Digital payments have become so commonplace today that consumers involuntarily reach out to their smartphones for making purchases for virtually anything and everything under the sun. It is no shocker that in the financial year 2023–24, over 187 billion digital transactions amounting to a value of more than ₹365 trillion were recorded!
In fact, digital payment apps have become so user-friendly and convenient for reporting and reconciliation that every business needs to add a payment service provider to its service offering.
Let’s dive into the details of how PSPs actually work and the various benefits associated with them.
How Do Payment Service Providers Work?
A payment service provider (PSP) is a third-party company that acts as a payment link between merchants and customers. It helps businesses accept online payments through different methods, such as debit cards, credit cards, e-wallets, and online banking.
In a nutshell, PSPs ensure that all online transactions are completed seamlessly and securely from point A to point B.
A critical part of the digital payment ecosystem, payment service providers work behind the scenes to enable businesses to manage their payments without any hiccups.
PSPs manage ’em all, from authorisation of funds from the customer’s account to the settlement of funds into the merchant’s account.
Role of Payment Service Providers
Here is an example of a typical online transaction and the role played by PSPs:
- A customer enters their credit card details to make an online payment. When they click ‘Pay’, a transaction request is sent to the payment gateway.
- The next step involves verifying the customer’s card details and checking whether the customer has enough balance in their account to complete the transaction. A PSP does this with the help of a payment processor.
- A confirmation, say, in the form of an OTP, is done to eliminate any possibility of fraud.
- Once the above is done, i.e., the customer’s details are verified and found to be true. They have sufficient balance to fund the transaction, so the PSP transfers funds from the customer’s account to the merchant’s.
- Upon completion of the transaction, a confirmation message is sent to the merchant and the customer about the completed transaction.
What Are the Benefits of Payment Service Providers?
Businesses keen on accepting online payments must enlist the services of PSPs. However, PSPs come with a host of other useful benefits for both merchants and customers that add to their importance.
1. Seamless Payment Experience
With a multi-payment system available via a PSP, businesses can enjoy the leverage of providing a wide range of payment options to their customers. This not only lends a sense of convenience but also provides the much-needed accessibility that most consumers seek.
Besides, integrating different types of payment methods, such as debit cards, credit cards, e-wallets, net banking, etc., individually can increase a business’s costs.
A PSP helps save much of these costs by bundling them into two types of fees: a one-time setup fee and a minimal monthly subscription fee.
2. Provide a Secure Payment Ecosystem
In the age of increasing cyber crimes, businesses need a secure channel for managing their payments. PSPs provide just that. All the information received via a transaction is heavily encrypted using SSL (Secure Socket Layer), which allows only the customers to view their confidential information.
Customers also feel assured of proceeding with online transactions without the fear of losing their money to a scam. The RBI has also implemented a comprehensive policy that governs the data protection practices followed by PSPs.
Owing to these regulations, PSPs can ensure that businesses are also safeguarded against hoax customers. The fund transfer process is initiated only once the customer’s card details have been verified and a sufficient account balance is available.
3. Allow Multi-currency Processing
Partnering with payment service providers can greatly benefit businesses aiming to expand globally and accept payments in multiple currencies.
Most PSPs offer the infrastructure to process fast, secure transactions from international customers, ensuring a smooth payment experience across borders.
For companies targeting overseas markets, a PSP with multi-currency support is essential to delivering a frictionless checkout and unlocking global revenue potential.
4. Provide Real-time Transaction Reporting
Most payment service providers offer real-time transaction reporting, allowing businesses to monitor and reconcile payments as they occur. This simplifies the tracking of multiple customer payments and significantly reduces the risk of human error during reconciliation.
Real-time access also makes reviewing and verifying recent transactions easier within minutes, improving transparency and operational efficiency.
5. Boosted Sales
As outlined above, payment service providers deliver various benefits to all stakeholders. One of the most significant advantages is their ability to help businesses increase sales. By supporting multiple currencies and time zones, PSPs ensure that no potential customer is turned away due to geographic limitations.
Moreover, PSPs continuously adapt to emerging payment technologies, enabling businesses to offer the latest payment methods without interruption. In essence, partnering with a PSP means outsourcing the complexities of payment processing to experts, allowing businesses to focus on growth.
To Sum Up
Payment service providers have proved to be an indispensable part of the global financial chain, enabling a smooth flow of high-volume transactions across the world. They provide an improved customer experience and help businesses flourish.
Finezza offers a range of services, including integrations with payment service providers, to help your business scale effectively.
Feel free to get in touch with us today.
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