DEFINITION
Payment Initiation Service Provider (PISP)
A Payment Initiation Service Provider (PISP) is a regulated financial entity that initiates payments directly from a user’s bank account to the recipient. This serves as a secure and typically faster alternative to traditional card-based transactions. PISP transactions also typically have lower fees than card payments, which is a considerable benefit for both the merchant and the consumer.
To ensure security, PISPs are regulated and licensed under the Revised Payment Services Directive (PSD2) and/or the relevant regional equivalent body. Along with AISPs, PISPs make up the framework for an open banking framework, allowing third parties to provide more seamless financial services.
Synonyms
Payment initiation platform
Acronyms
PISP
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Synonyms
Payment initiation platform
Acronyms
PISP
Examples
A person is shopping online and wants to check out. Instead of entering their card information, they see the option to pay directly through their bank. This is because the website they are shopping through has a partnership with a trusted PISP.
After clicking the button, they are taken to a secure interface where they can log into their bank account. Their credentials aren’t stored anywhere and after logging in, the PISP initiates the payment process and the funds are transferred. This process is typically performed instantly and the PISP in question doesn’t handle the funds at any point but rather just authorizes the payment in your stead.
FAQ
How does a PISP differ from an AISP?
While they both make up the framework for open banking, PISPs and AISPs handle different aspects of the process. Namely, AISPs only consolidate user data while PISPs initiate transactions on behalf of the user.
Are PISPs safe to use?
Yes. Just like AISPs and any other financial provider, PISPs are heavily regulated and must be licensed by the relevant regulatory body to ensure user safety. They also use Strong Customer Authentication (SCA) and do not store sensitive account details.
What are the benefits of using a PISP for payments?
Using a PISP will typically result in faster transactions, lower fees, and added security in the sense that the user won’t have to share card details with merchants.
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