Differences Between Payment Service Providers (PSP) & Payment Gateways

Misunderstanding between the roles of payment service providers and payment gateway can lead to applying the wrong types of services to your business’s needs, inefficient operation, posing security risks, and more that can negatively affect the business growth in the long term.

Online payment plays one of the most important parts of e-commerce industry, for it acts as an intermediary between businesses and their customers worldwide, enabling a safe and enjoyable shopping experience with just a few clicks from anywhere. However, its two most crucial components, payment service providers and payment gateway are often misunderstood and misused due to their interconnected nature.

Crucial Role Of PSP In Online Transactions And Its Components

A Payment Service Provider (PSP) is a third-party entity facilitating electronic payments by acting as an intermediary between the payer (customer) and the payee (merchant or recipient). It provides the technological infrastructure and services necessary to authorize, process, and settle transactions securely and efficiently.

Services offered by a payment service provider include accepting payments in multiple methods, payment gateways, payment processing, currency processing, reporting and analytics, security compliance with standards like PCI DSS, advanced fraud detection and prevention measures, customer or technical support, etc.

PSPs enable merchants to accept payments from customers using various payment methods, including card payments.

As mentioned above, PSPs play a crucial role in facilitating online transactions by providing essential components and services that enable merchants to accept payments securely and efficiently. Key components of PSPs in online transactions can be listed below:

1. Payment gateway - A key component provided by PSPs that works in conjunction with other entities to facilitate secure and efficient online transactions, which includes payment gateway, payment processor, acquiring bank, issuing bank, security and compliance. It encrypts sensitive payment information, authorizes transactions in real-time, and routes payment requests to the appropriate payment networks.
2. Merchant account - Special accounts to accept payments from customers, process transactions and receive funds from successful sales.
3. Payment processing - a payment structure that provides the necessary infrastructure, such as online payment gateways, POS terminals, or mobile payment apps. An ideal payment processing offers various payment methods, including credit cards, debit cards, bank transfers, digital wallets, and alternative payment options to facilitate transactions across different locations and devices.
4. Transaction secure protocols like PCI DSS Compliance, risk scoring, fraud monitoring, address verification, and 3D Secure authentication, etc., to ensure secure transmission and storage of payment information, complying with industry standards and regulatory requirements
5. Integration and Customization such as APIs (Application Programming Interfaces), SDKs (Software Development Kits), or plugins, enable seamless and customized payment experiences for customers, allowing them to integrate payment processing functionality into their websites, mobile apps, or point-of-sale systems.

By providing essential components and services such as payment gateways, merchant accounts, fraud protection, and multi-currency support, PSPs empower merchants to accept payments from customers worldwide and drive growth in the digital economy.

Although indicating different roles in the payment system, PSP and payment gateway are often used incorrectly interchangeably to mention an important part of a business’s payment software.

Reason Why People Often Confuse PSPs and Payment Gateways

A payment gateway is the only software allowing different payment methods to communicate with each other, and technically functions payment process. All four types of payment gateways, no matter how highly customizable those payment gateways are, need to be integrated with additional software such as security features to efficiently perform in this cyberspace full of risks.

A PSP, on the other hand, can be applied in the e-commerce store as a payment gateway to facilitate online transactions, and as a financial processing with actual cash transfer. The fact that PSP can be used as a payment gateway makes the two terms often be misused, and therefore, misunderstood.

Selecting The Wrong Type Of Payment Services Can Badly Effect Your Business In The Long Term

The misunderstanding between Payment Service Providers (PSPs) and payment gateways could potentially lead to confusion or misalignment of expectations, which might have negative effects on businesses and their payment processing.

Mentioning security features, payment gateways may offer basic fraud prevention features, like address verification or CVV checks, but may lack the sophisticated fraud detection and risk management capabilities provided by PSPs.

QR code scanning payment feature is one of the most popular fast payment methods of PSPs.

Also, solely relying on a payment gateway without considering the broader capabilities of PSPs could restrict their ability to cater to diverse customer preferences and limit their market reach.

Last but not least, the misunderstanding between payment gateways and PSPs can make small things complicated, increasing integration costs, and delaying implementation, impacting the efficiency and scalability of their payment processing operations.

Mistakenly perceiving a payment gateway as a PSP can make businesses overlook other essential features and capabilities offered by PSPs that as a result, lead them to come up with a solution that does not fully meet their business needs or growth objectives.

To mitigate these potential negative effects, businesses should take the time to educate themselves about the differences between payment gateways and payment aggregators (also called payment service providers - PSPs), thoroughly evaluate their payment processing requirements and growth objectives, and choose a payment solution that aligns with their business needs and long-term goals.

Indeed, a PSP is often an ideal choice for those businesses that have no idea which payment services they should come with. Partly possibly because of the larger area that the service covers compared to a payment gateway.

Benefits Only A PSP Can Bring To Your Business

Collaborating with a Payment Service Provider (PSP) offers merchants several advantages and capabilities that they may not have when working solely with a payment gateway.

PSPs facilitate cross-border transactions and enable merchants to expand their reach into international markets. By offering multi-currency support, multi-payment methods acceptance, language localization, and compliance with regulatory requirements in different regions, PSPs allow merchants to sell products or services globally without the need for separate integrations or partnerships.

PSPs also offer advanced fraud prevention tools and risk management capabilities by leveraging machine learning algorithms, behavior analysis, and real-time monitoring to detect and prevent fraudulent transactions, protecting merchants' revenue and reputation.

PSP apps prioritize data protection by offering customized and advanced security features such as biometric authentication.

Furthermore, merchants can access real-time dashboards, generate custom reports, and track key metrics across different payment methods, channels, and geographic regions, enabling data-driven decision-making and optimization of payment strategies.

PSPs also provide centralized account management tools and dashboards that enable merchants to monitor transactions, manage settings, and access customer support from a single platform.

Talking about security matters, PSPs ensure compliance with industry regulations, payment card industry standards (such as PCI DSS), and data protection laws, reducing merchants' regulatory burden and liability, protecting sensitive payment data and ensuring secure transmission and storage of customer information.

From what was said above, partnering with a PSP offers merchants a comprehensive suite of payment processing solutions, advanced features, and value-added services that enhance their capabilities, expand their market reach, and streamline their operations compared to working solely with a payment gateway.

Payment Gateway Vs. Payment Service Provider: What Is Best For Your Business?

Deciding between a payment gateway and a payment service provider (PSP) depends on your business needs, preferences, and long-term goals. Both options offer distinct advantages and functionalities, so it's essential to consider various factors before making a decision.

Here's a comparison to help you determine what's best for your business:

	PAYMENT GATEWAY	PAYMENT SERVICE PROVIDER (PSP)
Functionality	As a bridge between the merchant's website or application and the payment processor, facilitating the transfer of payment data.	Offers a broader range of payment services and functionalities, such as fraud prevention, multi-currency support, global payment processing, and reporting.
Features	Allow merchants to tailor the payment process to align with their brand identity and customer preferences.	Offer comprehensive payment processing solution including payment gateway functionality along with other services.
Management Control	Offer full control over the payment process to access transaction data, monitor performance, and manage settings from a centralized dashboard.	Offer all-in-one solutions that simplify setup and management. Be well-suited for businesses with complex payment processing needs, high transaction volumes, or international expansion plans.
Cost	Charge setup fees, transaction fees, and monthly subscription fees, depending on the provider and pricing model.	May have higher upfront costs but offers cost savings and efficiencies in the long run together with value-added features.

Ultimately, the best choice for your business depends on factors such as your budget, technical capabilities, business model, growth plans, and specific requirements. Consider evaluating multiple options, comparing features, pricing, and support services, and assessing how well each solution aligns with your business goals and objectives.

It may also be beneficial to seek recommendations from peers, consult with payment processing experts, or request demos and trials to test different solutions before making a decision.

PSP with the payment gateway as a crucial part enables businesses to efficiently transfer payments between partners and parties, enhancing their professional collaboration.

PayCEC: A Payment Services Provider That Can Fulfill Your Dream Business’s Needs

Talking about an ideal payment service provider for your business, PayCEC stands out as a rising payment gateway solution provider that facilitates a full set of payment services, together with high-standard products and the dedication of the engineering team full of experience.

About features and functionalities, PayCEC offers a wide range of payment gateway services besides payment gateway, such as Online Payment Solutions (multi-method payment, multi-currency payment, payment page customization, multi-device payment page); Payment Gateway Security (3D Secure, Fully PCI DSS, Tokenization, data encryption, ...); and more.

Regarding management features, PayCEC offers businesses almost full control of the payment system with Payment Management System services including account management and risk management to minimize fraud and accept more payments.

In addition to its most competitive pricing plans in the market, PayCEC also brings merchants and their customers a lot of seasonal promotions for their first day of activation, first successful payment, during holidays, and more to encourage the number of merchants and complete payment on the platform.

Mentioning the integration feature, PayCEC proudly presents its popular unique selling point besides payment services to partners with the 24-hour fast integration, immediately installing, integrating, and launching the payment gateway system within 24 hours, promise to help business partners go live and assist their customers right at the moment.

PayCEC is a dynamic payment service provider wishing to assist businesses in building their dreams with tailored payment solutions. Whether your business is a startup, expanding and existing enterprise, or aiming for global reach, PayCEC is here to bring you a comprehensive suite of services to support business objections.

About PayCEC

PayCEC was established in response to the growing need of businesses to accept online payments more quickly and easily. In the new media era, our payment flow has evolved to work seamlessly and effectively across all platforms and devices. We pride ourselves on combining superior technology with first-class customer service.

PayCEC is a truly global payments platform that not only allows customers to get paid but also withdraws funds to their business accounts in various currencies.

We have created an open and secure payments ecosystem that people and businesses choose to securely transact with each other online and on mobile devices.

PayCEC Team

• [email protected]
• +44 2032 864370
• www.paycec.com