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Mastering independent contractor and freelancer payments can be tricky. Is your business equipped to handle it?
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More than 50% of US workers are engaged in the gig economy, which is growing rapidly. These contractors are increasingly crucial to your business success in today’s dynamic digital environment.
To compete effectively, brands like yours need to scale contractor payments faster and more efficiently while keeping your contractors happy. A modern, reliable payment process will give your company a competitive advantage in an unpredictable market.
We invite you to read our new eBook, Are You Struggling With Paying Contractors? which reveals why automation is the solution. You’ll learn:
– Four pain points of manual contractor payments
– Five key ways automation improves payment inefficiencies
– How to build a more robust contractor network
In the UK, a large number of payment service companies provide a very competitive ecosystem for businesses to accept online and card payments. The PSP landscape continues evolving with enhanced security features, broader currency support, and innovative payment solutions that cater to businesses of all sizes.
Key Takeaways
- UK PSPs offer a competitive ecosystem for businesses to accept online and card payments, facilitating secure transactions both locally and internationally.
- Leading providers include Stripe, PayPal, Worldpay, Adyen and GoCardless, with additional niche operators offering competitive fees for various business sizes.
- PSPs handle customer payments and automate accounts payable, while platforms like Tipalti manage outgoing supplier payments for complete financial operations.
What is a Payment Service Provider (PSP)?
A payment service provider is a company running software, card terminals and financial processes that enable businesses to accept electronic payments like credit and debit cards, bank transfers, and digital wallets.
PSPs thereby act as intermediaries, connecting merchants to banks and card networks like Visa that are needed to securely process online and point-of-sale transactions.
They manage the entire payment process, from the customer clicking “buy” on a website, or using a card-terminal to pay, to funds settling in the seller’s bank account. In that way, they enable businesses to accept all kinds of different cards and other payment methods like digital wallets without needing direct relationships with numerous financial institutions.
The Core Functions of a Payment Service Provider
In essence, PSPs are providing the processing of funds, the necessary security layer, currency conversion, reporting and customer support:
Payment Processing
The primary function of Payment Service Providers is managing the entire transaction flow when a customer pays. The PSP sends the transaction data through its payment gateway to the relevant payment processor and card network like Visa or Mastercard to get it authorised by the customer’s issuing bank. This core payment processing enables a seamless customer checkout experience.
Security and Compliance
PSPs are responsible for protecting sensitive customer data. A crucial part of this is maintaining PCI DSS compliance, a set of rigorous security rules for handling card information. This significantly reduces the compliance burden on individual businesses. PSPs also provide fraud prevention tools and manage risks, ensuring transactions are secure.
Multi-Method and Multi-Currency Support
Payment Service Providers enable merchants to accept various payment methods popular in different regions, including UK-specific methods like BACS Direct Debit, along with global card networks. Many PSPs also handle international transactions, allowing customers to pay in their local currency which is then converted for the seller.
Consolidated Reporting
Payment Service Providers give businesses a unified dashboard to track all transactions, fees, and payouts, simplifying financial reconciliation and reporting which makes it easier to manage finances and accounting processes.
Fraud Protection
PSPs also use sophisticated tools to detect and prevent fraudulent transactions, protecting both sellers and customers from potential financial loss and reputational damage.
Examples of PSPs in the UK Business Landscape
The UK Payment Service Provider market is very competitive and has players of various sizes from global FinTech giants like Stripe and PayPal to more novel small business-focused solutions like Mollie. When looking at the big players, Stripe, for example, is known for developer-friendly APIs suitable for online and software businesses.
PayPal on the other hand offers a straightforward platform for all business sizes but is favoured for lower transaction volumes. Worldpay processes a large portion of UK card transactions with online and in-person solutions. Adyen caters to large global enterprises while GoCardless specialises in recurring Direct Debit payments ideal for subscriptions and invoices.
How a Payment Service Provider Fits Into the Broader Accounting Process
PSPs are responsible for collecting money from customers and ensuring it is securely transferred to the business’s bank account. Looking at the inner workings step by step, the process looks as follows:
- A customer pays and thereby initiates a transaction on the merchant’s website, app or in store.
- The PSP receives the payment details like the customer’s card number and price paid and securely sends them via the payment gateway to the relevant card network (e.g., Visa) or bank to authorise the payment.
- The card network communicates with the customer’s bank to check for sufficient funds and potential fraud flags before approving the transaction.
- Once approved, the funds are transferred to the seller’s bank account after deducting any fees and converting currency for international transactions.
PSPs handle only incoming payments for businesses, but businesses and their finance teams also need to handle outgoing payments for expenses like suppliers and vendors.
This so-called ‘Accounts Payable process’ has multiple complexities like invoice processing, approvals, global payouts, and financial controls. This is where AP automation platforms come into play: AP automation solutions like Tipalti help businesses automate payments to suppliers, saving them time and money.
Their software and workflows streamline the entire outbound payment process, from invoice capture and approvals to executing global payments and territories and reconciling them in real time.
So while PSPs handle revenue, AP automation is needed to streamline expenses. Together, they provide end-to-end financial management.
Close the loop: Automate your AP to match AR performance
Bring the same control and efficiency to outgoing payments as you have with receivables. Learn how to streamline approvals, reduce errors, and scale your finance operations with confidence.
The Benefits of Using Payment Service Providers
PSPs have several key advantages:
1. Simplicity
PSPs provide integration to access many payment methods and currencies, saving significant development time and resources.
2. Improved Customer Experience
Offering various familiar and trusted payment options can reduce friction at checkout, which can lead to higher conversion rates.
3. Enhanced Security
Using a PSP lets businesses offload much of the responsibility for PCI compliance and benefit from the provider’s fraud detection capabilities.
4. Global Reach
PSPs simplify selling internationally by handling foreign currencies and local payment methods.
5. Better Financial Oversight
Centralised reporting and transaction data give finance teams a clearer picture of incoming cash flow.
Top 5 Payment Service Providers in the UK
Selecting the best Payment Service Provider depends on factors like your business model, transaction volume, and target audience. Top UK providers have different target audiences and features. Here’s an overview of the Top 5:
| Feature | Stripe | PayPal | Worldpay | Adyen | GoCardless |
|---|---|---|---|---|---|
| Best For | Online businesses, startups, companies needing customisation | Startups and businesses with low transaction volumes seeking simple setup | Established retail and e-commerce businesses needing online and in-person solutions | Large, global enterprises with complex, multi-channel payment needs | Subscription-based businesses collecting recurring payments via Direct Debit |
| Typical UK Online Transaction Fees | From 1.5% + 20p for standard UK cards | From 1.2% + 30p up to 2.9% + 30p depending on payment type | Interchange++ model according to their website, but other websites also indicate pay-as-you go plans | Interchange++ model with £0.11 fixed processing fees and varying rates dependent on payment mentors used | From 1% + 20p (capped) for bank payments |
| UK Payment Methods | Cards, digital wallets, BACS Direct Debit, and more | Cards, digital wallets, PayPal balance | Cards, digital wallets, bank transfers | Extensive global and local payment methods | Specialises in Direct Debit and open banking payments |
| International Payments | Yes, with specific fees for international cards and currency conversion | Yes, with additional fees for cross-border transactions and currency conversion | Yes, supports 135+ currencies | Yes, a core strength with extensive global reach | Yes, available in over 30 countries with competitive FX rates |
Pricing and fees are indicative and subject to change. Always check the provider’s website for the most current information and for detailed quotes based on your business volume and needs.
1. Stripe
Stripe is a global technology and payments company. Its flexible, powerful API is highly favored by online businesses from startups to large public companies for deep customisation.
Key features
Key features include comprehensive APIs for custom payment flows, prebuilt checkout pages, broad payment method support including cards and UK Direct Debit, advanced fraud detection, extensive documentation and an active developer community.
Pricing
Pricing varies on card origin, for the UK it is 1.5% + 20p per UK card transaction with higher international rates and no monthly fees on the standard plan. Custom pricing is available for large enterprises.
Best for
Online-first businesses, SaaS companies and marketplaces needing a customisable, scalable payment solution.
2. PayPal
As one of the world’s most recognised payment brands, PayPal provides a straightforward, trusted way for businesses to accept payments. Its exceptionally easy setup makes it popular for new and small businesses.
Key features
Key features include a widely trusted brand name that can increase conversions, simple integration with a PayPal checkout button, and the ability to process both card transactions and digital wallet payments. It offers business financing and invoicing tools within its platform along with strong buyer and seller protection policies.
Pricing
Fees range from 1.2% + 30p to 2.9% + 30p per UK commercial transaction. There are no fixed monthly fees on the standard plan.
Best for
PayPal is best suited for startups, sole traders and small businesses seeking a quick, simple and trusted payment acceptance solution with minimal technical overhead.
3. Worldpay
Acquired by global financial technology leader FIS, Worldpay is one of the UK’s longest-standing and largest payment processors. It provides robust, reliable payment solutions for businesses of all sizes in both e-commerce and retail.
Key features
Key features include omnichannel solutions unifying online, in-store and mobile payments, advanced fraud prevention, support for over 135 currencies for international sellers, detailed analytics, and both pay-as-you-go and monthly pricing models with tailored rates.
Pricing
Pricing is complex — while some comparison websites indicate pay-as-you-go plans and monthly plans, we couldn’t independently verify this. Their fee schedule indicates a detailed pricing model based on Interchange++ principles.
Best for
Worldpay is best for established small, medium and large businesses, especially retail and hospitality, needing an all-in-one payment solution for online and in-person sales.
4. Adyen
Adyen is a global payment company providing a unified platform for online, mobile and in-store payments. Designed for large, complex global businesses, it offers a single integration to reduce complexity along with rich transaction data insights.
Key features
Key features include an in-house risk system, worldwide local payment support, and a focus on “Unified Commerce” linking online and offline data.
Pricing
Adyen’s pricing model consists of a fixed processing fee of £ 0.11 per transaction, plus a variable fee that changes based on the payment method. For major cards like Visa and Mastercard, the variable fee is based on the Interchange++ model (Interchange rate + scheme fee + 0.60%), while other payment methods have unique rates.
Best for
Adyen suits large international enterprises needing a single data-rich platform to manage complex multichannel cross-border payments.
5. GoCardless
GoCardless is a payment service provider specialised in recurring and one-off Direct Debit bank payments, ideal for subscription businesses and regular invoicing.
Key features
Key features include specialisation in BACS Direct Debit, the UK’s preferred recurring payment method, automated recurring revenue collection to reduce late payments and admin, intelligent payment retry, and integration with over 300 partners including major accounting software.
Pricing
Pricing is transparent and competitive for bank payments, with a standard 1% + 20p per transaction fee capped at £4 and no monthly fee.
Best for
GoCardless suits subscription businesses, B2B invoicing companies, and organisations automating bank-to-bank payments.
Other Notable PSPs in the UK
Checkout.com, Mollie, Braintree and Klarna are other notable payment service providers in the UK market. Checkout.com offers enterprise merchants a modular, cloud-based platform with granular data and flexible tools. Mollie focuses on simplicity for small and medium businesses with transparent pricing. Braintree (owned by PayPal) provides developers with a customisable checkout and strong mobile support. Klarna is best known for its Buy Now, Pay Later (BNPL) solutions, and gives e-commerce retailers the option to integrate flexible financing for customers.
How to Choose the Right PSP for Your Business Needs
When selecting a Payment Service Provider, UK businesses should consider the following factors:
1. Analyse Your Transaction Profile
What is your average transaction value and volume — are you processing high or low volumes of payments? Some providers offer better rates for micropayments, while others have volume discounts more suitable for larger volumes. Match your profile to find the most cost-effective option.
2. Know Your Customer’s Payment Preferences
Do you need to accept just cards, or also Direct Debits, digital wallets like Apple Pay or Google Pay, and other local payment methods popular where your customers are? Make sure the payment service provider supports all the options your customers want to use, for maximum convenience and conversion.
3. Check Your PSP’s Cross-Border Capabilities
Check which currencies are supported, what international and currency conversion fees may apply, and that the rates offered are competitive. Having strong worldwide payment acceptance and processing will be key for global expansion.
4. Verify Software Integrations
It’s important to check how well the payment service provider integrates with your existing e-commerce platform, accounting software, or ERP system. You want seamless integration to automate financial workflows. Technology like AI can also streamline accounting processes like accounts payable.
5. Analyse The Fee Structure
Look beyond just the headline transaction fee percentage when evaluating payment providers. Consider the full fee structure — are there monthly fees, setup fees, chargeback fees or additional costs for features you may want? Make sure the overall pricing model is a good fit for your business’s financial structure and needs.
6. Confirm The PSPs Security Profile
Confirm the provider is PCI DSS compliant and FCA authorised and offers strong fraud protection tools. Also consider the level of customer support available in case any issues arise. Robust security protections and readily available support are essential.
Remember to ensure there is a scalable solution not just for collecting payments, but also for accounts payable like invoicing and making payments. Robust software can drive efficiencies on both sides of the financial workflows.
Complete Your Financial Picture: Automate Your Outgoing Payments
Choosing the right payment service provider is crucial for optimising revenue and delivering a seamless customer experience when getting paid. But for growing UK businesses, managing payments out to suppliers, partners and freelancers globally is equally critical. Manual processes here can slow growth and introduce risk.
While a PSP streamlines accounts receivable, a dedicated platform is needed to modernise accounts payable too. Tipalti automates the full payables workflow — from capturing and approving invoices with AI to mass global payments via BACS, Faster Payments or international wires.
Real-time visibility and control help finance teams scale efficiently. Tipalti integrates with ERPs like NetSuite, Sage and Xero, syncing financial data.
To bring the same efficiency to supplier payments as customer sales, request a demo.
FAQs
What is the difference between a Payment Service Provider (PSP) and a payment gateway?
A payment gateway securely captures and sends customer payment data to the processor. A Payment Service Provider is a more comprehensive service that includes a gateway plus merchant accounts, transaction processing, reporting, and acquiring bank relationships. The gateway is a technology tool while the PSP provides an end-to-end payment acceptance service.
Are PSPs regulated in the UK?
Yes. Payment Service Providers operating in the UK that handle client funds must be authorised and regulated by the Financial Conduct Authority (FCA). They are typically authorised as an Electronic Money Institution (EMI) or Payment Institution (PI). FCA regulation ensures Payment Service Providers meet strict standards for security, financial stability, and safeguarding of funds.
Do I still need a separate merchant account if I use a PSP?
Whether a separate merchant account is needed depends on the Payment Service Provider. Modern PSPs like Stripe and PayPal offer an aggregate merchant account, allowing businesses to operate under their master account. This streamlines setup. More traditional PSPs may require an individual merchant account with an acquiring bank.
How is a PSP different from Tipalti?
Payment Service Providers help businesses collect money from customers, handling accounts receivable. Tipalti automates accounts payable, helping businesses pay suppliers. While both involve payments, they address opposite business needs. PSPs manage incoming revenue while Tipalti manages outgoing expenses. Tipalti ensures global compliance, streamlines invoice processing, and simplifies mass payouts. PSPs handle revenue inflow, and Tipalti handles expense outflow.
