Attracting over 4 million active payment users and reaching an impressive lifetime milestone of 11.4 million payments in July and August 2023, Open Banking is rapidly reshaping the financial landscape of UK payments. Open Banking technology has sparked financial innovation, redefining how we interact with our money and allowing users to exercise more control over their finances.

At the centre of this revolution are two key players: Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs). In this article, we will explore the two types of third party providers (TPP) in Open Banking, and how their services influence the way users manage their finances and initiate payments. We will also explore how businesses can unlock the benefits of both AISP and PISP Open Banking services to reduce costs and enhance their payments ecosystem.

The growth & benefits of Open Banking

Despite initial slower adoption than other Open Banking services, the use of Open Banking PISP solutions is now growing consistently in the UK. The education surrounding the benefits of Open Banking powered payments has become more widespread, encouraging regular usage by customers, and increased adoption by businesses.

For consumers, benefits such as a more streamlined payment journey with less data entry are clear winners when it comes to checkout customer experience. And for merchants, reduced costs, improved authorisation success rates and real-time payment settlement offered by Open Banking makes this payment method an appealing option to add to ecommerce checkouts.

How do PISP’s differ from AISPs?

In a nutshell, AISPs have ‘read-only’ access to financial data and can view a customer’s bank account data via their financial institution, this allows businesses to gather user information that can influence services offered and help improve their products.

PISPs go one step further, having ‘read-write’ access to customers’ financial information and authorisation to push payments from a user’s bank account, removing the need for any manual data input of debit or credit card information.

How can businesses benefit from AISPs?

The key feature of an AISP is the ability to gather financial data from users and make tailored recommendations to suit specific needs. From a high-level view, this has a very clear benefit – by accessing bank account data directly from users, businesses can gain deep insight into their customers’ finances and money management. Analysing users’ buying habits then allows businesses to make personalised recommendations and offer innovative solutions like spending caps, saving opportunities, and other smart budgeting services.

One example of this can be seen in the lending sector. AISPs allow lending companies to assess customers’ financial information in detail, using the data to quickly analyse eligibility and enhance customer affordability. For the customer, this means they receive decisions quicker and have greater control over their financial decisions. The outcome of this is speedier application approval, reduced administrative costs, and efficient decision making about customer affordability with higher precision.

How can businesses benefit from PISPs?

As with AISPs, PISPs can support businesses in reducing friction and costs, as well as improving the overall payment experience for customers by connecting directly with bank accounts.

For merchants, the benefits of adopting Open Banking payments are substantial. Businesses can expect to save up to 80% on operating costs and processing fees compared to traditional card payments. Open Banking payments also achieve significantly higher payment conversion rates and provide instant settlement, improving cash flow and increasing overall revenue.

Compared with traditional card payments, Open Banking payments save time and effort for the end user. The checkout process involves much fewer steps and customer payment information doesn’t need to be manually entered and repeated, providing a more streamlined payment journey and ultimately improving conversion rates.

Adopting Open Banking is a registered PISP and can help businesses add Open Banking to their online checkout or create payment links. Pay by Bank (our proprietary Open Banking solution) can be integrated as a stand alone product or as part of our Hosted Checkout solution.

Hosted Checkout can be a fantastic place to get started with open banking, allowing businesses to leverage Pay by Bank as a payment method alongside credit and debit card payments, and digital wallets (including Apple Pay and Google Pay) through a single integration. It’s a great way to easily enable the inclusion of Open Banking payments alongside traditional payment methods, sparing businesses the burden of an additional time-consuming integration process for each payment method.

Interested in hearing more about how Open Banking powered payments can support your business? Get in touch with our team today to chat about Pay by Bank and Hosted Checkout.