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AISP vs PISP: What is the difference?

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Last editedOct 20224 min read

If you run a small business in the UK you’ve likely noticed the explosion of new payments that have changed the way we do business in recent years. In-person mobile payments software, E-Wallets, and Payment Service Providers have enabled merchants to accept payments from customers in more ways than ever. The more simple, convenient and secure it is for customers to pay you, the more likely they are to keep coming back to your business.

But none of this would be possible if it weren’t for open banking services and tools like AISPs and PISPs. You may well have heard these terms used before but be unsure what they mean and how they apply to your business operations. Here, we’ll look at AISP vs PISP and what they mean for your business and its customers when it comes to getting paid.

What is open banking?

There was a time when only banks could manage the handling of business and consumer bank account information. Today, however, open banking enables all kinds of regulated service providers to allow data and payments to be sent and received between bank accounts.

The companies that manage these services fall into two camps: AISPs and PISPs.

Companies must register as one or the other with the FCA before offering financial service APIs to users.

What is an AISP?

An Account Information Service Provider (AISP) is authorised to connect to a person’s bank account and use their account information to provide a service. However, they are not allowed to move money into or out of said account.

There are lots of businesses and services that use AISPs including:

  • credit checking services

  • money management services and apps

  • price comparison tools

What is a PISP?

A Payment Initiation Service Provider (PISP) is able to access read-only data from a bank account and they are also authorised to initiate payments on a customer’s behalf. PISPs can therefore be used to make payments directly from a bank account, removing the need for a debit or credit card.

Naturally, this lends itself well to retailers and other businesses that want to initiate bank-to-bank payments. However, PISPs are also used by financial management tools. These can move money between accounts automatically to ensure that the user does not incur overdraft fees by moving, for instance, money from a savings account into a current account.

PISPs can be very useful in simplifying buyer journeys, allowing businesses to connect directly with the bank accounts of frequent shoppers. This saves time and effort for the customer as payment information does not need to be repeatedly entered manually.

How do PISPs work?

The revised Payment Services Directive (PSD2) is the open banking standard applied across Europe enabling this technology. This European regulation controls electronic payment services by increasing banking innovation. It removes prior rules that gave banks a monopoly on customer data, instead allowing other businesses to access banking data with full customer permission. PSD2 opens a new world of banking products, including PISP providers.

A PISP uses open banking APIs to initiate bank account transactions. The customer no longer needs to log into their account to arrange a transaction; instead, it’s set up automatically like a card payment. As with a card payment, the customer authorises the transaction but instead of a PIN code, biometric data might be used or another secure form of login.

How does open banking benefit your business?

Open banking enables businesses like yours to accept a broader range of payments from customers. So they can pay using the method that is easiest and most convenient for them. What’s more, open banking can enable businesses to avoid the extensive fees and confusing charges that can come with accepting credit and debit card payments.

Benefits of using PISP open banking

PISP providers are independent of any single bank, which means customers can use them regardless of where their current account is located. The payment process is streamlined and simple, with transactions easily authenticated using a mobile device or biometric log-in.

There are multiple benefits for businesses as well.

  • User-friendliness: making payment easier for customers helps build brand loyalty while reducing abandoned shopping cart rates.

  • Security: Bank transfers require tools like Strong Customer Authentication (SCA) to cut down on fraud. Only the customer can authenticate the transaction, without passing any payment details to the merchant or provider. In turn, this reduces your business’s liability and risk.

  • Efficiency: while other types of bank payments can take several days to settle, PISP open banking payments are collected and settled in the same day. Payments can even arrive in your merchant account in a matter of seconds.

  • Reduced chargebacks: card payment carries the risk of chargebacks when a customer disputes a payment. PISP open banking payments prevent this from happening because the buyer is the one who ‘pushes’ the payment and makes the request.

  • Affordability: when compared to traditional payment gateways and banking services, PISP providers offer more transparent and affordable pricing models. Credit card charges often involve a list of small fees, not to mention the risk of fraud or chargeback costs.

GoCardless, for instance, uses open banking to offer Instant Bank Pay (in the UK and Germany). This allows merchants to send payment links to customers and request one-off payments.

This quick, easy and secure payment method facilitates bank-to-bank payments powered by open banking. Payment confirmation is instant so both you and your customer have complete peace of mind.

Because the process is carried out via payment request links, it’s super easy for businesses to get paid. The customer simply needs to click the link and go with the flow.

Common examples of PISP uses:

  • Financial management tools: many more modern PISP open banking solutions enable tools that transfer funds between accounts on the customer’s behalf to avoid fees.

  • Faster checkout: authorised PISPs can connect to the bank faster and automatically re-enter card details for every transfer. This allows customers to checkout faster.

  • Business solutions: PISP tools can also integrate fully with back-office systems, facilitating secure payment management and collections and allowing for real-time bank transfers.

  • Improved visibility: open banking is a more transparent platform that allows for greater payment visibility.

We can help

GoCardless is a global payments solution that helps you save time and money, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.

Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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