What does a payment service provider do?

Businesses as a commercial activity are where merchants process payment from the clients or customers. It applies the same to every business be it the traditional brick to mortar business or the e-commerce for commoditized products or e-tailers. However, with online businesses such as e-commerce, the payment method are not quite so simple. Because e-commerce websites do not provide merchants with the ability to accept payment directly. Security and safety regulations don’t allow transaction information to route directly from the business site to any credit card business processors. Payment service provider hence provides merchants with the ability to accept payment online with the service of the payment gateway. The payment gateway process, verify and accept or decline the credit card transactions.

Because with payments there is a huge concern regarding security such as frauds and also the loss of cart abandonment. To have safe payment merchants require a service or more so a payment gateway service provider. Payment service provider hence fully manages the technical connections and handles the relationships with the external network and the bank account.

Payment service, in other words, make the merchant less dependent on financial institutions. Merchants can hence free themselves from the task of establishing relationships with the financial bodies such as international banks.

Merchants can now accept payment from various payment methods such as credit, debit, bank transfer, etc because payment service providers have already offered risk management services for the card and bank-based payment. To make payment more viable for the merchant's payment service provider add multi-currency functionality and service because they are aware of the fact that e-commerce business can stretch globally.

The payment service providers, in turn, charge you fees such as the setup fee, registration, fee, payment processing fee, chargeback fee and so on. They are hence the sole reason online shops can accept payment.