To accept payments online, businesses must rely on a third party payment processors. There are three types of these: a payment service provider, a payment facilitator and a payment aggregator. So what are the differences between these payment processors?
A payment service provider (PSP) is a company that provides merchants with individual merchant accounts and helps them with underwriting and payment processing but does not fund merchants directly. This is done by the acquirer. A payment facilitator acts similar to a PSP. Every merchant has its own Merchant Identification Number (MID) through which payments are processed, but it funds merchants directly. A payment aggregator works with small businesses and uses a single MID to process payments for all of them. The diagram below illustrates how it all works. Also, a more detailed explanation of these concepts is available in this article at the Paylosophy blog.