Today, lenders and financial institutions are turning to open banking as a solution to the tedious, complex and inefficient processes. Hence, by collecting data from banks through digital pipes, facilitates secure and instant data collection.
Thus, whilst instant insights gathered from bank’s transaction data is powerful if used the right way to improve existing business processes, it also requires expertise on data handling and the underlying technology to make the most of it. In this context, here are two of the core services that companies can provide through Open Banking are:
- Account Information Service Provider (AISP)
Having an authorised AISP means that businesses can request permission to connect to a bank account and use the bank account information to offer a service. Likewise, businesses with AISP status are authorized to read-only access bank account information. In essence, they can look, but not touch, so the money of their customers cannot be transferred.
As an alternative to banks, AISPs can also provide these services such as price comparison, money management tools, faster and more accurate access to financial products, and the ability to speed up applications for mortgages, loans, and more.
- Payment Initiation Service Provider (PISP)
PISPs are authorized to make payments on behalf of their customers, not just view account information. Through the bank’s tools, transfers can be initiated directly from or to the payer’s bank account.
A PISP can also request permission to connect to customer bank accounts and initiate payments on the customer’s behalf. Consider, for instance, an app that takes a small percentage of each user’s balance each month and deposits it into their savings account according to a previously agreed process.
Following the insights into AISPs and PISPs, here are a few aspects to consider concerning the licensing of AISP & PISP:
- Authorisation of Account Information Service providers (AISP)
The license of a payment institution that just provides account information services can be obtained by institutions around the world. Aside from that, AISPs also fall under the category of payment institutions and are eligible to obtain a passport to another EU country.
The providers of AISPs do not have to meet capital requirements and they have to comply with fewer conditions than authorised or licensed firms. AISPs must have professional indemnity insurance (PII).
- Authorisation of Payment Initiation Service providers (PISP)
When your firm plans solely to provide PIS or to provide both PIS and other payment services, you must apply to become an authorised payment or e-money institution. Further, PISPs can make use of the EU Passport to provide services in other EU member states.
The initial capital required by a business that offers payment initiation services must be at least €50,000. Nonetheless, AISPs and PISPs are both required by law to carry professional indemnity insurance (PII).
Open Banking has replaced previously manual and increasingly complicated processes for individuals, lenders, and financial institutions. Yet, at present, understanding how the AISPs and PISPs work and what innovative companies can achieve with them can help find other applications. Integrating financial services through a provider such as OpenPayd, you get access to an entire ecosystem of banking and payments services, with instant global reach.