Whether you are a
brokerage firm that’s been in business for many years, or whether you’ve just
opened your books, you won’t be able to proceed successfully without a reliable
Payment Service Provider, or PSP.
A PSP is often
described as the gateway through which your brokerage operation can pay and
receive electronic payments. Clearly, without such a facility, your company is
unlikely to function. Payments can use a variety of formats such as credit
card, direct wire fund transfers, or payments by online e-wallets such as
The key element in the
PSP process is opening a merchant account. This is a facility arranged by your
PSP agent that provides access to major international banks through which fund
transfers can be arranged. These FX merchant accounts are critical to your
business, and they can only be established through third parties with proven
track records in such operations.
Also critical to
establishing formal merchant accounts is a solid hardware and software base
within the brokerage operation itself. There are hundreds of trading systems on
the market. Many of them are first class, while many are below standard and
should be avoided. Newcomers to the business should sign up first with a respectable
technology provider, who can advise on the most suitable PSP for their platform
One of the concerns of
any large bank when taking on new clients is that the FX business is
notoriously risky. Not only is this due to the large potential losses involved,
that could filter through to the international bank, but also due to the sheer
volume of business. Due to the nature of the business, FX transactions must be
fast, and the number of transactions per minute is mind-blowing. The correct
technology to manage these requirements while also managing the risks involved
will be carefully considered when a bank takes on new clients, particularly
those without history of successful activity.
Traders open and close
accounts on a regular basis, and this is another consideration that must be
controlled by any PSP. At the end of the day, brokerage companies will only
stay in business for as long as they are collecting commissions, which means
the flow of customer deposits must operate 24/7. A solid PSP should be able to
keep that pot boiling at all times, and this is another point where an
experienced tech provider with industry knowledge can prove essential for your decision.
Regulatory control is
another factor that increasingly affects players in the international financial
markets, brokers in particular. Concerns over transaction protection, fraud
prevention, and customer security are paramount. Likewise, your trading
platform itself must also incorporate robust settlement and processing systems
in its design.
Brokers can set up two
kinds of merchant account—an aggregate account, where brokers’ transactions are
amalgamated into blocks with other transactions, and direct merchant accounts.
The later arrangement is preferred, but this pathway is only available to
seasoned players with many years of successful operation behind them.
A mobile and web
presence is also a consideration. Many end users will transact business from
their mobile phones or computers, and facilities to meet those requirements
must also be built into a comprehensive trading platform.
All of these concerns
must be taken into account when looking for the PSPs that will facilitate your brokerage
services and enable your business to grow. An easier route to take would be to partner
up from the outset with a trusted brokerage technology and services provider, who
can take care of this side of business and assign the right PSPs to your company
with no efforts or dilemmas on your side.
One of the most popular paths new brokers take in recent
years, is to open a white label brokerage. Maoz Tenenbaum, VP of Sales at leading
brokerage tech and services provider Leverate,
explains: “There are many reasons for aspiring entrepreneurs to take their
first steps in the industry as white label brokers. With stronger regulation
and enforcement all over Europe, and tighter restrictions by banks and PSPs, it
becomes clear that only a knowledgeable and experienced provider can lead beginners
in the right direction. In Leverate, we offer LXLite, a complete turnkey solution with
instant licensing and incorporation, bank account, PSPs, and all the technology
a broker should have. We have experts that help brokers with opening a merchant
account at the most suitable PSP for each need”.
So, if you want to skip the tedious process of PSP-hunting, there are definitely business shortcuts that will allow you to concentrate on sales and marketing, and leave the red tape to others in the know.
First published on Finance Magnates.