What Is A Third Party Payment Provider?

One easy way of answering the question ‘What is a third party payment provider?’ is to explain that GoCardless is a third party payment provider. The other two parties are the business signed up with GoCardless and the customer making a purchase with that business. We act as a payments platform which makes it much simpler and quicker for the business to collect a payment from their customers’ bank account. Time and again, small and medium sized businesses find themselves struggling due to issues with cash flow, and these are almost always caused, in turn, by late payments. With a third party payment provider like GoCardless working for you, late and delayed payments become significantly less likely.

How does a third party payment system work?

Traditionally, consumers have interacted directly with their own banks. The rise of digital technology has made it possible for third party payment providers to take the burden of interacting with the bank from the customer and do it on their behalf.  

In general terms, there are two types of third party payment providers – AISP and PISP, which mean:

• AISP – Account Information Service Providers. These can gather information from a bank on behalf of a customer, but are not allowed to make payments.

• PISP – Payment Initiator Service Providers. These are the third party payment providers, such as GoCardless, who are allowed to initiate payments from a bank on behalf of a customer.

The rise of third party payment providers has been triggered by the era of open banking, an approach which made it legal for banks to provide banking data to authorised third parties via their public interfaces. The opening up of data in this manner, underpinned by legislation such as PSD2, made it possible for bodies other than the traditional banks and/or card providers to move into the payment space and provide payment facilities.   

The degree and type of regulation which covers the work of third party payment providers differs from region to region, which is why working with a third party payment provider such as GoCardless offers such huge advantages to merchants. With us processing their payments a merchant or freelance business of any size will be able to take full advantage of the digital revolution and operate on a genuinely global scale. Our expertise in the field means that we are always fully conversant with the regulations in place in different parts of the world, and are also able to offer the payment options which are more popular in different places.  

Maximum flexibility 

According to figures published by Statista, for example, 82% of online shoppers in the Americas named credit or debit cards as their preferred payment method, while in Europe 80% of those asked preferred to use a method such as PayPal or Alipay. In order to compete on a truly global scale and to offer consumers the kind of seamless experience they now take for granted when shopping online, a merchant needs to work with a third party payment provider that can move easily from method to method. This will mean adjusting to work with whatever is the preferred payment method of each individual customer no matter where they happen to be. For a merchant working alone this would represent a fairly impossible task, which is why a third party payment provider is needed to act as a bridge between the business and the customers. GoCardless can do precisely that, with full security and a first rate user experience always at the forefront.   

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.