive payments, pool, and transfer payment from customers to the merchants after a specified time period.
Payment Service Provider offers value added services such as risk management, reconciliation tools, dispute management, etc. to assist businesses in facilitating smooth flow of payments between various stakeholders i.e., customer, merchant, vendor, etc.
The advancements in FinTech industry have contributed immensely to providing customers and merchants with fast, secure, and efficient payment systems. Take a look at Pay10’s Payment Gateway, Payment Links, Payout services, Billing service, Reseller services, and more.