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White-Label Payment Gateway vs. PSP Direct Solutions: What’s the Difference?

In this article, we'll explain the distinctions, advantages, and considerations for using each option in this blog.

April 29, 2025

If you're a FinTech startup, an online merchant, or an Independent Sales Organization (ISO) ready to launch your payment processing solution, understanding the difference between a White-Label Payment Gateway and PSP Direct Solutions is critical.

What is a White-Label Payment Gateway?

A White-Label Payment Gateway is a payment processing service that allows you to offer payments in your merchant identity. This means a better-customized user experience for the customer, and they don't realize that a third-party Payment Service Provider (PSP) is powering the checkout process when everything from check-in to checkout is a custom visual interface. Essentially, the third-party Payment Service Provider (PSP) handles the technical requirements of the payment processing; however, your business has all the branding, design, and customer-facing requirements under the identity of your choice.

Thus, any merchant can host the gateway on its website integration or app integration using logos, colour schemes, and designs to fit its larger feel and offer, essentially making the payment processing option an integrated part of the overall customer journey. For many FinTech startups and Independent Sales Organizations (ISOs), this option is critical for establishing credibility, trust, and cohesive brand image as it maintains brand identity. Furthermore, this solution enables a high degree of customization for aspects during processing UIs and merchant back-end experience despite longer setup times and potential upfront costs.

What is a PSP Direct Solution?

A PSP Direct Solution is direct integration with a Payment Service Provider (PSP). A merchant integrates directly with the PSP platform or PSP API to facilitate payment processing. The merchant uses PSP solutions directly without a middleman, meaning they have the ultimate control and customization abilities over the merchant integration and user experience. This solution differs from white-label solutions in that it's not the merchant's branding, or it is more branded than a white-label solution can customize.

Direct integrations are implemented, likely, faster implementation with less risk because compliance is more easily managed (i.e. PCI standards) and a wide variety of payment methods and global markets access. Companies looking for speed-to-market with PSP compliance already managed for security and scalability purposes would benefit from such a solution. In addition, higher payment completion rates with optimized user flows like express checkout and profile sharing support the direct solution.

The Differences in Transaction Costs Between White-Label Gateways and PSP Solutions

The differences in transaction costs between white-label gateways and PSP solutions are crucial to assess when determining the most profitable choice, as revenue generation from a profitability perspective heavily relies on transaction costs. The transaction costs involved with white-label gateways can be higher in the medium run as they are more varied; depending on the gateway, there may be initial setup fees, recurring monthly charges, and per-transaction fees. This means more investment at the onset for the branding capabilities and customization of the merchant experience. In the long run, however, this can be less costly as a merchant-branded solution means more customer loyalty and the sustainability of merchant use will generate more transaction volumes per customer over time. Thus, while costs are high at the initiation, they even out with longer commitments.

On the other hand, a PSP direct solution tends to have a streamlined cost model that relates to lower costs in the short run and focuses mainly on the transaction fee—as it may not have a setup fee or subscription charges. This allows easy predictability of costs without lower entry barriers. However, this can generate less profitability over time because a lack of branding control and a non-customized experience for the end user can create customer churn as they feel no loyalty to a non-branded option. In addition, often PSP interfaces possess their own compliance features and security features integrated within to prevent costs to the merchant through regulatory requirements.

In the end, it's all about the nature of the financial commitment which affects profitability down the line. White-label gateways generate higher transaction costs at initiation and continued use because of required fees for customization—but this allows for higher overall profitability through brand value. PSP direct solutions offer simplicity and lower transaction costs at initiation, but long-term growth potential down the line could suffer without the enterprise having the option to customize.

Key Responsibilities of a PSP in a Gateway-Only Model

The PSP is responsible for facilitation only, without settlement, as a PSP operating in a gateway-only model does not engage in financial intermediary functions between the merchant and the customer. Therefore, PSP responsibilities do not shift in terms of facilitation; rather, facilitation is all it does, and any responsibility for settlement is on the merchant and the acquiring bank directly.

Notable responsibilities include:

  • Technical Integration: The PSP is responsible for providing the payment gateway technology that allows the merchant's website to communicate with either alternative payment methods (APMs) or card networks to effectively handle transaction routing.
  • Transaction Authorization: The PSP is responsible as a technical facilitator that sends payment data transmission for authorization and approval via a payment method; it facilitates secure communication between the acquiring banks and the issuing banks to inform whether funds are available and approval is provided; however, the PSP does not facilitate settlement of funds thereafter.
  • Security and Compliance: The PSP is responsible for maintaining security and operates under infrastructure for payment processing mandates (even if this is just a gateway-only model) such as PCI DSS to utilize encryption and fraud detection tools to ensure sensitive data protection.
  • Fee Structure Management: The PSP is responsible for assessing a gateway fee for payments processed (this may be noted as a Local Payment Reconciliation Fee) separate from any settlement fees directly assessed from the acquiring bank with which the merchant seeks to process.

Merchants would prefer this "gateway-only" service if they want to negotiate their own financial agreements for settled transactions directly with banks/processing, although they must establish an independent relationship (the PSP would be used solely for technical services and technical support).

Benefits for FinTech Startups, Online Merchants, and ISOs

Each stakeholder in the payment ecosystem—FinTech startups, online merchants, and ISOs—stands to gain distinct advantages from modern gateway solutions. Here's how white-label and PSP direct models cater to their unique needs.

White Label Payment Gateway

  • FinTech Startups: Ideal offerings for FinTech Startups looking to gain a definitive foothold in the market. Providing a branded payment experience means startups can get a payment processing solution branded to their name, etching out a permanent position against competitors with the ability to develop other branded services without worrying about payment infrastructure. In addition, the white-label opportunity can launch in mere weeks (2 months for DECTA's White-Label Payment Gateway), while other payment opportunities can take longer for market entry acceleration.
  • Online Merchants: For merchants, white-label gateways present an optimal experience for customer retention as a branded checkout experience provides a seamless and frictionless experience that promotes cart abandonment reduction. Dynamic descriptors with customizable features and payment types allow merchants to service niche markets for specific customer preferences, ensuring conversion.
  • ISOs (Independent Sales Organizations): The benefits for ISOs are abundant; reselling white-label solutions provides ISOs with yet another revenue-generating avenue through which merchants can use white-label solutions for their branding. Revenue can be generated through transaction margins and/or subscription models while the white-label solutions establish trust and brand awareness with payment processing without merchants having to focus on payment facilitation. In addition, the solutions can be highly scalable for ISOs working with diverse merchant portfolios.

PSP Direct Solution:

  • FinTech Startups: Ideal solutions for FinTech startup operations providing rapid deployment with little to no setup costs are an enormous advantage in a competitive world. Minimal setup costs and instant account approvals from successful companies like Stripe or Mollie present successful PSPs that allow for pre-built integrations, allowing new businesses to focus on product development focus instead of payment facilitation research and implementation.
  • Online Merchants: For merchants, PSP Direct Solution provide numerous advantages, whether access to a wide array of payment methods not offered through in-person payments (swipe features) or access to global market reach (Stripe has multi-currency support) accessible through optimized checkout flows (Stripe boasts a high-converting UI). In addition, PSPs take care of compliance handling and security handling, allowing startups to bypass the operational burden reduction of creating secure payments and setups.
  • ISOs (Independent Sales Organizations): For ISOs, the benefits involve quick client onboarding through guidance from PSPs allowing for acceptance based on compliance checks as well as scheduled monthly payments. Predictable pricing from reputable PSPs allows easy management of substantial transaction volumes as well as automated reporting features. This creates an easy transaction reconciliation for tax season as well as client management.

Which Solution Should You Choose?

Determining whether a White-Label Payment Gateway or PSP Direct Solution is best for you depends on your current business needs and vision for the future:

Choose White-Label Payment Gateway IF:

  • Branding and Customer Experience are vital. If you've built your business around a specific custom, trust-building payment experience, then a White-Label Payment Gateway will encompass the necessary customization to plug directly into your brand. This will be an adjustment FinTech startups and online merchants should make to establish themselves in highly competitive markets.
  • Long-Term Cost Efficiency. While potentially high initial setup costs may be frustrating, customizing what's needed for the opportunity to make a margin on transaction margins (something ISOs (Independent Sales Organizations) are expected to do) will make the White-Label Payment Gateway solution the cheaper option over time.
  • Control Over Payment Flow is required. If there are specific payment policies you require, need integration to certain third-party systems, or niche payment methods, a White-Label Payment Gateway provides the access necessary to make the gateway work for your operational needs.

Choose PSP Direct Solution IF:

  • Speed and Scalability Options are required. If you need rapid deployment, or you're going big or going home with high transaction volumes from the get-go, feel free to choose the direct PSP integration as it can be established quickly, already plugged into existing networks.
  • Compliance and Security Needs are overwhelming. Most PSPs will possess PCI DSS compliance, KYC/AML requirements, fraud prevention, etc. As a regular merchant, you should focus on core business activities without additional regulatory requirements. For online merchants and startups with limited cash flow and efforts, this is the best solution as it will be regulated already.
  • Global Reach and Payment Variety are required. If you'd like to have your business deployed internationally down the line or want extensive payment options at the onset, choosing the PSP Direct Solution will most likely have multi-currency support and different payment methods available without additional integration requirements.

At DECTA, we meet the needs of FinTech startups, online merchants, and ISOs. With our White-Label Payment Gateway, your business can create a branded payment experience without sacrificing cutting-edge technology infrastructure when compared to competitors. Contact us today if you're searching for a bespoke payment solution and direct integration options to expand your space in the competitive online payments industry.