Clear DefinitionsPayment Service Provider (PSP)
1 min read
Pronunciation
[pay-ment sur-vis proh-vy-der]
Analogy
Like a credit card processor that handles transactions between your bank and the merchant’s account.
Definition
An entity that facilitates electronic payments between merchants and customers, offering APIs, wallets, and compliance services for cryptocurrencies or fiat on‑ramps/off‑ramps.
Key Points Intro
PSPs streamline payment acceptance, settlement, and compliance for businesses.
Key Points
API integration: Simplified payment initiation and settlement.
Liquidity management: Handles currency conversion and pools.
Compliance: KYC/AML screening and reporting.
Merchant tools: Invoicing, refunds, and reconciliation.
Example
A crypto PSP provides merchants with a widget to accept USDC payments, auto-converts to EUR, and settles daily via bank transfer.
Technical Deep Dive
PSP platform uses custody wallets, automated FX via DEX aggregators, and KYC API pipelines. Merchant API: `createPayment(amount, currency)`, webhooks for `paymentConfirmed` events.
Security Warning
PSP custody risk; choose providers with insurance and audits.
Caveat
PSP fees and settlement delays vary; compare SLAs.
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