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A guide to choosing a payment service provider

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJun 20223 min read

A payment service provider (PSP) is a company that facilitates the processing of non-cash payments. As the role of cash has declined, so the role of the PSP has grown. In fact, many SMEs now rely on them to run their business. With this in mind, here is a quick guide to choosing a PSP.

Decide if you actually need a PSP

If you need to take card payments or mobile payments, you almost certainly need a PSP. If you handle Direct Debits, Instant Bank Payments (from GoCardless) or eWallets, then you almost certainly don’t.

Take the time to think seriously about this and to do the sums carefully. Using a PSP increases the cost of processing transactions. It’s therefore important to ensure that this cost is justified by the value a PSP adds.

Decide what you need from a PSP

If you’ve decided that you do need a PSP, work out what you need from your PSP. Once you’ve established your needs, define your wants and how important they are. Use these lists to establish which payment service providers you could use. Here are some points to consider.

Security

For most SMEs, this is the ultimate non-negotiable. Very few SMEs have the in-house resources to manage payment security. They depend on third parties such as PSPs, eWallets and GoCardless to take care of this for them.

Areas served

Using a PSP makes it possible for you to take payments from customers anywhere in the world. This is vital for some businesses; for others, it’s of little relevance.

Note that the ability to take international payments does not depend on using a PSP. For example, GoCardless processes payments from customers in over 30 countries, including the Eurozone, USA/Canada and Australia/New Zealand. This means that merchants get international access at a reasonable cost without using a PSP.

Payment services offered

You can generally assume that a PSP handles single payments, and also that it supports contactless payments. It is, however, advisable to check other types of payments such as recurring payments and instalments. Also check the qualifying criteria for cross-border payments, which may not be offered by default.

If you’re operating in the real world, or even just thinking about it, it’s a good idea to check if a PSP supports mobile infrastructure. Mobile infrastructure allows you to take your payment terminal to your customers. This opens up a lot of opportunities, and in particular, it allows you to leverage the possibilities of pop-up sales points.

Compatibility with your infrastructure

If it’s important for you to retain your existing infrastructure, check if a PSP will support this. As a rule of thumb, if you’ve recently invested in modern infrastructure, it’s almost guaranteed that a reputable PSP will support it.

If you’re holding on to older infrastructure, ask yourself why. Unless you have a very specific reason for keeping old equipment, think seriously about upgrading. In simple terms, the older payment hardware gets, the less secure and less reliable it becomes.

Reporting

Most SMEs are going to need at least a basic level of reporting, so be sure that a PSP will support this. Again, the ability to generate reports is far from unique to PSPs; for example, GoCardless supports data exports and also integrates with partners such as Xero.

Costs

Even though this is quite far down the list, it’s still going to be hugely important for most merchants. Ideally, the headline fee structure should tell you everything you need to know. If you find yourself having to scan the fine print wondering what terms mean, move on to another candidate.

Where it can get complicated is when transaction fees depend on your choice of package. This requires you to do your sums carefully and make educated guesses about your likely usage. If you’re doing these sums, compare the costs of keeping all your payments with a PSP versus splitting them between a PSP and one or more platforms.

If you’re going to choose a contract, make sure you understand what the terms are. In particular, be clear about your options (if any) for exiting the contract early. Also, check how easy it is to move between plans and the timescales for doing so.

Finally, check the expected speed of payment. This will vary according to the source of the payment (e.g. domestic or cross-border) and payment type. Be clear on how long it will take for any transaction to reach your account.

Customer service

Never compromise on customer service. You may not need it often but you’ll want it to be there when you do. In particular, think carefully about using a PSP that doesn’t offer a phone number. When dealing with anything complicated, using the phone is often the best option.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.