Understanding PSP, EMI, PI – simplifying payment process
The payment process is a complex structure involving several key participants: payment processor, merchant (business), and client. By breaking down the algorithm of payment in this way, we can clearly trace its procedure and understand the interrelationships. The client pays, merchant receives the payment, and processor in between makes this possible. Sounds simple, right?
While the general meaning of online payments is simple and understandable to everyone, which is why they have become widespread, the reality of online business involves more complex structures that perform their functions differently. Today, we will clarify the main concepts that are often confused and will break down their meaning and key differences.
If you have a need to "connect a payment system" but don't know which one, today you will understand how to differentiate them.
What are PSP, EMI, and PI, and what are their differences?
Payment Service Provider (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. This means that by signing a contract with such payment system, you can expect it to fully cover your needs, with ready-made payment pages and often a wide set of payment methods connected via API. Such providers usually operate in multiple countries, trying to offer a maximum package of services.
To be a PSP, a license is required, but obtaining it is somewhat easier than, for example, obtaining an EMI license.
Electronic Money Institution (EMI), on the other hand, is a more regulated company that issues electronic money. It has the right to store fund balances of users, conduct payments, and is fully responsible for safeguarding of funds. EMI has become a full-fledged replacement of banks for many people and is used everywhere. A prominent example of EMI for a long time was Revolut, which has now obtained a full banking license.
In Europe, this type of payment company is highly developed, both for individuals and business users. The reason is simple — real inability of traditional banks to meet user expectations and adapt to modern digital trends. Many European banks still conduct large payments through visits to branches, issue money at the cash desk, and do not provide quality online banking or do, but with limited functionality. Of course, using such systems is very inconvenient; and therefore users are looking for better and faster options, optimized to current world. This is where online banking institutions with an EMI license come to the rescue.
Although most of them are not banks, but only online wallets or, more accurately, operators issuing electronic money, the difference for average user is only that such institutions do not participate in deposit guarantee program. But their functionality is even better than that of any European bank. Prominent examples here can be the Lithuanian Genome, which provides a convenient personal account for freelancers and a business account; British Monese, and even well-known Wise.
Obtaining an EMI license is not easy because it provides broad financial capabilities and entails a high level of responsibility. Such companies must prove to the national bank of their country that their activities will be within the law, that they have the means to fulfill obligations, and will comply with the regulations of country (or countries, if we are talking about the EU) where they do business. Such companies often lose their licenses because failing to keep up with the constantly changing regulations, especially in the field of AML. At the same time, if such a license is obtained, it gives its holder the opportunity to create advanced financial products and implement them freely.
Another payment company you may encounter is a Payment Institution. Its functionality is much simpler than the previous two institutions, and it exists literally for implementation of target payments. You may have seen or even used websites for topping up mobile operators, paying utility bills, and other similar services. Such payment "aggregators" provide a list of merchants whose services you can pay for through their website and act as intermediaries in this payment. This activity is also regulated, but not as strictly as PSP or EMI. Such websites are often very limited in functionality and earn money on fees from payments they process.
In the context of working with online casinos or gaming websites, Payment Service Providers and EMIs will most often be required. These two types of financial structures can cover needs of online businesses, providing, in the first case, quality acceptance of payments from users, and in the second case, movement of personal or business flows for spending and savings. Every business needs to pay for marketing services, technical expenses, salaries, or other payments. Having account in EMI, which fully replaces a bank account, can cover this need. Moreover, for iGaming EMIs have become literally a number one option and the only provider of banking, as a traditional bank will not open an account for this business.
How to choose the right payment provider
In the modern business, you may need to cooperate with several, or even all types of financial companies that we discussed today. And choosing one of them is not always necessary. Each has its specialization and unique service that can cover a range of business needs.
Since we specialize in online business, particularly crypto and gaming, let's focus on the detailed questions you should consider when choosing a payment partner.
When choosing an EMI to open IBAN account, find out:
- The country of license and coverage of transfers it offers — whether it will be only SEPA or also SWIFT;
- Fees for payments and quality of banking application;
- The EMI's attitude towards your type of business and willingness to support your industry;
- The presence or absence of a setup fee for opening an account;
- Reviews from other businesses about this company.
By gathering this information, you can obtain basic data about the future partner and assess potential cooperation. Often, opening an IBAN account for a gaming site is not an easy task, and opening an EMI for a crypto company is even more difficult. All these difficulties are due to the high risk of the industries and high speed of regulatory changes. Thus, some online banks are not ready to cooperate with some industries to protect themselves from excessive risk of losing license or getting into unpleasant situations with financial monitoring.
This is why the process of choosing an institution for IBAN account can be lengthy and accompanied by constant refusals, even after passing full compliance. We at Monoup know how difficult this can be. That's why one of our flagship services is opening an IBAN account for gaming and other online projects, where we take care of everything. The account is opened turnkey; our specialists independently fill out all forms and communicate with the bank to avoid errors or misinterpretation of your business. Since compliance is not a legal procedure, it requires more targeted industry knowledge, which is precisely what financial and payment system specialists have.
Nevertheless, by combining our accumulated knowledge in regulations, payment systems, and legal issues, we are ready to support your application and open an account in an EMI within few weeks or even days. Contact our manager to find out the details and stay up-to-date with payment trends together with Mono Talks.
