“Merchant Service Provider”: What to Think About Before Using This Phrase

The payments ecosystem is chock-full of words and phrases that cause confusion. People often use terms that don’t really mean anything specific. Or the terms might mean different things to different people, depending on the context. Or different card brands can use different terms for the same thing. This can make understanding the industry needlessly complicated.

Merchant service provider (also called MSP) is one of those terms. It’s confusing because it’s, well, vague, and it’s not a term that’s defined by card networks Mastercard and Visa (more about that below). So anyone can use it to mean anything.

Before the industry defined and caught on to the term payment facilitators (Payfacs), these businesses were often referred to as MSPs. Now, when people talk about MSPs, they might still be talking about Payfacs. They also might be talking about other businesses that are referred to simply as service providers by the card networks.

These providers may or may not be merchant-facing businesses. ISOs, gateways, tokenization or fraud prevention tool providers – all of these could be referred to as MSPs.

But here’s the important thing to remember: Any business that provides any type of service within the payments industry must adhere to card network rules that are meant to protect the integrity of the payments system.

The card network rules define what all payments-related companies are allowed to do and what requirements they must follow.

And while both Mastercard and Visa rules do talk about service providers (Visa also refers to service providers as third-party agents), they go further to define categories within this group of businesses. Each of these categories has its own rules it must follow.

So any business that provides payments-related services has specific requirements defined within the card brand rules. A service provider that is operating legitimately – within the bounds of these rules – will be performing a specific, defined function.

So next time you find yourself tempted to use the term MSP, it might be worth reconsidering. Whether you’re looking for – or looking to be – an MSP, it’s clearer to be specific about the services you need (or the services you provide).

Resources:

• Mastercard rules (check out section 7.1)
• Visa rules
• Visa resources for service providers