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 PayPal.
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 of choice.
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 for your company, with no efforts or dilemmas on your side.
One of the most popular paths available when opening a brokerage firm, is to take the white label route. 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, payment solutions, 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.