A payment service provider, or PSP, is a company that supplies merchants with the technology and services to accept payments: the gateway, the checkout, fraud tools, reporting and often access to many payment methods through one integration. A PSP may hold its own acquiring licence or may sit on top of one or more third party acquirers.
Why it matters
Merchants often negotiate with a PSP believing they are negotiating with the party that sets the terms. Frequently they are not. If the PSP rents its acquiring from a bank, the reserve, the risk appetite and the termination decision sit with that bank. For high risk merchants the practical question when choosing a PSP is not the feature list but which acquirer stands behind it, how many acquirers it can route to, and whether it will still want your vertical when the acquirer tightens policy.