What Is A Payment Service Provider?
PSP is a company operating under EMI license and providing payment aggregation or cross-border payment services. PSP’s operate via nostro accounts and rely on wholesale payment networks that of traditional banks.
What To Check When Choosing A Payment Service Provider?
If you’ve ever been wondering how to choose the best payments service provider, then please keep reading on. Here is a full guide that will help you to select, analyse and choose the best provider of all.
There are plenty of payment service providers nowadays across various jurisdictions. They all are offering the same thing – multi-currency accounts.
But not all are equally good and it is important to choose wisely as they are going to handle your money. In order to help, we have put together a list of tips for you:
Money safeguarding. Ask where the payments provider is safeguarding client funds (bank name, country, currencies). If it is a good payments provider, they will have bank accounts for funds safeguarding in top tier banks such as Barclays, Citi, Deutsche, UBS, etc.
If it is an unknown bank or high risk country, avoid such provider. Also check if client money are segregated on your provider’s balance sheet.
Regulation. It is important to check where the provider is licensed. If it is a small country, less developed, it implies risk. Also check if the provider ever had a problem with the regulator.
For example, if a particular PSP was fined by the regulator for money laundering practices, you should avoid it.
Security. Review the overall platform security, authorisation tools and encryption. There is an increasing number of fraud cases, even with banks. Modern hackers are using the security loopholes to wire-out client funds.
Here is an example of OTP Authentication process popular in payments industry:
Exchange rates. Foreign exchange rates and payment fees are very important. The reason for anyone to choose a payment service provider over the traditional bank is to save money.
Transaction fees should be transparent and sensible. In order to have better grounds for negotiation, provide your current pricing with the bank and ask for a reduction. It is the easiest and most constructive way of negotiation.
For FX fees, it is important to check with current spot rate in the market in order to have an understanding of the margin being charged on you. Also do not forget to check with other providers and again compare for the spot rate to see which one is more competitive.
Payments technology. You should investigate the technological capabilities of the payments platform that is being offered by the provider.
Pay attention to: secure login, reporting functionality and available audit trails. In addition, the ability to store beneficiary details so you don’t need to do repeated entries. The beneficiary email notifications are too important so your payees get told you have made a payment to them.
A live feed of FX rates and hedges will help you to determine when is the right time to enter a foreign exchange transaction. In case you are dealing with dozens of payments or exchanges per month, you may also check possibility to make mass-payments.
Mass-payments solution will reduce the need for manual payments entry and reduce errors. In addition, ask about API for possible integration with your existing business infrastructure.
FX portfolio. Check their full FX offering. Ask for a list of currencies they are able to execute payments and exchanges in, and hedge. A good provider should have more than 50 currencies available.
Payments capability. It is important to know their full list of countries they can send payments to and list of currencies the platform is able to accept payments in.
Not all providers can send funds to all destinations and in all currencies. Only a good provider will have a wide list of cross-border payment routes.
Testimonials. Ask for clients testimonials and especially form a relevant industry. Any well-established payment service provider will have happy clients that can say a good word for them.
How To Finding A Good Payment Service Provider?
As mentioned earlier, there a plenty of providers. We suggest to look for one in the most banked countries, such as UK, Germany or The Netherlands.
To save your time, we can recommend you EU based payments specialist IFX Payments. IFX is supporting business clients with foreign exchange and cross-border payments services since 2004.
IFX Payments are partnering with Barclays Bank where they safeguard client funds, use payment routes and access FX markets through.
Full IFX Payments offering:
- Single EU IBAN for all payments and foreign exchange
- Ability to receive payments in 39 different currencies
- Ability to send payments in 100+ currencies to 120+ countries
- Ability to make mass-payments by integrating via API or uploading an excel spreadsheet
- Access to effective currency hedges
- Exchange of currencies using reasonable and competitive pricing
- Process automation via API integration
- Cost-effective solution for low value international payments
- Payment control and audit trails
- Streamlined beneficiary management and compliance processes
- Relationship manager ready to help finding best solution and answer questions
Please do not hesitate to contact IFX Payments for more information or account opening following this link.
Should You Keep Your Money With Payment Service Provider?
Unlike with the bank, your money with PSP are not insured. Even though, payment service providers are required to safeguard client funds with a licensed bank overnight, this is not fully equal to insurance that banks have.
Yes, a highly reputable PSP like IFX Payments will be keeping client funds with Barclays according to all rules and it is almost like keeping your money with the bank. But it is not a case with other PSPs.
We would recommend to use payment service provider only for the intended services, such as foreign exchange or cross-border payments. This would mean that we recommend to pre-fund the account with payments provider to exchange currency or make an international payment. Keeping money for a long time with PSP, unless it is some with excellent reputation, is not smart.
All in all, we have covered the main things to consider before choosing a payment service provider. Hope this guide will help you in your selection process!