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Business Benefits of PISP Open Banking

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedFeb 20222 min read

Bank-to-bank payments are convenient and secure. While Direct Debit has been the standard option within the UK for many years, the rise of open banking has led to new options including PISP payments. But what is a PISP, and is this type of payment system right for your business? Here’s what you need to know before signing up.

What is a PISP?

A Payment Initiation Service Provider, or PISP, is a service allowing payments to be taken directly from a buyer’s bank account. While Direct Debits are pulled from an account, this type of payment is authorised directly by the customer via the PISP. Another feature that makes this type of payment unique is that the customer can specify which bank account they want the PISP payment to be drawn from.

How do PISP payments 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 you might use biometric data or another secure form of login.

Benefits of using a PISP

On the surface, benefits of PISP open banking payments offer clear advantages to customers. This push-based bank payment system puts the customer in full control of initiating payment and sending it to the merchant. 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 several potential benefits to 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 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.

Is PISP open banking right for you?

As you can see from the benefits above, working with PISPs can make the payment process more convenient from your customers. Using a PISP offers a simple, secure way to take customer payments automatically.

GoCardless currently offers pull-based Direct Debit payments as well as an Instant Bank Pay service that’s powered with open banking like PISPs. These instant bank payments not only offer same-day processing, but they carry lower fees than cards without the risk of chargebacks. For all these reasons, it’s worth adding open banking payments via PISPs and others to your preferred payment methods.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.