What are Secure Payments Services?
Payment service providers (PSPs) are third-party companies that help business owners accept online payment methods, such as online banking, credit cards, debit cards, and electronic wallet applications. PSPs ensure that transactions are delivered safely and reliably. They take responsibility for the entire payment process, from the time a customer enters their payment details, to the time payment is actually received by the merchant.
In this article, you will learn:
- What are Secure Payments Services
- How does a Payment Service Provider_Work
- Payment Service Providers Benefits
- Payment Flexibility
- Get Paid Faster
- POS Integration
- Lower Operational Costs
- PCI Compliance
- Transaction Data Encryption
- Address Verification System (AVS)
- Payment Apps
How Does a Payment Service Provider Work?
To understand how the PSP process works, let’s review a basic example:
- The customer requests to pay on a merchant website and is taken to the PSP’s payment gateway.
- The customer types credit card information and clicks “payment”, and a transaction request is sent to the payment gateway.
- The PSP checks the customer’s card information to see if the customer has sufficient funds. This is done by integrating with a payment processor.
- When the customer’s card details are verified, and it is determined that funds are available in their account, the PSP starts transferring money from the customer’s bank to the account associated with the business.
- When the PSP confirms that the transaction has gone through, it sends a transaction notice to the merchant and the customer.
- If the card is rejected due to invalid card information, insufficient balance, or other reasons, the PSP cancels the transaction and sends a status message notifying both the customer and the merchant of payment failure.
Payment Service Providers Benefits
There are several important benefits that lead merchants to process payments using a PSP.
Payment flexibility significantly impacts conversion rates and revenues. To provide consumers with a positive experience and ensure they are able to make a purchase, merchants need to be able to accept a wide range of payment forms. A PSP provides merchants with the ability to accept the majority of commonly used credit cards, as well as PIN-based debit cards and EMV chips. PSP also helps process contactless transactions like credit or debit tap, Samsung Pay, Apple Pay, and e-wallets.
Get Paid Faster
Modern payment systems are based on electronic transactions. Payment reconciliation, batching, and collection are much faster than in traditional systems. Many PSPs give merchants the option of next-day financing, allowing them to receive payments within one day of batch processing.
Integrated payment systems are generally considered more secure than traditional non-integrated systems. Additionally, integrated payments are more cost effective. The transaction is pushed directly to the payment terminal, rather than being added manually. Point of sale (POS) integration systems also automatically update invoices once payments are tendered. This significantly increases the accuracy of accounting.
Lower Operational Costs
Integrated billing systems offered by PSPs enable a merchant to push payments from multiple workstations and devices to one payment terminal. For example, in a restaurant, waiters can manage orders using regular tablets, and push an order to the PSP terminal device. The same device can accept orders and payments from the restaurants’s online ordering service. This can save the need to purchase and maintain multiple payment terminals.
Secure Payment Services: Key Security Methods Used by PSPs
One of the key benefits of a payment service provider is security. Here are a few ways PSPs improve security, compared to self-managed payment options.
Possibly the biggest pain PSPs can relieve for merchants is the need for PCI DSS compliance. The Payment Card Industry Security Standards Committee was established in 2006 to develop information security standards. They define standardized rules companies must meet if they process payment card data.
PCI compliance is divided into four levels based on the size of the business and the number of transactions per year, from Level 1 for merchants that process more than 6 million card transactions, to Level 4 for merchants that process fewer than 200,000 transactions.
However, regardless of their merchant level, the PCI standard makes all providers responsible for protecting customer data. Non-compliance or data leakage can have serious consequences, including fines and the inability to process credit cards in the future.
Ensure your business is PCI DSS compliant is a complex undertaking, including regular system testing, encrypting cardholder data, ensuring sensitive systems are protected by antivirus and other security systems, and severely limiting physical access to data storage and processing systems to protect against external and insider threats (read more about this threat). By using a PCI-compliant PSP, a merchant is free from these requirements, because credit card processing and storage are outsourced to the payment provider.
Transaction Data Encryption
Data encryption can protect data in transit during a financial transaction, and afterwards when stored by a payment provider. Client-side encryption is also important to ensure security and reduce the scope of PCI compliance. PSPs typically encrypt data throughout its journey to ensure compliance with relevant standards and prevent security threats.
Address Verification System (AVS)
Most PSPs provide an additional security measure—an address verification system (AVS). This ensures that the cardholder provided the correct personal information and that the listed address matches the billing addresses on file. If the information is not correct, this can indicate fraud. A cybercriminal who has obtained a credit card number probably does not also have the correct address of the cardholder.
Mobile payment applications allow consumers to avoid the use of cash or credit cards, transferring funds digitally by linking bank account or credit card information to a mobile application. These apps are used by approximately 80% of adults in the United States, and by 94% of millennials. PSPs enable merchants to securely support payment apps, whether through an eCommerce site, or in-store at a cash register.
Secure Payments Services with Lightico
Lightico’s eSignature solution enables companies to accelerate the collection of more than just customer eSignatures. It also goes beyond enabling PCI-compliant payments, though this is an important feature.
With Lightico, companies can digitally orchestrate full end-to-end customer servicing and sales processes. Customers can easily send documents, fill out eForms, get their ID verified, receive secure payment services, and much more all from the comfort of their smartphones. These actions take place as part of a wider automated digital workflow, which enables agents to seamlessly collect and process customer information. To learn more about Lightico’s features, visit Lightico.com.