What is a payment service provider (PSP)? A full guide to choosing the best PSP
Discover what a payment service provider (PSP) is, how they simplify online payments, and how to choose the right partner to grow your business.
Discover what a payment service provider (PSP) is, how they simplify online payments, and how to choose the right partner to grow your business.
For thousands of years, money has existed in different forms: Native Americans once used shells to trade goods, while ancient Fijians counted their earnings in whale teeth. Paper currency was introduced in China around 700 CE, eventually spreading worldwide and simplifying trade (and relieving merchants of the burden of carrying strings of coins). Today, notes and coins are becoming less common, and money increasingly flows along the binary signals sent out across the digital world.
The simplicity of exchanging cash for goods and services has exploded into a complex, fragmented world of credit networks, digital wallets, buy now, pay later (BNPL) schemes, and localised payment methods. For a modern business, trying to build individual connections to every one of these systems is not practical or viable.
This is where payment service providers (PSPs) come in. Born from the need to manage this chaos, a PSP acts as a single, powerful gateway that consolidates the entire payment universe into one integration. By stripping away the backend complexity, PSPs empower any digital business, from a local boutique to a global ecommerce platform, to receive revenue quickly, securely, and efficiently, regardless of how the customer chooses to pay.
This article will help you navigate this new world, explaining:
What a PSP does
Different payment processing options and online payment tools
The benefits a good payment provider offers
Understanding the terminology
It’s easy to get lost in the terminology. Many people ask about the difference between a PSP and a payment gateway.
Full-service payment provider vs payment gateway
A payment gateway is specifically the technology that captures and transmits payment data. A full-service PSP, however, is an all-in-one solution. It negotiates the relationships with banks and payment methods for you, aggregating everything into a single platform.
The benefits of a full-service provider include:
No multiple contracts: You don’t need a separate deal with every credit card company or bank.
Centralised management: You can manage all your funds, refunds, and reversals in one dashboard.
Lower costs: Using a single provider often reduces overhead and integration fees.
Easy scaling: Adding a new payment method usually takes just one click.
Payment service provider vs business accounts
When setting up your shop, you might hear the term business account. So, how does a business account work in relation to a PSP?
Traditionally, a business needed a specific business account (a type of bank account) to accept credit card payments. This often came with high pricing breakdown and complex setups. Most modern PSPs, like Mollie, provide you with a business account automatically or aggregate your payments into their own account, saving you the hassle of setting one up yourself.
Payment Initiation Service Providers (PISPs)
As the digital landscape evolves, you might come across another term: the payment initiation service provider (PISP). While it sounds similar to a standard payment provider service, they play a slightly different role in the ecosystem.
A PISP is a service that, with the customer’s explicit consent, initiates a payment directly from their bank account to yours. Unlike a traditional credit card transaction that moves through several networks, a PISP bypasses the "middleman" of the card scheme.
How they complement your PSP:
Direct bank transfers: PISPs enable pay-by-bank options, which can be faster and more cost-effective.
Streamlined UX: Customers don’t need to manually enter long IBANs or reference numbers; the PISP handles data entry securely.
Increased security: Since the payment is authorised directly through the customer’s own banking app, it adds an extra layer of authentication.
Many full-service PSPs now integrate PISP technology into their platforms, giving you the best of both worlds: the broad reach of traditional cards and the efficiency of direct bank-to-bank transfers.
How do PSPs work?
The process happens in seconds, but there’s a lot going on behind the scenes. When a customer hits pay in your checkout, the PSP in payments performs two main roles:
Retailer side (Acquiring): The PSP manages the transaction and assumes the risk of authorising the payment.
Customer side (Issuing): The PSP contacts the cardholder’s bank to verify funds and details.
There are four parties involved in any transaction involving a PSP:
The customer: They choose the payment method they want to use, are transferred to their chosen payment provider, authorise the payment, and then return to your online shop.
The issuer: The customer’s bank. They provide the card and issue the funds.
The acquirer: Your business's bank (or the PSP acting on their behalf). They acquire the funds from the issuer and deposit them into your account.
The retailer: Receives a notification from the PSP that the transaction has been successful and that the order can now be processed for shipping.
Why use a Payment Service Provider?
The right payment solution service provider can be a growth engine. Data shows that 56% of shoppers want to see their favourite payment options at checkout. If they don’t see them, they leave.
By using a PSP, you can:
Offer multiple methods with one integration: Give your customers the ability to pay with everything from Apple Pay to local methods like iDEAL or Klarna through payment integrations.
Manage payments in one place: Use a dashboard to get a clear overview of your cash flow.
Scale internationally: Easily accept different currencies and settle funds back into your local account.
How to choose the right PSP
The right PSP should be a partner that supports your growth by guiding and refining your payments strategy. That means bringing you closer to your customers, allowing you to offer the payment methods they prefer and making international expansion and payments effortless. Your PSP should handle the entire electronic payment process, provide a clear overview of your payments, and offer advanced technology, security, and support.
Choosing a PSP is about more than just finding the lowest fees. You need to consider how well a PSP complies with regulations (like GDPR and PCI-DSS) and the quality of their support.
Ask yourself these questions:
Which payment methods do my customers prefer?
If you’re planning to sell your products across Europe or internationally, you need to offer different payment options. Offering local payment methods right away builds trust with your customers, making them more likely to complete the transaction.
Is the pricing transparent?
Look for providers that offer a pay-as-you-go model without hidden monthly fees. Ask yourself:
How much is the one-time set-up fee?
Are there fixed monthly fees?
What is the fee per transaction for each payment method?
Are there cancellation fees when a transaction is cancelled?
You also need to consider the holding period that the PSP enforces. Some PSPs don’t immediately transfer the payment to the retailer, but hold it for several days (or even weeks) before paying out.
Is the checkout optimised?
A seamless, user-friendly checkout experience reduces friction and boosts conversion rate. Look for a PSP that supports one-click payments, a mobile-friendly design, and smart payment routing to achieve higher authorisation rates.
Does the PSP offer secure payments?
Businesses have an obligation to protect customer data, and that means more than just implementing web security. If you sell in the EU, you have to ensure that all data is processed by third parties in accordance with the GDPR. Here’s how you can tell if you are dealing with a trustworthy PSP:
A serious PSP ensures that transactions are handled transparently and in an orderly manner.
They are monitored by the national oversight authorities for financial service providers.
They comply with all data security legislation and hold the necessary certifications to ensure secure payments, including PCI DSS.
Does it integrate with my platform?
Make sure it works with your existing tools (like Shopify, WooCommerce, or Magento).
Does the PSP offer real-time payment authentication (including for credit checks)? Will they initiate legal proceedings if a customer defaults on payment? Do they offer support to resolve questions or problems?
For a detailed breakdown of how to pick the best PSP for your business, read our full guide.
Payment service provider examples
Choosing the right PSP depends on your business model, where your customers are, and which specific features you need to grow. While there are many payment service provider examples on the market, each tends to have its own speciality.
To help you decide, here is a summary of some well-known PSPs and what they offer your business:
PSP
Pricing model
Customer support
Contract type
Integration
Best for
Mollie
Pay-per-transaction (No hidden fees)
Localised expert support (phone, email, chat)
No commitment (cancel anytime)
Simple plugins & robust API
Scaling European SMBs
Adyen
Interchange++ (Transparent pricing)
24/7 technical support for enterprises
Usually monthly or long-term
Highly technical API-first
Large global enterprises
Stripe
Flat-rate + paid add-ons
24/7 chat and email; phone for Pro
No commitment
Advanced API & 100+ plugins
Tech-heavy & SaaS platforms
PayPal
Flat-rate + fixed fees
Phone, email, and community forum
No commitment
Simple buttons to full API
New stores & global trust
Square
Flat-rate (higher for online)
Phone & email (standard business hours)
No commitment
Advanced API & 100+ plugins
Omnichannel & micro-merchants
Worldpay
Bespoke/Subscription (can be complex)
24/7 expert support
12 to 18-month+ ag
100+ platform integrations
Established UK/ Global retail
Paysafe
Bespoke (tailored to risk/volume)
Dedicated account managers
Often requires a contract
Single API for 100+ methods
High-risk & regulated sectors
Payone
Subscription + transaction fees
Phone-based service & onboarding
Typically 12-month minimum
Major European shop systems
DACH region retailers (DE/AT)
Opayo
Monthly tiers + transaction fees
UK-based 24/7 phone support
12 to 36-month contracts
Strong Sage/ERP connectivity
UK-based SMEs & professional firms
Payplug
Subscription tiers (Starter/Pro)
Localised support (email/phone)
No commitment (flexible)
Easy plugins (Woo/Presta)
French market & entry-level ecom
As seen in these examples of payment service providers, your choice depends on your specific goals. If you need a partner that simplifies recurring payments and invoices while offering human-driven support, a payment service provider like Mollie is often the ideal fit.
Mollie as your Payment Service Provider
At Mollie, we’re dedicated to making payments effortless. With a focus on transparent pricing, world-class payment security, and easy-to-use integrations, we help over 300,000 businesses grow across Europe.
Ready to simplify your payments? Sign up to Mollie today and see the difference a human-centric PSP can make.
FAQ: Payment Service Provider
How much do PSPs charge?
Fees usually consist of a fixed amount plus a percentage per successful transaction. Unlike some providers, Mollie has no monthly subscriptions or hidden costs – you only pay for what you sell.
How much does it cost to collaborate with a PSP?
Costs vary by provider but typically include transaction fees and occasional chargeback costs. Choosing a pay-as-you-go model helps keep your overhead low as you scale.
What is the difference between a PSP and a business account?
A business account is a specialised bank account for accepting card payments. Modern PSPs simplify this by providing business account functionality automatically, so you don't have to set one up yourself.
Is a PSP secure?
Yes, reputable PSPs are PCI-DSS compliant and monitored by financial authorities. They use advanced encryption to ensure customer data and transactions remain safe and private.
What is a Payment Initiation Service Provider (PISP)?
A PISP is a service that moves money directly from a customer’s bank account to yours with their permission. It’s a faster, often cheaper alternative to traditional card payments.
How long does it take to receive my funds?
This depends on your provider’s holding period. While some wait weeks, a good PSP offers flexible payouts, ranging from daily to weekly, to keep your cash flow healthy.
Whether you want to grow internationally or focus on a specific
market, everything is possible. Mollie supports all known payment methods, so you can grow your business regardless of location.
