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Looking for a payment solution, heard something about IPSP and payment gateways but still don’t know the differences? Read this complete guide to learn more.
But first, some basics.
IPSP (Internet Payment Service Provider), also known as an aggregated account or the third party biller, operates under the financial license and is used to represent many merchants. It’s based on accepting payments on behalf of merchants, so the provider ‘touches’ their money. This solution is rather recommended for smaller volume merchants and certain types of business models.
On the other hand, a payment gateway (also called a PSP), comes with an individual merchant account and an acquirer. It’s an application that allows you to accept online payments on your website and gives you more features and flexibility. But most of all it gives you full control over your account and business.
What are the differences and how could the wrong decision affect your business growth?
Note that IPSP platforms were developed less or more 10 years ago. The solutions are still based on an old legacy system and its technology lacks innovation. The world and technology are developing that fast, so it was natural we needed some changes.
Also, the payment world had to put innovative solutions in place to meet consumers’ expectations and make the entire process more secure. Now, payment gateways with a future approach are constantly looking for the technology that makes both merchants and their client’s life easier.
Do you know that over 80% of things you can do with a payment gateway aren’t available when you work with IPSP?
Think of it this way: you want to move into a dream house and look for the best materials and technologies, but have to pay attention to the costs at the same time (with future expenses in mind).
What do you choose?
A flat suggested by a real estate agent, in the area that was popular a few years ago, without any convenience and with lots of neighbors around you don’t know? Or maybe you want to build a house in a silent area, perfectly fitted to your needs, with solar panels and other innovations inside?
I bet you prefer the second scenario – an innovative and future approach.
Developers love the flexible and robust APIs because they know what’s possible and how to get things done. And the right payment solution works the way you expect.
The main ‘problem’ with IPSP is the integration process. This is because it doesn’t let you add payments to your website the way you want. IPSP chooses exactly how your integration process should look and what programming language you have to choose. And yes, you have to stick to their requirements.
How does it look like when you choose a payment gateway like SecurionPay? First and foremost, you have limitless possibilities when it comes to integration. You can decide which programming language to choose, and how to customize payments to fit your website and make it look professional.
To understand the technology differences, think about the speed of integration. The IPSP integration takes about 2-3 weeks while you can integrate a payment gateway in a few hours. The powerful and robust API gives you room for flexibility. The final outcome is payments perfectly suited for your website, your business model and the product you sell.
That’s exactly the opposite of what IPSP has to offer. When you want to make a little change and integrate payments in a different way than recommended, the entire integration process could fail.
When you go for an IPSP, you have to use their own hosted payment pages – redirection. We focused on a new technology with more possibilities and replaced an iframe with an embedded custom form. The main advantage is you are the HTML’s owner, so you can fully customize the payment form and set up any payment scenario you want.
To learn the differences between iframe and custom form, read the article: How to integrate payments without hurting your conversion.
Need more? With a payment gateway, you get a sandbox environment to test all the features without touching ‘live’ servers and their data. It enables you to initiate and watch the entire payment process. You can use your actual data and simply switch between test and live mode anytime you want without disrupting your live transaction flow.
IPSPs don’t provide this kind of solution so every time you want to make some changes, you need to put all the data from production to the test environment. That means payment processing on your website will be put on hold. Now, answer yourself: What does it mean for my business?
Another main difference is the reporting system. Choosing a solution like ours gives you real-time transaction insights so you get the updated information any time you want. With IPSP it’s different. It aggregates lots of merchant accounts, so, as you can guess, it comes with a plethora of information. It’s not a surprise that report generating takes some time. In most cases, you can see the updated analytics in around 30 minutes after the transaction.
With payment aggregator, you redirect customers to an external service to pay which may cause some confusion. After clicking the ‘Pay’ button they will see a completely different site than yours, with different logos and URL. How do you think, is that the solution they can trust?
Besides choosing between IPSP and a payment gateway, you can also choose between redirecting customers to a corporate payment page and keeping them on your website. Payments without redirects simplify the whole process, make it faster and build customer trust as well. When you redirect end users to a 3rd party payment form (managed by IPSP), the payment process is getting longer, and your customers’ trust decreases. Customers are more likely to abandon their carts because they feel confused and don’t know what they are paying for.
What’s more, on an IPSP payment website you can often find the payment form with lots of unnecessary fields to fill in (10 or more). By using an embedded form you can limit the number of fields to 3. Asking for essentials only (card number, expiration date and CVV) is not only user-friendly but also improves your conversion. Note that with SecurionPay you can also choose a Checkout, a simple pop-up with payments, which is impossible to implement via IPSP because of its legacy technology.
You need to remember how users like to pay. They use their smart devices every day and they spend more time on online activities via smartphones and tablets. When you want to keep your position on the market (of course you want to), you have to keep mobile users in mind.
New technology lets consumers pay on smart devices with just a click, without any distractions and redirections. That’s another payment gateway’s advantage over the IPSP. Aggregators lag far behind their ‘innovative colleagues’.
IPSP offers a quick entry into the payment world. And yes, there is a lower number of documents than when you apply with a payment gateway. But, keep in mind that there are more rigorous controls now, which means the application process could be similar in both cases.
IPSP makes the registration process and setting up an account simple, but it comes with lots of limitations. Your initial convenience might cause hassles for your clients, such as redirects to external services, long checkout process, etc.
The payment gateway compliance process is much more incisive, so it needs to take time. But, that’s what leads to a certainty that the setup is done the right way. It’s also important that it gives you peace of mind because you are sure everything has been double checked.
What about when you want to change the payment provider (either now or in the future)? With a PSP, the migration process will be much easier and, what’s extremely important, you will have access to your payment history. The full history lets you negotiate better conditions or change the acquirer without hassles. Even if you decide to change the gateway someday, the payment processing consistency won’t be terminated.
Moreover, the IPSP acts as a barrier between your business and companies such as the acquirer or issuing bank. In this model, merchants have an agreement with the aggregator, not with the acquiring bank.
IPSP is a middle man, which means the bank pays them first and then they transfer money to your account. That causes delays and managing your cash flow could be inconvenient. The time of settlements could be about 2 weeks longer than with a payment gateway.
When you have your own merchant account, you get payouts directly from the acquiring bank. You can get the payouts weekly, so you don’t have to wait 2-3 weeks.
To be more precise, with IPSP you get paid bi-weekly, so it comes with waiting at least two weeks to get paid for a one-week performance. Sometimes, the delay is even longer due to money being transferred between the banks.
Imagine that, when working with IPSP, you get paid for days 1-7 at around days 25-30. With a gateway like SecurionPay, you get paid weekly with a one-week delay. This means you get paid for days 1-7 on day 10.
OK, now you know lots of differences, but what about the costs? Can you afford a new technology and all these innovations?
Let’s dig deeper into the fee structure. The IPSP’s registration fee is about €500. When you choose a gateway, the fee is usually €1000, but the good news is we can also offer you a €500 fee.
You should know that IPSP usually takes 16-10% of the processed value, while we start with 9-4% and lower the range along with volume processed growth. We also don’t charge any hidden, monthly or weekly fees so there are no surprises down the road.
When it comes to rolling reserve (when the bank or payment processor hangs on to part of your money for some time to protect from potential loss), it’s usually 10% of your amount. Note that you can negotiate a reserve with us to reduce the amount required to 5%, as you build credibility.
With your own merchant account, you have full control over payments and a flexibility which you can’t find with IPSP solution. When you decide to process payments with an aggregated account, your payments are managed under the IPSP requirements.
What about a chargeback issue?
Chargebacks on an aggregated account may lead to limitations with transactions. The account may be locked for some time, or even closed completely. IPSPs manage lots of accounts at a time, so they need to keep the chargeback threshold on the acceptable level of risk, due to Visa and MasterCard requirements. And your performance could depend on other IPSP client’s activity.
Note that in the event of chargebacks or an increase in processing volume your account could be put on hold for months or end by IPSP without any explanation. And the worst part is that payment processing on your website might be stopped for a while. Of course, to diversify the risk, you can have multiple accounts. But that is only possible with payment gateway.
Now, think about your business liquidity. How can you grow when you need to face the intervals? That creates complications you definitely can’t afford. You need a proven partner to manage the payment risk.
When you manage the account yourself, it’s up to you to determine the tolerance of risk. Our adjustable and flexible fraud management system, based on machine learning, helps you better identify fraudsters and match the risk level with your current needs.
It’s like choosing between an antiquated bike and one with a seven-speed shifter.
Also, take a look at 3D Secure, which is an additional security layer. Both solutions offer this feature but IPSP has limitations which can lower your conversion. This is because when you add 3D Secure to your website and a customer’s card is not enrolled, the payment is declined.
On the other hand, when you choose our payment gateway, the payment previously mentioned case is completed. Note that not every issuer adopted 3D Secure so when a customer can’t pay on your website, he/she won’t come back again. We provide you with a non-invasive 3D Secure.
As a merchant, you know that payment fraud is unstoppable and so a strong protection is desired. One of the best security layers is tokenization, which uses a random string of characters that replaces the sensitive data. And again, you can’t get mentioned technology when you choose IPSP…
I bet you probably didn’t even think about customer support issues. You should know that when it comes to payments, a responsive team is what may save not only your reputation but also a business.
Online payments are a 24/7 experience so we understand you need to get help instantly. We also know how waiting hours or days for answers and getting put into a ticketing system can be frustrating. Especially, when payments on your website are not working.
IPSPs often use the previously mentioned ticketing system or outsource customer service. In this situation, your requests could be investigated with a delay which can cause long-term problems with payments on your website.
When looking for a payment solution, merchants usually don’t even ask about the quality of customer service. You should know that it also can have a huge impact on your business and your customers trust. Don’t let your customers wait ages to solve problems with their money (and yours as well).
Find a payment partner with the in-house support that you can always count on.
Payment providers offer extra features which help you take your business to a higher level. One of them are cross-sales, and, depending on what payment solution you choose, the feature comes with key differences.
When you choose an IPSP, the cross-sale offers can only be set among one of your accounts and it’s not possible to set it up between MIDs (the merchants are boarded under one MID). You can have this option when you choose the SecurionPay Checkout with its cross-sales offers. It takes minutes to create offers that other merchants can use on their sites.
SecurionPay also lets you add multiple optional parameters, and then use the data and additional information to track your performance. If you want to sell globally, you can accept payments in 160 currencies and receive the payouts in 20.
Our flexible API lets you set your own payment scenario and integrate with any apps and tools you want. It’s possible thanks to solutions such as Zapier which allow you to get more out of data by connecting other apps to simplify your workflow.
The main difference is we adapt to our clients’ needs and IPSP expects you to stick to their requirements.
As you can see, there are many more differences than similarities. Choosing IPSP doesn’t have to be that bad. It depends on the business model and the size of a business.
Pick the payment provider wisely with all of your business and customers’ expectations in mind. You have to consider the payment solution based on your needs, such as transaction volume, ease of integration, payout intervals, the precision of analytics and more.
Payment gateway has a bigger potential to help you increase your revenue and number of sales. For all that, it also comes with the opportunity to reduce processing costs when your volume gets higher. One of the biggest IPSP’s flaws is the lack of innovation.
Innovative payment gateway gives merchants the power of consistent growth and not being subjected to any fixed requirements. You are responsible for the business actions you take, and with powerful API you have a full control over the entire payment process.
Merchants with the global-thinking perspective, willing to process large volumes and who want to make their own payment processing history, should definitely choose a payment gateway.
Armed with this knowledge, you can make the right choice. Would you like to put an innovative solution on your website that boost your business or the legacy one that lags you far behind your competitors?
Have questions? E-mail us at firstname.lastname@example.org, our team is happy to help!
This article originally appeared on securionpay.com