Third Party Payment Processors

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

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

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?

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.