Nowadays, most e-commerce companies use one or more payment service providers nowadays. Far more than half of the online shoppers pay for their orders using e-wallet solutions, mobile payment systems or the credit cards. In order to process these, online merchants need a payment service provider.
What is a Payment Service Provider?
Payment service providers (PSP), also known as payment processors, connect an e-commerce company to various payment providers, such as credit card acquirers or PayPal. In addition to technical integration, PSPs often also handle transactions, negotiate with payment procedures and payout. In addition, many payment service providers offer additional services such as receivables management, subscriber management or collection.
It is sometimes difficult to find your way through the "Payment Jungle" or to find the best provider. Paylobby wants to remedy this situation. In just a few minutes you will get an overview of all relevant providers and a free offer.
What Countries does the Payment Provider covers?
Customers payment preferences vary from one country to another. Therefore an online retailer should become familiar with the methods of payment and legal requirements in a country when it comes to international expansion.
There are payment providers who specialize in one country or one region and thus achieve good conversion rates in the respective countries. Other providers cover a wide range of countries and are therefore an interesting choice for international companies.
When deciding on a payment provider, the current country coverage as well as the next few years expansion plans should be considered.
What Payment Methods can the Provider process?
The selection of the appropriate payment methods is crucial for success. Purchase cancellation are reduced and the conversion rate are increased. The choice of appropriate payment methods depends on the targeted market, but also on the industry, the target group and the average basket size.
On a worldwide average, the five preferred payment methods are e-wallets (46%), credit cards (20%), debit cards (9%), bank transfers (8%) and pay on delivery (8%).
The top 5 payment methods in Europe are debit cards (27%), e-wallets (21%), bank transfers (18%), credit cards (12%) and pay on delivery (6%).
What Services should the Payment Provider offer?
Depending on the countries and industries a merchant is active in, he should have the opportunity to minimize his risk of payment failure by means of risk management options such as (Dynamic) 3D Secure, Blacklist, IP Geolocation, Card Data Encryption or Scoring.
Extensive transaction-based reporting helps you retain the transparency of your products and processes, and will be able to exploit additional revenue and cost potentials.
Customer service includes accessibility, support in the appropriate languages, as well as individual consulting in terms of conversion optimization or fraud management.
Further payment services such as micropayments, dynamic currency conversion or the processing of marketplaces are elementary for individual business models and can be selected via the Paylobby comparison portal.
PSPs often charge a fee for the initial setup of the merchant account. This is in the two to three-digit range.
For the provision of the gateway, some PSP bill monthly charges.
Transaction costs and disagio
Fixed or percentage fees are charged for each transaction. The costs differ according to various criteria such as payment procedures, transaction volumes, products. The percentage fees usually vary between 1 and 6 percent.
Within a time limit, credit card customers can contest transactions. If a customer has triggered the chargeback, the corresponding amount is credited to him. The retailer is then charged between 20 and 60 euros - regardless of the order size.
In the case of international or transnational transactions, additional costs can apply. The costs of these vary according from a provider to another.
If products or services are offered in a currency other than the home currency and payment is made in the local currency, FX charges for currency exchange will be charged. Those fees should not exceed 1 percent. At the exchange rate, traders should ensure that they receive a guaranteed daily exchange rate. This is particularly important for the countries that are subject to higher exchange rate fluctuations. In addition, transfer fees are charged. If the countries do not have a double tax treaty, a withholding tax is applicable.
What are payment methods?
Credit cards, direct debits, invoice purchase, debit cards, PayPal are examples of payment methods with which customers have the possibility to make payments at online shops.
What are prepaid cards?
The prepaid cards are cards which are charged with a credit. They can be purchased online or in the shop.
What is an e-wallet?
An e-wallet is an electronic wallet. The e-wallet is either assigned a reference account or charged with credit.
What is Fraud Prevention?
To protect against fraud and data misuse in e-commerce, dealers use fraud prevention measures. During the check-out process various plausibility and credit checks are used. Online merchants can refer fraud management to the services of a payment service provider or to providers specializing in fraud prevention.
What is Processor?
The processor – also called gateway/distributor – is responsible for the technical integration of different payment methods for the online retailer. The retailer has the advantage because they only need one technical connection to offer different payment methods. They receive the payment directly from the financial institution handling the payment process. For retailers who offer only a few payment options or want to balance the accounts and payment flows themselves, the integration of a processor could be of interest.
What is collector?
The collector takes care of not only the technical integration but also the settlement of the payments and reporting. The aggregator takes care of the contract negotiations with the financial institutions or alternative payment methods in addition to the services of the collector.
What is acquirer?
Acquirers are banks or financial institutions that offer one or more online payment methods. They establish agreements with retailers concerning accepting, authorizing and settling the payment methods for goods and services and process payments.