Behind the scenes, payment service providers consolidate credit card processing for tens of thousands of businesses into one mega-merchant account. By aggregating payment processing volume, PSPs can negotiate extremely low processing fees with their partner banks. The PSP then passes those savings on to their customers, usually in the form of simple flat-rate fees and low or no monthly costs.
PSPs also assume the credit risk for fraud and chargebacks for thousands of their clients. When fraud or chargeback issues occur, the PSP's merchant bank deducts these amounts and the PSP resolves them with the client. This is why most PSPs prohibit high-risk selling activities and place accounts on hold or freeze more often than standard merchant accounts.
Payment Service Provider Overview
Also known as third-party processors, PSPs enable a wide range of payment options in an all-in-one solution, typically offering instant account approvals with no long-term contracts, simple, flat-rate processing fees, and fully integrated software, POS systems, and hardware.
With many PSPs, there are no upfront, monthly, or termination fees, so your only ongoing cost is the payment processing fee. PSPs set their processing fees based on the type of payment (credit card, debit card, ACH, e-wallet, etc.) and how you process the sale (online, in-person, manual entry, etc.). Once you reach a certain sales threshold, typically around $250,000 in payments processed per year, most PSPs will negotiate to lower their processing fees.
PSP Prices and Pricing
Payment service providers offer an all-in-one solution that bundles payment processing fees, account costs, hardware and software into one service. Here we look at the payment processing fees, account features and associated costs of some of the top PSPs.
PSP Payment Processing Fees
A flat-rate payment processing fee is the basis for most PSP services. Payment processing fees vary depending on the PSP service, but unlike traditional merchant accounts, all PSP fees are based on the type of sale, not the brand or type of card used.
PSP Setup and Account Fees
Account fees are another way PSPs simplify and reduce costs. Most PSPs have no sign-up, setup, or ongoing monthly account fees, and they also have no long-term contracts or termination fees. PSPs that charge monthly fees tend to be payment services built into other systems. For example, Shopify Payments is part of the Shopify e-commerce platform, and QuickBooks Payments integrates with QuickBooks accounting software.
PSP Software and Hardware Costs
Most payment service providers offer an integrated suite of online systems, POS systems, card readers, and cash registers, giving your business the tools it needs to accept payments anywhere and streamline its day-to-day operations. Many features are available for free, while others cost extra.
*An iPad or other tablet may be required to complete register setup at an additional cost.
PSP Payment Options
Today, most PSPs and traditional merchant accounts support a variety of payment methods, including credit and debit cards, ACH bank transfers, and e-wallets like Apple Pay and Google Pay. With a PSP, all payment options are available right away or can be easily added with just a few clicks. Traditional merchant accounts often require additional setup or separate accounts to support different payment methods.
- Credit and debit cards: PSPs make it easy to accept credit and debit cards wherever you sell: through mobile or in person at a retail store, online through e-commerce and e-invoices, or via keyed-in payments over the phone or remotely.
- E-Wallet Payments: Accept e-wallet apps like Apple Pay, Google Pay, Samsung Pay, and more for all types of sales, including mobile payments, retail sales, and online orders.
- ACH Electronic Check and Bank Transfer: Accept ACH transfers for online sales and e-invoices.
- Cash and Check: Most PSPs allow you to record cash and paper check sales along with the payments processed.
PSPs also support a variety of customer payment conveniences, including secure card-on-file, quick response (QR) code payment screens, and automated recurring payments for memberships and subscriptions.
