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What Is a TPP in Open Banking?

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Last editedMay 20222 min read

TPP stands for Third Party Provider, which, as the name suggests, is an organisation which communicates between banks and consumers in order to either carry out payments or retrieve account information using an Application Programming Interface (API). In this article we’ll delve further into exactly what open banking TPP is, how it works, and the security merits it offers.

TPP in open banking explained

Open banking third party providers facilitate interaction between bank and customer. While typically consumers communicate directly with the bank, with a TPP, consumers communicate with their TPP who then interacts with the bank. It therefore functions as a kind of liaison.

There are two types of TPPs offering distinct services: Account Information Service Providers (AISP)  and Payment Initiator Service Providers (PISP).

AISPs act on behalf of the bank to access customer information. They are authorised to view bank account information but cannot initiate payments or transfers. Credit bureaus, for example, may use AISPs to check a customer’s credit history and creditworthiness.

PISPs, meanwhile, act on a consumer’s behalf to initiate payments. A PISP allows you to carry out online payments without the need for credit or debit card details.

How Open Banking works

With Open Banking, regulated TPPS are permitted access to your bank account data and can initiate payments. This access to your account, however, is never done without your consent.

Open Banking can be used with any payment account that is accessible online. This includes, but is not limited to: current accounts, credit cards and even some savings accounts.

Open banking, by way of TPPS, offers users the following feature:

  • Financial management

  • Access to all account information in one place

  • Tools for managing debt

  • Tools for issuing payment directly from the bank via a TPP app

  • Tools for saving money

In order to provide these features, TPPs will use software which operates either online or via a mobile app which interacts with the bank. Providers will also use login information in order to access your bank account to obtain information for the bank. Naturally, in order for TPPs to be granted permission to do this, you will need to provide your explicit consent.

Open Banking TPPs: are they secure?

Any TPP offering open banking services must be regulated by the Data Protection Act in the UK.

A full list of regulated third party providers can be found on the Open Banking website, where GoCardless is listed. All companies listed are enrolled in the OBIE’s Directory and therefore permitted to provide secure open banking-enabled services.

To remain extra safe while using Open Banking, however, you should implement the following strategies:

  • Always be cautious when receiving phone calls, emails or messages claiming to be from your Open Banking service provider. Often fraudsters pose as legitimate providers, so make sure you don’t give away your financial information unless certain of the caller’s validity.

  • Ensure you thoroughly understand and agree with the level of access you are permitting to TPPs, as well as how your personal details will be used.

  • Always be sure that the TPP you opt for is authorised on the Open Banking website.

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