Last editedMar 20222 min read
In the digital age, there are more options than ever to help businesses get paid. Choosing the right payment options can help SMEs like yours to avoid excessive charges from Payment Service Providers, while providing speed, convenience, and security to the customer.
However, it’s important to understand the technological and legislative implications of the different payment methods you choose, in order to understand how they affect your business. For instance, when making or receiving bank-to-bank payments, there are a range of services that provide authorised access to account information. These are known as ASPSPs.
What are ASPSPs?
Account Servicing Payment Service Providers (ASPSPs) are the entities responsible for providing payment accounts for companies and consumers that use payment services. They facilitate the sharing of account data with third-party service providers that can, in turn, initiate payments on the user’s behalf. APSPs are typically banks and similar financial institutions, interacting with consumers and vendors via authorised third parties.
Different types of ASPSP services
ASPSPs provide a range of services to users. These fall into three distinct camps, as detailed below:
AIS (Account Information Services)
These provide access to account information in customers’ bank accounts. Services of this kind can see the funds in a bank account but they cannot necessarily access them. These services are often employed for things like credit and affordability checks. As more and more consumer credit opinions enter the market, we can expect these services to remain a mainstay of account servicing payment services.
PIS (Payment Initiation Services)
These enable service providers to initiate payment from the customer’s bank accounts on their behalf. These services can be used to collect either ad-hoc or recurring payments. This service is typically used to facilitate payments for e-commerce.
CAF (Confirmation of the Availability of Funds)
Businesses that offer high-value items may encounter logistical and cash flow problems if a customer turns out not to have the necessary funds to make a payment. CAF service providers ensure that consumers have sufficient funds in their accounts to complete a transaction. So vendors can have complete peace of mind.
Are ASPSPs open banking?
Yes, ASPSPs are a form of open banking. Banks and other financial institutions share data with other regulated companies in order to provide their payment services. The ASPSPs publish read/write APIs to enable bank and transaction data to be communicated between banks and authorised third parties.
What is PSD2?
Revised Payment Services Directive or PSD2 is a set of regulations for all electronic payment services set up by the European Commission. These regulations are designed to provide consumers with greater protection when making online purchases or carrying out banking transactions over the internet. These regulations were first set up in 2007 then revised in 2015, hence the term PSD2.
Does the UK use PSD2 for ASPSPs?
PSD2 compliance was a legal requirement before the onset of Brexit. Although the UK left the single European market in 2020, PSD2 continued to be used in a transitional period until January of 2021. After this time, PSD2 was replaced by a similar set of post-Brexit legislation. This is the Regulatory Technical Standard on Strong Customer Authentication and Common and Secure Communications, or RTS – SCA & CSC. This set of requirements is known as SCA-RTS in the UK.
These requirements were developed under PSD2, with very similar requirements for compliance. This helps to provide a sense of continuity for ASPSPs and the vendors and consumers that use them.
We can help
If you’re interested in finding out more about ASPSPs, PSD2, and bank-to-bank payments, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.