Payment Service Provider (PSP): What Are They and How Does They Work?

What is a Payment Service Provider?

A Payment Service Provider (PSP) is a company that helps businesses accept, process, and disburse payments through various methods, including credit and debit cards, bank transfers, e-wallets, and even cryptocurrency. 

PSPs bridge the gap between the consumer making a payment and the business receiving it, ensuring that transactions are processed securely and efficiently.

In B2B eCommerce, using a payment service provider is essential. They play a large role in facilitating online payments.  

How Does a PSP Work?

When a customer makes a purchase on an online store, several steps need to happen for the electronic payment to go through. 

Here’s a simplified breakdown of this process:

1. Customer Actions: The customer selects items and proceeds to checkout, where they enter their payment information.
2. Payment Request: The PSP takes this information and securely transmits it to the appropriate financial institution (like a bank or credit card company) for approval.
3. Authorization: The financial institution checks whether the customer has sufficient funds and whether the transaction is valid. If everything looks good, it authorizes the transaction.
4. Confirmation: The PSP receives the authorization and informs the online store, allowing the transaction to complete. 
5. Settlement: Finally, the money is transferred from the customer’s account to the merchant’s account, completing the sale.

Types of Payment Service Providers

Aggregated PSPs: These are providers like PayPal or Stripe, which allow multiple merchants to use one gateway to process payments. The PSP handles all the merchant accounts and transactions, streamlining the process—especially for smaller businesses.

Dedicated PSPs: For larger businesses that require more tailored services, dedicated PSPs integrate directly into a merchant's system, allowing for greater customization and control over the payment process.

Alternative Payment Methods: Many PSPs also facilitate new payment options such as mobile payments (like Apple Pay or Google Pay), e-wallets, and even cryptocurrencies, offering flexibility for customers.

Benefits of Using a Payment Service Provider

• Convenience: PSPs simplify the transaction process for both businesses and customers.
• Security: They often include advanced security features (like encryption and fraud detection) to protect sensitive payment information.
• Multiple Payment Options: Businesses can offer various payment methods, making their checkout process more user-friendly which can lead to higher sales conversions.
• Integration: Many PSPs easily integrate with eCommerce platforms, making the implementation seamless for businesses. 

What the experts say: 66% of FIs believe that offering digital payment options to B2B clients is important for reducing payment frictions. 

Best Practices for Implementing a PSP

Choose the Right PSP for Your Needs

Consider what features are most important for your business, such as transaction fees, types of payment methods supported, and ease of integration with your current system.

For example, DJUST connects seamlessly with several PSPs such as Lemonway, Thunes, and Mangopay, allowing businesses to select the provider that best fits their requirements.

Conducting business abroad? Make sure your PSP can easily accept foreign currencies and handle exchange rates. 81% of Finance VPs and Execs feel that receiving payments is one of the major challenges when expanding abroad, according to the Global Expansion Survey.    

Look for Diverse Payment Method Support

Customer preferences regarding payment methods evolve over time, so it’s important to pick a tool that offers the hottest ways to pay. 

For example, the 2025 Payments Trends Report predicts that by 2026 60% of the population will use digital wallets. Therefore, you may want to find a PSP with digital wallet compatibility. 

Ensure a Secure Connection

Ensure that the PSP you choose complies with security standards (like PCI-DSS) to protect customer data, and consider using secure connections (HTTPS) to safeguard the information exchanged during transactions.

With the increasing trend toward mobile commerce, ensure that the PSP can handle mobile payment processing efficiently. This could enhance the user experience, as mobile transactions are becoming more common.

Monitor Performance

Regularly review your payment processing operations. Use analytics features provided by your PSP to assess transaction performance, fraud alerts, and chargeback rates, adjusting your processes accordingly to improve efficiency and security.

Challenges of Using a PSP

While PSPs provide many benefits, businesses may also face challenges:

• Fees: Transaction fees can accumulate quickly, especially for businesses with high sales volume. The average 
• Integration Issues: Not all PSPs integrate smoothly with every eCommerce platform, which can lead to operational challenges. 
• Dependence: Relying on a third-party provider means entrusting them with crucial financial transactions. It’s important to select a reputable PSP and regularly review their service quality.

Using DJUST to Enhance Your PSP Integration

DJUST offers a robust platform that allows businesses to manage B2B transactions smoothly. With its flexible payment service provider integration, you can choose from various options to meet your payment needs. 

DJUST also facilitates multiple payment methods per order, ensuring that your customers have a variety of choices while maintaining a secured environment for all transactions. The platform's architecture allows you to connect effortlessly with PSPs, streamlining the purchasing process and enhancing customer satisfaction.

‍