What is a PSP? Benefits, challenges, and opportunities for 2024


PSPs are essential to electronic and digital payment processing in Europe.

PSP stands for Payment Service Provider. (No, not PlayStation Portable in this context!) What’s a Payment Service Provider? It’s a company that helps businesses handle electronic payments. Basically, a PSP is the intermediary who facilitates an electronic transaction between a seller and buyer.

In the EU, Payment Service Providers are important because they make transactions smoother across different countries and currencies. This is key given the diverse economic landscape of the EU. PSPs also follow strict EU regulations to protect against fraud and ensure money moves safely. This builds trust in digital transactions, which is essential for the EU’s digital market and digitalisation transformation. Plus, they’re integral to ecommerce growth, making it easier for businesses to sell to customers anywhere in the EU, and even beyond.

Now, we’ll give you 7 quick takeaways for each of these topics:

  • Benefits for businesses who use a Payment Service Provider
  • What to consider when choosing a good PSP
  • How PSPs in the EU may differ from those in the rest of the world
  • Challenges PSPs might face

That’s right! We’re giving you 4 listicles and each have 7 bite-sized chunks about PSPs!

7 advantages for a business when using a Payment Service Provider

There are many advantages for a business that partners with a PSP.

  1. Ease of Integration: They provide easy-to-integrate solutions that work with various ecommerce platforms, simplifying the process of setting up payments for online stores.
  2. Multiple Payment Methods: They offer customers a range of payment options – credit cards, bank transfers, e-wallets, etc., increasing the likelihood of purchase completion.
  3. Security and Compliance: PSPs handle security compliance with industry standards like PCI DSS, reducing the risk of data breaches and fraud.
  4. Global Transactions: Businesses can accept payments in different currencies and manage cross-border transactions more efficiently.
  5. Reduced Costs: By aggregating transactions, Payment Service Providers can offer lower transaction fees compared to businesses negotiating directly with banks or credit card companies.
  6. Real-Time Reporting: PSPs provide real-time insights into transactions, helping businesses with better financial tracking and decision-making.
  7. Customer Experience: A seamless payment process improves customer experience, potentially increasing conversion rate, retention and repeat business.

What should a business look for in a good PSP?

It’s often hard to choose a good business partner to ensure your company is in good hands. Here are 7 tips for choosing the right Payment Service Provider:

  1. Security: Look for robust security measures, compliance with PCI DSS and ISO27001, and a track record of managing data securely.
  2. Payment Options: A good one should offer a variety of payment methods to cater to the preferences of different customers.
  3. Currency and Localization: The ability to handle multiple currencies and provide localised payment experiences is important for reaching international markets.
  4. Integration: It should offer easy integration with your existing systems and ecommerce platforms.
  5. Fees and Pricing Structure: Transparent and competitive pricing, without hidden fees, is crucial for calculating costs and profits.
  6. Customer Support: Reliable and responsive customer support to assist with any issues that arise is essential.
  7. Reputation and Reliability: A PSP with a strong reputation and a track record of reliability will ensure that transactions are processed smoothly.

What are some differences between PSPs in the EU vs. the rest of the world?

As with many other aspects of doing business, the EU’s unique approach affects PSPs, too:

  1. Regulatory Environment: The EU has specific regulations like PSD2 which aim to increase competition and enhance security in payments. This regulation is not present in other regions. Additionally, PSD3 and PSR1 will bring further evolution of the PSP regulatory environment over the next few years.
  2. Currency Handling: EU Payment Service Providers are adept at dealing with the Euro and facilitating SEPA (Single Euro Payments Area) transactions, which is less relevant outside of Europe.
  3. Market Integration: The EU market is more integrated, allowing PSPs to offer services across member states with less friction, compared to other regions which may have more diverse and separate markets.
  4. Data Protection: EU PSPs must adhere to GDPR (General Data Protection Regulation), which sets high standards for data protection. This robust level of data privacy is not required in all parts of the world.
  5. Cross-Border Transactions: EU PSPs may be more focused on cross-border transactions within the EU, facilitated by the common market. However, global providers might need to navigate a more complex web of international regulations.
  6. E-Invoicing: There’s a stronger emphasis on e-invoicing within the EU. So, Payment Service Providers here often integrate these services to comply with EU directives, which may not be the case in other regions.
  7. Consumer Protection Laws: The EU has strict consumer protection laws affecting payment reversals and dispute resolutions, which PSPs must accommodate. Other regions might have different levels of consumer protection that influence PSP operations.

What challenges do payment service providers face?

It’s not all smooth sailing. PSPs have to navigate through choppy waters and overcome numerous challenges, including:

  1. Fraud and Security: They must constantly evolve to counteract sophisticated cyber threats and protect sensitive payment data.
  2. Regulatory Compliance: Keeping up with changing regulations across different markets can be complex and costly.
  3. Technological Innovation: Staying ahead with the latest payment technologies and integration capabilities is crucial to remain competitive.
  4. Market Competition: The payment industry is crowded, and standing out to merchants amidst many PSP options can be tough.
  5. Customer Experience: Balancing security with a frictionless payment experience is challenging but necessary to prevent cart abandonment.
  6. Global Expansion: Expanding services to new regions requires navigating diverse payment habits, currencies, and regulations.
  7. Interoperability: Ensuring their systems work seamlessly with a variety of merchant platforms and other financial systems can be technically demanding.

Key takeaways about Payment Service Providers in the EU

As you can see, Payment Service Providers are pivotal in the EU for seamless, secure digital transactions. They offer a plethora of advantages from multiple payment options to robust security.

However, they do face challenges like stringent regulatory compliance – that’s great! They also need to continually keep up with technological advancements and evolution while providing top-notch customer experiences. 

Maximise PSP benefits for your B2B operation with Terms.Tech

Terms.Tech is a comprehensive payments solution. It’s available throughout the whole EEA and Switzerland. Terms.Tech includes a B2B Buy Now, Pay Later service for SMEs. With this,  Terms.Tech allows you to offer your customers the option to pay in 30, 60, 90 or even 120 days. Meanwhile you get paid immediately and avoid all default risks. So, PSPs are essential in our operation to ensure sellers receive payment up front.

Set up a call with our Terms.Tech consultants to learn more about us.