Behind the scenes, payment service providers combine credit card processing for tens of thousands of businesses under one super-sized merchant account. By aggregating payment processing volumes, PSPs can negotiate extremely low processing rates with supporting banks. Then, they pass those savings on to their clients, usually in the form of simple flat-rate fees and low or no monthly costs.
PSPs also take on the credit risks for fraud activities and chargebacks for their thousands of clients. When fraud and chargeback issues occur, the PSP’s merchant bank deducts these amounts, leaving the PSP to work it out with their client. This is why most PSPs prohibit high-risk sales activities and tend to have more account holds and freezes than standard merchant accounts.
Payment Service Providers at a Glance
Also known as third-party processors, PSPs enable a broad range of payment options in an all-in-one solution. They typically offer immediate account approval with no long-term contracts, simple, flat-rate processing fees and fully integrated software, POS systems and hardware.
Many PSPs have no startup, monthly or termination fees, so the only ongoing costs are your payment processing fees. PSPs set their processing rates based on the type of payment, such as credit and debit card, ACH or e-wallet and how the sale was processed, such as online, in person or manually keyed-in. At a certain sales threshold, typically around $250,000 in payments processed annually, most PSPs will negotiate lower processing rates.
PSP Pricing and Fees
Payment service providers deliver all-in-one solutions that roll payment processing fees, account costs and hardware and software into one service. Here’s a look at the payment processing fees, account features and related costs of several top-rated PSPs.
PSP Payment Processing Fees
Flat-rate payment processing fees are the cornerstone of most PSP services. Payment processing fees vary among PSP services, but all PSP fees are based on the type of sale, not the brand or type of card used, unlike traditional merchant accounts.
PSP Setup and Account Fees
Account fees are another way that PSPs simplify and reduce your costs. Most PSPs have no application, set-up or ongoing monthly account fees, plus no long-term contracts or termination fees. Those with monthly fees tend to be payment services built into other systems; for instance, Shopify Payments is part of the Shopify ecommerce platform, and QuickBooks Payments ties into QuickBooks accounting software.
PSP Software and Hardware Costs
Most payment service providers deliver a suite of integrated online and POS systems, card readers and checkout registers. These give businesses the tools they need to accept payments anywhere and streamline day-to-day operations. Many features are included for free, but some have added fees.
PSP Payment Options
Nowadays, most PSPs and traditional merchant accounts support a wide variety of payments, including credit and debit cards, ACH bank transfers and e-wallets, such as Apple Pay and Google Pay. With PSPs, all payment options are immediately available or added easily with a few clicks. Traditional merchant accounts often require additional setup or separate accounts to support various payment types.
- Credit and debit cards: PSPs make it easy to accept credit and debit cards anywhere you sell, including in-person via mobile and retail store sales, online for e-commerce sales and e-invoices and via keyed-in payments for phone sales and remote processing.
- E-wallet payments: Accept Apple Pay, Google Pay, Samsung Pay and other e-wallet apps for all types of sales, including mobile payments, retail store sales and online orders.
- ACH e-checks and bank transfers: Accept ACH transfers for online sales and e-invoices.
- Cash and paper checks: Most PSPs let you record sales made via cash and paper checks alongside your processed payments.
PSPs also support a range of customer payment conveniences, including secure card-on-file, quick-response (QR) code payment screens and automated recurring payments for memberships and subscriptions.