What is a payment service provider (PSP)?

Payment service providers (PSP) and other providers, help businesses securely accept digital payments, such as credit cards, digital wallets, and bank transfers. With over 5.2 billion customers estimated to use digital wallets by 2026¹, adopting a PSP can support business growth by enabling acceptance of digital wallet payments across multiple currencies, both locally and internationally.

Some of the most well-known payment service providers in Australia include Airwallex, PayPal, and Stripe. PSPs typically provide both payment gateways and payment processing solutions, often bundled as part of an integrated PSP service provider solution.

What do payment service providers do?

Payment service providers (PSPs) simplify how businesses accept and manage digital payments. By combining essential functions such as gateways, fraud prevention, and compliance into a single platform, PSPs remove the need to juggle multiple vendors.

This makes it easier to offer card payments, bank transfers, and digital wallets across markets. Many PSPs also support multi-currency settlement and integrate with accounting, eCommerce, or expense tools to streamline workflows.

How do payment service providers work?

Payment service providers facilitate transactions between merchants and customers. They also authorise and settle transactions, ensure security, compliance, and fraud prevention.

Before PSPs existed, businesses had to manage transactions directly with banks and credit companies and had to handle security, compliance on their own. However, investing separately in different payments and fraud reduction technology meant that a business needed more people to manage separate relationships and integrations.

PSPs manage those relationships in one system by taking care of the entire payment value chain from checkout to final settlement. This feature makes PSPs easier to set up and manage, making them more cost-effective, especially for growing businesses.

Here’s a breakdown of how PSPs work in five steps:

1. The customer chooses a payment method and submits their payment details online or in person.

2. The payment details are encrypted by the payment gateway and then transferred to the payment processor. 

3. The processor verifies the card information and requests authorisation for the transaction from the customer’s issuing bank. 

4. If there are sufficient funds and the transaction is approved, the merchant will be notified.

5. Finally, the payment processor transfers the funds from the customer’s bank account to the merchant’s account, typically within a few days.

Who benefits most from using payment service providers?

There are plenty of advantages to using a payment service provider. The most direct benefit is the potential for increased revenue through broader payment acceptance. Customers can pay in their local currency, using familiar methods.

PSPs typically have simpler, more affordable fee structures. They also offer analytics and reporting tools that support better financial decisions and business forecasting. 

Different industries have varying requirements when evaluating PSP service providers. eCommerce platforms and SaaS businesses often need multi-currency support, recurring billing, and integrations that align with broader financial systems. These businesses frequently operate across multiple regions, making scalability and currency management critical.

On the other hand, smaller or local businesses may prioritise transparent pricing, ease of use, and responsive support. For those operating on subscription models, automation tools and recurring payment capabilities are often essential.

Ultimately, the choice of payment service provider depends on business scale, preferred payment methods, and whether transactions occur online, in-store, or across both channels.

What are the challenges of using payment service providers?

Despite the benefits, PSPs can also introduce challenges. Cost is a key concern. Many providers charge setup, transaction, and currency conversion fees.

Multi-currency settlement may be limited. For example, a payment received in EUR might be converted to AUD before settlement, potentially incurring FX fees and exchange rate losses.

Another common issue is limited control over the checkout process. Some PSPs offer minimal customisation, leading to checkout flows that don’t match the brand experience.

What are the key features to look for in payment service providers?

There are several essential payment service provider key features to look for, especially when comparing online payment gateway service providers, such as:

• Global payment capabilities: A PSP should support payments from multiple payment methods, currencies and countries. This will make it easier to collect payments internationally.

• Ease of integration: A PSP should offer integration options that will work with the existing website or eCommerce store. This will reduce the amount of time it takes to accept payments.

• Speed of settlements: Payment service providers can have different payment processing times. Aim to find a PSP with fast settlement times to receive payments into an account quickly.

Security and fraud prevention: Partner with a reliable PSP that has robust payment security. They must comply with relevant regulations, such as Payment Card Industry Data Security Standard (PCI DSS), which ensures cardholder’s information remains secure.

What are the challenges of using payment service providers?

While payment service providers offer many pros for businesses, there may be some challenges to keep in mind. One of the primary concerns is cost. Apart from transaction fees, PSPs may charge setup fees, and other hidden fees which can eat into your profit margins.

For instance, while many PSPs may allow you to collect payments in multiple currencies, you may only be able to withdraw them in your home currency. If you get a payment in Euros but your account is in USD, the PSP will convert the Euros to US Dollars when you withdraw your earnings. This exposes you to currency conversion fees and exchange rate fluctuations, and many PSPs often charge a fee for this, which can increase your costs and affect your profits.

Another challenge is ‌reduced control over the payment process. Using a PSP can mean you’d have less control over the checkout experience, which can be crucial for maintaining a positive customer relationship. Some PSPs may offer only basic customisation options for the checkout page. Others have fixed checkout flows that you can't modify. This can make the checkout process feel disconnected from your brand, leading to a less cohesive customer experience.

Now that you know the pros and cons of payment service providers, look at some examples of PSPs as you begin your search.

What are some examples of payment service providers?

What are some examples of payment service providers?

There’s no one-size-fits-all PSP. Below are examples of widely used payment service providers in Australia and globally, each offering different strengths depending on business needs and scale.

Airwallex

Airwallex helps businesses accept a wide range of international payment methods in over 130 countries. Payments can be settled like-for-like in multi-currency accounts, helping reduce FX costs. Airwallex also offers no-code, low-code, and custom integrations.

Its all-in-one platform includes Business Accounts, foreign exchange, and expense management tools, with integrations available for accounting and eCommerce platforms.

PayPal

PayPal is a well-known PSP that is widely used globally. It offers a user-friendly platform, allowing businesses to quickly set up and accept payments. PayPal lets businesses accept many payment methods, including credit cards, digital wallets, and bank transfers. This makes it easy for customers to pay for things with methods they’re familiar with.

Like many other providers, PayPal also provides strong security features like fraud protection and buyer/seller protection, which boost customer confidence. While PayPal provides essential security features and flexibility for online payments, it can be limiting for businesses operating across borders, as a different bank account may be required for each settlement currency.² This often results in higher conversion fees and added complexity when managing multiple currencies.

Stripe

Stripe is a powerful and versatile PSP that offers a wide range of features and services to help businesses process payments, manage subscriptions, and handle various financial transactions. Stripe also operates point-of-sale (POS) systems that streamline in-person transactions³.

Adyen

Adyen is a global payment processor trusted by large enterprises for its all-in-one platform that covers online, in-store, and mobile transactions. It offers extensive local payment method support, multi-currency processing, and unified commerce features. Adyen is especially known for its scalability, making it a strong choice for global expansion.

Here’s a quick side-by-side comparison to help summarise the differences between leading PSP service providers and online payment gateway service providers:

How to choose the right PSP for your business

Selecting a PSP service provider depends on several business-specific factors. Here are some tips to help choose the right one:

• Assess needs: Different types of businesses may need specific PSP features. For businesses with an international customer base, a PSP that supports a wide range of payment methods and currencies and enables like-for-like settlement is often essential to help manage fees and costs.

• Seek customisation: Flexibility matters when integrating a PSP into a website or marketplace, especially for businesses that need more control over the checkout experience, regardless of technical resources.

• Evaluate customer support: Helpful and reliable customer service can go a long way especially when dealing with payment issues or technical challenges. Look for a PSP that offers 24/7 support, multiple contact channels, and a reputation for resolving issues quickly. This will ensure that the payment process remains smooth, reducing any hiccups in the business.

Unlock business growth with a payment service provider that does more

Choosing the right payment service provider (PSP) can be a game-changer for business. PSPs help boost checkout rates and ensure a seamless payment experience for customers by enabling checkout a wide range of payment methods and currencies.

Whether you’re a small business seeking cost-effective solutions or a global company aiming for streamlined operations, the right PSP equips you with the tools to manage payments efficiently and fuel long-term growth.

With Airwallex, businesses can accept payments from major card schemes and 160+ payment methods from more than 180 countries. Businesses can also take advantage of no-code and low-code integration options and like-for-like settlement with multi-currency Business Accounts.

We're regulated in all markets we operate in, with 60+ licenses and permits globally. Join the 150,000 businesses that trust us to process over US$100 billion in global payments volume.

Payment service provider: Frequently asked questions

What is a payment service provider?

A payment service provider (PSP) is a third-party company that enables businesses to accept, process, and manage digital payments across multiple channels. These platforms typically combine payment gateways, security tools, and settlement features into one streamlined solution.

Is a bank a payment service provider?

No, most banks are not considered PSPs. While banks can provide merchant accounts and process payments, PSP service providers offer a broader range of digital tools and integrations to support online and in-person transactions. PSPs also simplify compliance and cross-border payments.

What do online payment gateway service providers do?

Online payment gateway service providers encrypt and transmit payment data from customers to the PSP for verification. These services ensure that payment details remain secure and are essential for enabling online checkouts, particularly for eCommerce and SaaS businesses.

Can PSPs support growing international businesses?

Yes. Many PSP service providers offer features tailored for international growth, such as multi-currency support, local payment method acceptance, and compliance with regional regulations. This makes it easier for businesses to scale across borders without relying on multiple providers.

What is the difference between a payment gateway and a PSP service provider?

A payment gateway is a tool that transmits encrypted customer data to a PSP service provider or acquiring bank. The PSP service provider includes the gateway but also handles authorisation, currency conversion, fraud detection, and settlement. This end-to-end capability is why many businesses choose PSPs.

Can a payment service provider handle multi-currency payments?

Yes. A payment service provider can support multi-currency payments, enabling businesses to accept and settle transactions in various currencies. Many also offer like-for-like settlement, reducing FX fees and simplifying global operations.

Are PSP service providers only for online businesses?

No. While PSP service providers are essential for online transactions, many also support in-person payments through POS systems or card readers. This makes them suitable for retail, hospitality, and hybrid business models.

How do PSP service providers support compliance and security?

A PSP service provider offers built-in tools for PCI DSS compliance, fraud detection, and data encryption. These features help businesses meet regulatory requirements and secure sensitive information without managing complex infrastructure in-house.

Disclaimer: We wrote this article on 28 January, 2025. We based the information on our own online research and were not able to manually test each tool or provider. The information is provided for educational purposes only, and a reader should consider the specific requirements of their business when evaluating providers. This research is reviewed every six months. If you would like to request an update, feel free to contact us at [email protected].

Sources:

1. https://business.bankofamerica.com/resources/benefits-of-digital-payments.html 

2. https://developer.paypal.com/braintree/articles/get-started/currencies 

3. https://stripe.com/pricing