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)

Alternatively, companies can take the indirect route and become an AIS agent with a regulated AISP. AISPs provide agents with a single API to access bank data, and assume responsibility for PSD2 compliance. While agents must submit to their service provider’s ongoing compliance due diligence, the onboarding process is much faster. AIS agents usually get access permission within four to six weeks.

Companies looking to offer PIS face a similar decision. One option is to register as a PISP with the FCA. As with RAISPs, PISPs can either connect to accounts through bank APIs or through one API from a technical service provider. The registration process also takes up to a year, and applicants must:

• Follow PSD2 rules and address customer inquiries

• Hire in-house compliance professionals

• Prove they have €50,000 or more in initial capital 

• Hold PII

There’s also an indirect option, which involves a registered TPP integrating with your app or website to handle payments. Again, the TPP must comply with PSD2 and respond to customer complaints, but their customers don’t need to purchase PII or meet initial capital requirements. There’s also minimal onboarding time — businesses only need to wait until their integration finishes.

To learn more about becoming an AISP or a PISP, check out the UK regulation chapter in our ultimate guide to open banking.

How can businesses benefit from AISPs? 

Working with an AISP can help businesses use customer data to improve their products.

By accessing bank account data directly, companies can gain insight into their customers’ finances. Take smart budgeting. With help from an AISP, personal finance apps like Plum analyse its users’ buying habits and recommends customised spending caps and unique savings opportunities. 

Lenders may also access customer data to speed up their assessment processes. For example, Zopa uses both income and spending data to calculate the affordability of loan repayments. This lets them approve loans faster and with reduced administrative costs.

Registering as an AISP helps businesses to offer features that further enhance their customer experience. Financial apps like Revolut and Numbrs use data APIs to create a single dashboard that seamlessly integrates all of their users’ accounts in one place. The result: greater visibility and ease of use.

How can businesses benefit from PISPs?

As with AISP, PISPs can help businesses provide a better customer experience. Open banking payments require fewer steps and less data entry than other methods.

Customers aren’t the only ones who benefit, though. Open banking payments help merchants save money and settle transactions faster. Their operating costs and processing fees are minimal, and with instant settlement, cash flow gets a whole lot easier.

Whether they’re working with an AISP to help customers make the most of their financial data or using a PISP to accept payments, businesses have plenty to gain from open banking. Find out how you can benefit. 

Learn more in our definitive guide to open banking.