The financial infrastructure behind digital payments can seem complex and confusing, especially when it comes to terms like PSPs, EMIs, and PIs. These acronyms stand for different types of payment service providers, each with its own role in the online payments ecosystem. Understanding their functions and differences is especially important for companies planning to enter the fintech market or launch their own white label PSP solution. In this article, we will look at the main differences between them.
What Are PSP, EMI, And PI?
The payment process is a complex structure involving several key participants. Among them are the payment processor, the merchant (business), and the client. By explaining the essence of the payment in this way, we can more clearly trace its procedure and understand the relationships. The client pays, the merchant receives the payment, and the processor between them makes it possible for this to happen.
The general essence of an online payment is really quite simple and understandable, which is why they have become widespread. But in the reality of online business, there are more complex structures that perform their functions differently in one way or another. Today we will understand the basic concepts that are often confused, what their essence is, and the main difference.
Payment Service Provider (PSP)
Payment Service Provider or PSP is a company that represents the broadest category of payment organizations and provides payment processing services for merchants. PSP specializes in providing services to businesses and organizing the entire payment process for a website. That is, when concluding an agreement with a payment system, you can expect that it will fully cover your needs, have ready-made payment pages, and very often a wide or specialized set of payment methods connected via API. Such providers most often operate in several countries, trying to provide the maximum package of services.
To be a PSP, you need a license, but it is somewhat easier to obtain than, for example, to obtain an EMI license.
Electronic Money Institution (EMI)
EMI (Electronic Money Institution), in turn, is a more regulated company that issues electronic money. It has the right to store the balances of its users, make payments, and is fully responsible for the safety of funds. In fact, EMI has become a full-fledged replacement for a bank for many people today and is used everywhere.
For example, in Europe, this type of payment company is very developed, both for individuals and for business users. The reason for this is simple – the inability of traditional banks to meet user expectations and adapt to the modern digital trend. Many European banks still make large payments by visiting a branch, issuing money at the cash desk, and have either never heard of online banking or created it with minimal functionality.
Of course, using such systems is very inconvenient, many simply cannot afford to constantly go to the bank or call there to perform some transaction. Here, online banking institutions with an EMI license come to the rescue.
Payment Institution (PI)
Another payment company that you may come across is the Payment Institution (PI). Its functionality is much simpler than the previous two institutions, and it exists literally to implement targeted payments. You may have seen or even used sites for replenishing mobile phones, paying for utilities and other services.
Such payment “aggregators” provide a list of merchants whose services you can pay through their site and act as an intermediary in this payment. This activity is also regulated, but not as strictly as PSP or EMI. Most often, such sites are very limited in functionality and earn on commission from the payments they make.
PSP and EMIs can cover the needs of online businesses, providing both high-quality acceptance of payments from users and the movement of personal or business flows for spending and saving. Every business needs to pay for marketing services, technical costs, wages, or other payments. Having an EMI account, which fully replaces a bank account, can cover this need.
How to Choose The Right Payment Provider?
In the realities of modern business, you may need to cooperate with several, or even all, types of financial companies that we discussed today. And you don’t always need to choose one of them. Each has its own specialization and unique service that can cover a number of business needs.
When choosing which EMI to open an account with, find out:
- Country of license and transfer coverage — will it be only SEPA or also SWIFT;
- Payment fees and quality of the banking application;
- EMI’s attitude to your type of business and willingness to support your industry;
- With or without a fee for opening an account;
- Reviews from other businesses about working with this company.
Having collected such a layer of information, you can get basic data about a future partner and assess the potential for cooperation.
Wrapping It Up
Understanding the differences between PSP, EMI, and PI allows businesses to intelligently approach the choice of a payment partner or a model of their own payment platform. Depending on the company’s objectives, either a standard PSP or a more functional EMI with the right to issue electronic money may be suitable. For those who want to quickly enter the market with their own payment solution, the white-label PSP model is gaining more and more popularity — it allows you to launch a service under your own brand, using the ready-made infrastructure of a licensed provider.
If you are attracted to this model, we recommend that you pay attention to Tranzzo. Tranzzo is a company that has been in the payments market since 2017. It offers a white-label SaaS PSP that enables companies to quickly and efficiently launch their own payment processing solutions.
