Whether you’re a brokerage firm that’s been in business for many years or you’re just starting out in this industry, you won’t be able to succeed without a reliable payment service provider (PSP).
What Is a Payment Service Provider (PSP)?
A payment service provider ( PSP) typically refers to the channel through which your brokerage business makes and receives electronic payments. Clearly, without such a service, your company could not operate normally. Payments can take various forms, such as credit cards, direct wire transfers, or online e-wallets (such as PayPal).
How to Find the Best Payment Service Provider
First, during the business account opening process
The most critical step in the PSP process is opening a commercial account. This service is arranged by your payment service provider (PSP) agent and grants you access to major international banks through which you can arrange fund transfers. These foreign exchange merchant accounts are essential to your business and can only be established through third parties with a proven track record in this type of operation.
Another key to setting up a formal merchant account is having a solid hardware and software infrastructure capable of supporting the scope of brokerage operations. There are hundreds of trading systems on the market. Many of them are top-notch, while others fall below standard and should be avoided. New users should first sign a contract with an outstanding technology provider that can offer the most suitable PSP for their chosen platform.
Any major bank is concerned about the significant risks associated with foreign exchange operations when accepting new clients. This is not only because the enormous potential losses involved could affect international banks, but also because of the sheer volume of business. Due to the nature of this business, foreign exchange transactions must be executed quickly, and the number of transactions per minute is staggering.When banks accept new clients—especially those without a proven track record—they must carefully consider the appropriate techniques for managing these demands and risks.
Second, during the platform operation phase
Traders regularly open and close accounts, which is another factor that any PSP must manage. Ultimately, brokerage firms can only continue to operate by collecting commissions, which means that the flow of client deposits must operate 24/7.A robust PSP should be able to maintain a steady flow of activity at all times; furthermore, an experienced technology provider with industry knowledge is crucial to your decision.
Regulatory controls are another factor increasingly affecting participants in international financial markets, particularly brokers. Concerns regarding trade protection, fraud prevention, and client security are of the utmost importance. Similarly, your trading platform itself must incorporate robust settlement and processing systems into its design.
Brokers can set up two types of business accounts:
- One type is a consolidated account, where the broker’s trades are combined with other trades into a block
- The other is a direct commercial account.
The latter approach is the best, but this path is only suitable for players with extensive, years-long experience in successful operations.
Mobile and web-based interfaces are also factors to consider. Many end users will trade via mobile phones or computers, so a comprehensive trading platform must be designed to meet these requirements.
Summary
When searching for a PSP, you must consider all these factors that can enhance your brokerage services and drive business growth. A simpler approach is to partner with a trusted brokerage technology provider from the start—one that can handle these aspects of the business and assign the right PSP to your company without requiring you to expend energy or face difficulties.
When launching a brokerage firm, one of the most popular approaches is to go the white-label route. Maoz Tenenbaum, Vice President of Sales at Leverate, a leading brokerage technology provider, explains: “There are many reasons why aspiring entrepreneurs choose to take their first steps in this industry as white-label brokers.With stronger regulation and enforcement across Europe, as well as stricter restrictions from banks and payment service providers (PSPs), it’s clear that only knowledgeable and experienced providers can guide newcomers in the right direction.At Leverate, we offer LXLite, a comprehensive suite that includes timely licensing, company formation, bank accounts, payment solutions, and all the technology a brokerage needs. We have experts who help brokers open a business account with the most suitable PSP.”
So, if you want to skip the tedious and time-consuming process of finding a PSP, there are certainly some business shortcuts that will allow you to focus on sales and marketing, leaving the other tedious details to those who know what they’re doing.
