After January 2018, Open Banking has revolutionised everything from payment options and budgeting methods to lending applications and credit evaluations, bringing drastic change to the financial environment. But what exactly do businesses that deliver Open Banking do? Regulated providers build and manage the digital channels that allow banks to safely test samples and payments.
Via two separate FCA authorisations, businesses will have two main services available through Open Banking:
- Account Information Service Provider (AISP): a person who is authorised to locate account information from banks and other financial institutions.
- Payment Initiation Service Provider (PISP): a person or company who is authorised to make payments into or out of a user’s account.
Companies must go through a stringent application process with the FCA to become regulated as an AISP or PISP. Any Open Banking providers can be operated as both an AISP and a PISP, but the majority still have one.
Customers’ consents to use Open Banking data are handled by AISPs and PISPs. This ensures that each AISP and PISP specifies to the end user what data will be accessed, how long it will be accessed for, and with whom it will be exchanged. This interactive consent journey also serves as the foundation for GDPR data collection for AISPs and PISPs.
AISPs (Account Information Service Providers)
Account Information Service Providers (AISPs) are companies that provide information about your account.
The following are few examples of AISP applications:
Money management tools: some AISPs gather financial data and present it in a position that ensures people to better consider their financial status, build a schedule, and track their spending. These modern personal finance applications combine data from different bank accounts into a single view of a user’s spending.
Loan applications: Some AISPs, such as Credit Kudos, use this same capability to allow customers to exchange financial details with a lender or broker easily and safely. Lenders often use account information’s derived data and measurements to improve credit and affordability decisions.
Conventional underwriting is amplified by this method, which reduces the need for creditors to manually assemble and validate bank statements. Better perspectives support lenders, while standardised implementations benefit creditors.
PISPs (Payment Initiation Service Providers)
PISPs are authorised to make transfers on behalf of customers, rather than only displaying account results. PISPs do this by using the bank’s own resources to initiate transactions either to or from the payer’s bank account. As a result, some industry observers have labelled AISPs as having’ read-only’ access to an individual’s accounts, whereas PISPs have ‘read-write’ access.