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Overview Of The Essential PSP Business Model Building Blocks

Overview Of The Essential PSP Business Model Building Blocks

In this article, we take a closer look at the essential business model building blocks of payment service providers so you can ideate the right model design for your payments business.


Payment service providers (PSPs) are integral to e-commerce, international payments, billing, and other payment operations that billions of people make daily.

Every business needs a payment service provider, whether you sell online to clients worldwide or offer products in a shop.

When starting a payment processing company, you have to pick an efficient PSP business model.

Which 5 Key Business Model Building Blocks Should You Choose for a PSP Company?

To make the right choice, consider the following five key business model building blocks:

  1. Markets
  2. Segments
  3. Services
  4. Payment channels
  5. Marketing channels

Let’s overview each of these vital blocks in detail.

1. Markets

When considering which market(s) to enter, you initially need to know where your clients are. Do you sell in a particular country or region? Alongside this, are your target clients B2B or B2C? These parameters will influence the partnerships you need to establish, the currencies your PSP needs to process, and the types of operations and payment methods to support.

According to the Worldpay from FIS Global Payments Report 2022, e-commerce is expected to account for 12% of global consumer spending by 2025. Growth is predicted to slow in Asia, while it should increase in Latin America, Europe, and the Middle East.

Although the impact of a possible recession and rampant inflation is starting to be felt, which might slow e-commerce growth estimates. As we head into the fourth quarter of 2022, consumer spending might slow compared to 2021, and businesses (B2B) spending is expected to reduce globally.

2. Segments

Secondly, you need to pick the market segments you will target and define the risk type of the clients you work for and the balance of your portfolio.

Generally, you can choose between two options — becoming a higher-risk or lower-risk provider.

Let’s take a look at the differences.

A lower-risk PSP provider usually works with the following market segments:

  • A more mature business (older than five years)
  • Low-risk providers traditionally have a lower chargeback ratio (than the industry average) and a healthier risk profile. They’re usually registered in higher tax countries (e.g., UK, US, EU/Western Europe).
  • Often works with the following sectors: Hotels, Car rental, Ticket sale, Physical item sale, Clothes, Airline tickets, etc.
  • Usually restricted to particular lower-risk markets, e.g., the US, Canada, Western Europe, Japan, New Zealand, or Australia).

On the other hand, a higher-risk PSP provider often has this sort of profile and works with the market segments outlined below:

  • Is a younger business. In financial terms, that’s usually any business less than five years old (with many software companies, that’s the norm and can’t be helped until a company matures).
  • Often works with the following sectors: E-wallets, Gaming, Hosting, Web design, Digital Goods, Regulated Forex, Regulated Betting, etc.
  • Higher-risk businesses often have a higher chargeback ratio, are more able to handle chargebacks and returns, and may be licensed in offshore tax havens.
  • Accepts and processes payments in multiple currencies, often processing transactions from countries with higher levels of fraud and lower national credit ratings (e.g., Latin America, MENA, South East Asia, China, etc.).

Being a higher-risk PSP provider isn’t a bad decision; it just means merchant acquirers or banks might consider your business “high-risk” for several factors and will require higher deposits, rolling reserves, and other financial terms to mitigate risks related to serving this type of business.

Most successfully growing payments businesses tend to blend these segment types within their portfolios to make better economic outcomes while keeping the chargeback ratios and other metrics within the permitted limits.

3. Services

PSP providers can deliver a wide range of services, such as account-to-account payments, online payments, and at the in-store point of sales by cards or via open banking channels, payment orchestration mechanics, billing, and even tools to run better marketing campaigns. Maybe you need all of these. Or perhaps only one or two.

On a broader scale, you need to factor in global and regional market trends for payment service types as well. Here are some of the most impactful trends you should keep in mind:

  • The Worldpay from FIS Global Payments Report 2022 states that the e-commerce sector experienced 14% Year-on-Year (YoY) growth in 2021, exceeding $5.3 trillion in transactions. Mobile e-commerce sales now exceed 52% of all transactions. So, for B2C brands, you need to have a PSP that can support worldwide growth and a higher volume of consumer transactions.

  • Point of sale (POS) transactions also accelerated dramatically, with a sustained growth of CAGR of 6% expected globally from 2022 until 2025. POS transactions are anticipated to exceed $58.9 trillion in 2025.

Your requirements will influence the choice of a PSP business model your business needs and the payment processing partnerships to establish within the payments space.

4. Payment channels

When choosing the relevant payment channels, you must factor in everything we’ve discussed in the sections above. In addition, to find the partner who’ll become a perfect fit, you need to ask yourself the following key questions:

  • What are your clients selling? Are these high or low-risk goods/services from a payment business perspective?
  • Where are your clients registered legally?
  • Where do they send or receive money from?
  • What currencies do they operate in?
  • Are payments going to be online or in-store, with POS terminals required?
  • Which payment methods have to be supported?
  • How will the payment channel influence the speed of the operation of the payments business?

Picking the payment channels you need as one of the building blocks of a PSP business model is an important consideration, and an inefficient partner can ruin any successfully invented project and marketing. Speking off marketing…

5. Marketing channels

The two main marketing channel types are personal sales and retail marketing. Generally speaking, personal sales are for PSPs serving business clients, whereby the marketing/sales approach establishes and maintains personal relationships between providers and clients. Revenue lifetime value allows taking such a sales and relationship approach.

While retail marketing and stimulation of network effects are the most efficient approaches for a highly growing payments business focused on serving personal accounts. Communication en-mass and growing an online audience, marketing, and advertising are all essential to drive customers into the sales funnel to the point whereby they apply for payment services.

Such an approach can work for PSPs oriented on serving business accounts. Still, you’ll need tools that help you efficiently handle large volumes of unchecked information correctly. Spell has got you covered on a scale even with such data challenges.

Why Choose Spell as a White Label Payments Service Provider?

Spell is a Software as a Service (SaaS) white label payment platform provider. We have developed a market-leading, cutting-edge platform for worldwide partners who want to optimize & scale their payments business and offer top-notch tools to the market.

With Spell, you can up-and-running in 1 week, sometimes as quickly as 1 day, winning in the hyper-competitive payments business. Our platform consists of powerful and user-friendly front and back-office systems, giving you everything your business needs to provide payment services to clients.

By choosing a white label business model from Spell, you get the ultimate possibility to accelerate and grow your payments business — making it easier for you to generate more revenue, optimizing operating costs, and giving customers a better user experience and set of tools than they would get with any other white label payment gateway provider.

Use Spell to launch a platform on your domain to start or upgrade your payments within a day. Visa confirms that Spell is a PCI DSS Level 1 compliant platform built on a robust AWS infrastructure, with an outstanding 99.999% uptime.

Handle a Demo Tour, download the Spell Deck and accelerate your business with the best white label payment platform on the market! Let’s get Spelling!

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