Account information service providers (AISPs) and payment initiation service providers (PISPs) are essential to open banking. Whether it’s enabling a host of new financial products or providing a better way to accept payments, open banking is changing the way that consumers and businesses alike manage their money. AISPs and PISPs are key to making that happen.So what are AISPs and PISPs, what’s the difference between them and how do they work? Here are just a few of the things you should know about them.
What is open banking?
To understand AISPs and PISPs, you need to grasp the basics of open banking. Essentially, open banking lets approved companies access bank accounts with the account holders’ permission. Using technology called application programming interfaces (APIs), open banking apps can gather financial data and even initiate payments. The ease and speed of this process make open banking ideal for everything from budgeting apps to ecommerce payments and more. Consumers control how much access these apps have, and must authorise any transactions. The proposal of PSD2 in 2015 laid the foundations for open banking in Europe. In the UK, a 2016 mandate from the Competition and Markets Authority (CMA) ordered the country’s nine largest banks to provide access to accounts at their owners’ request. It also required these institutions to follow specific standards with their APIs. The Financial Conduct Authority (FCA) regulates open banking in the UK and ensures companies follow these standards.So how do AISPs and PISPs fit in?
The FCA decides which companies can access and use open banking data. Approved organisations are known as third party providers (TPPs), which are designated as either AISPs and PISPs. These categories differentiate how TPPs can use the data they collect from open banking:- AISPs offer account information services (AIS) by gathering read-only financial information. They can compile data from multiple bank accounts, but they can’t initiate activity — such as payments — from those accounts.
- PISPs provide payment initiation services (PIS). This means they can not only access and present financial information, but also move money from a user’s bank account. Customers must consent to these payments, and can revoke it at any time.
How do companies become an AISP or PISP?
So should you become an AISP or PISP? The answer will depend on how you intend to use open banking. Those looking to offer AIS or PIS each have two options: a direct route and an indirect route.The direct way to provide AIS is to become a registered account information service provider (RAISP). RAISPs can either access each banks’ APIs or work with a technical service provider to connect through a single API. Registration can take up to a year, and involves:- Registering directly with the FCA as a TPP and reporting to it regularly
- Maintaining compliance with PSD2 and addressing customer complaints
- Purchasing professional indemnity insurance (PII)
- Follow PSD2 rules and address customer inquiries
- Hire in-house compliance professionals
- Prove they have €50,000 or more in initial capital
- Hold PII
