June 12, 2014
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Three players of merchant services industry

Due to expansion of merchant services industry we are witnessing nowadays, many businesses involved in payment card industry (credit card processing) in this or that way, face the temptation of switching to payment service provider operation mode, in order to increase their revenues.

To become a payment service provider it is not sufficient for a company to acquire as many potential clients (merchants) as it can. In order for the future payment service provider to actually start operating, it needs to establish three groups of relationships with different types of entities. Beside relationships merchants, the company is going to get involved in relationships with payment gateway services providers, as well as in relationship with acquiring banks.

Why each type of relationships is a necessary?

Establishment of each type of relationships is a necessary step a company needs to undertake on the way to becoming a real payment service provider, because the aforementioned relationships facilitate creation, conveyance and collection of payments. Creation of payments is associated with the specific environment from which transactions (or payments) are submitted. Conveyance of payments must be conducted using respective payment gateway software. Collection of payments calls for a necessity to establish relationships with some bank in order to transfer the funds to merchants.

Each of the listed three components requires separate mechanisms to be implemented by a business wanting to assume the role of a payment service provider. A more detailed description of creation, conveyance and collections can be found in the respective article “Payment Service Provider Relationships” at Paylosophy.com web-site.

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