A PISP (Payment Initiation Service Provider) is a regulated entity that can initiate a payment directly from a customer's bank account on behalf of a merchant. PISPs are one of the two core third-party provider types created by Open Banking regulation in the UK and PSD2 in Europe. The other is the AISP (Account Information Service Provider), which can read account data but cannot move money.
If you have ever paid for something online and been redirected to your banking app to approve the payment — rather than entering card details — you have almost certainly used a PISP. This guide covers exactly what PISPs are, how the payment flow works, who the major PISP companies are, and where PISP payments fit in the broader payments landscape.
What Is a PISP?
PISP stands for Payment Initiation Service Provider. It is a type of third-party provider (TPP) authorised under the Payment Services Directive 2 (PSD2) in Europe and the Open Banking framework in the UK. A PISP has the legal and technical ability to initiate a payment from a consumer's bank account — with the consumer's explicit consent — and send it directly to a merchant or payee.
In practical terms, a PISP sits between the customer and their bank. Instead of the customer logging into their banking app, finding the merchant's account details, and manually sending a bank transfer, the PISP handles the entire flow. The customer simply authenticates (usually via their banking app or biometrics), confirms the amount and recipient, and the payment is initiated instantly.
The key distinction: the PISP never holds the funds. Money moves directly from the customer's bank account to the merchant's bank account. The PISP is an initiator, not an intermediary.
PISP Meaning in Simple Terms
Think of a PISP as a secure, regulated bridge between the "pay now" button on a checkout page and the customer's bank. Before Open Banking, the only entities allowed to interact with a bank account were the bank itself and the account holder. PSD2 changed that. It required banks (known as ASPSPs — Account Servicing Payment Service Providers) to open up secure APIs so that authorised third parties like PISPs could initiate payments on behalf of customers.
This was a deliberate regulatory move to increase competition, reduce reliance on card networks, and give consumers more control over how they pay.
How PISP Payments Work
A PISP payment follows a specific technical flow. Understanding this flow is important because it explains why PISP payments are faster, cheaper, and more secure than traditional card payments.
Step-by-Step PISP Payment Flow
Here is how a typical PISP payment works from start to finish:
1. Customer selects "Pay by Bank" at checkout. The merchant's checkout page presents bank payment as an option alongside card payment. The customer chooses to pay directly from their bank account.
2. Customer selects their bank. The PISP presents a list of supported banks (e.g. Barclays, HSBC, Lloyds, Revolut). The customer picks theirs.
3. PISP sends a payment initiation request to the bank (ASPSP). Via the bank's Open Banking API, the PISP sends the payment amount, merchant details, and a unique reference. This is a server-to-server API call.
4. Customer authenticates with their bank (SCA). The customer is redirected to their banking app or online banking portal. They authenticate using Strong Customer Authentication (SCA) — typically biometrics, a PIN, or a one-time passcode.
5. Customer confirms the payment. The banking app shows the exact amount and recipient. The customer taps to confirm.
6. Bank executes the payment. The bank (ASPSP) processes the payment via the Faster Payments scheme (in the UK) or SEPA Instant (in the EU). Funds arrive in the merchant's account within seconds.
7. PISP confirms payment status to the merchant. The merchant receives a webhook or callback confirming the payment was successful. The customer is redirected back to the merchant's confirmation page.
The entire process typically takes under 15 seconds. No card numbers are entered, no card network is involved, and the merchant receives the funds almost immediately — compared to the 1-3 business day settlement window typical of card payments.
PISP vs AISP: What's the Difference?
PSD2 and Open Banking created two types of third-party providers. They serve fundamentally different purposes, and a company can hold one or both licences.
PISP (Payment Initiation Service Provider) — Can initiate payments from a customer's bank account. Used for checkout, bill payment, and account-to-account transfers. The PISP writes to the bank account (it sends a payment instruction).
AISP (Account Information Service Provider) — Can read account data (balances, transaction history) with the customer's consent. Used for personal finance management, credit scoring, affordability checks, and account aggregation. The AISP reads from the bank account but cannot move money.
A useful analogy: a PISP has the key to send payments out of your account (with your permission each time). An AISP has a window to view your account balance and transactions (with your ongoing consent). Many Open Banking companies hold both licences — for example, TrueLayer and Plaid operate as both PISP and AISP.
When Would You Use an AISP vs a PISP?
AISP use cases: Bank account verification for onboarding, income verification for lending, personal finance dashboards (like Emma or Plum), and affordability assessments.
PISP use cases: E-commerce checkout ("pay by bank"), invoice payments, subscription billing, payroll disbursements, and any scenario where you need to collect or send a payment without cards.
PISP Examples: Companies and Platforms
The PISP landscape has matured significantly since PSD2 came into force. Here are the major PISP companies operating today, along with what they do:
Infrastructure PISPs (APIs for Developers)
TrueLayer — One of the largest European Open Banking platforms. Provides PISP and AISP APIs. Used by Revolut, Wise, and thousands of merchants for instant bank payments. FCA-regulated.
Yapily — Connectivity-focused Open Banking infrastructure. Connects to 2,000+ banks across Europe. Offers payment initiation and data APIs. Used by American Express, Intuit, and Volvo Financial Services.
Token.io — Enterprise-grade PISP infrastructure. Powers HSBC's PayMe and other large bank integrations. Covers 6,000+ banks and offers multi-rail payment initiation across SEPA, Faster Payments, and other schemes.
Plaid — Originally a US-focused AISP (account aggregation), Plaid expanded into payment initiation in the UK and EU. Now offers both PISP and AISP capabilities.
Volt — A global real-time payments network built on Open Banking. Operates as a PISP with coverage across Europe, UK, Brazil, and Australia. Focused on e-commerce and gaming merchants.
Consumer-Facing Services Powered by PISPs
Trustly — One of the pioneers in account-to-account payments. Trustly processes PISP payments for e-commerce, financial services, and iGaming across Europe and North America.
GoCardless — Traditionally a Direct Debit provider, GoCardless now offers Instant Bank Pay powered by Open Banking PISP rails. Used for invoicing and subscription collection.
Banked — A PISP focused on checkout payments. Powers "pay by bank" at merchants including the Premier League (for ticket purchases). Direct bank-to-bank payments at checkout.
It is worth noting that many traditional payment service providers (PSPs) and payment gateways are now integrating PISP capabilities into their offerings — either by building their own Open Banking connections or partnering with the infrastructure PISPs listed above.
Benefits of PISP Payments
PISP payments offer significant advantages over traditional card-based payments, both for merchants and consumers. These benefits are structural — they stem from the fact that PISP payments bypass card networks entirely.
For Merchants
Lower transaction fees. Card payments typically cost 1.5-3% per transaction (interchange + scheme fees + acquirer margin). PISP payments usually cost a flat fee or a much lower percentage — often 0.1-0.5% — because there is no card network in the middle.
Instant settlement. Card payments settle in 1-3 business days (sometimes longer). PISP payments via Faster Payments settle within seconds. The merchant has the money immediately, improving cash flow.
No chargebacks. Card payments carry chargeback risk — the customer can dispute the charge and the card network reverses the funds. PISP payments are irrevocable once authenticated. The customer explicitly confirmed the payment in their banking app.
No card data to handle. Because no card numbers are entered, the merchant has no PCI DSS scope for these transactions. This eliminates the cost and complexity of card data security compliance.
Higher payment success rates for high-value transactions. Card payments frequently fail for large amounts due to fraud checks and credit limits. Bank payments authenticate directly with the customer's bank, so success rates are typically higher for large-ticket items.
For Consumers
No need to enter card details. The customer authenticates with their banking app. No card numbers, expiry dates, or CVVs to type in — reducing friction and eliminating the risk of card details being stolen.
Payment comes directly from bank balance. For consumers who prefer to pay from available funds rather than credit, PISP payments offer a direct debit-like experience without the delayed collection timeline.
Bank-grade security. Authentication happens within the customer's own banking app using the same biometrics or credentials they already trust. The PISP never sees the customer's banking credentials.
PISP Regulation: PSD2, FCA, and Open Banking
PISPs do not operate in a regulatory grey area. They are among the most tightly regulated entities in payments. Understanding the regulatory framework is important for any business evaluating PISP payments.
PSD2 (EU)
The revised Payment Services Directive (PSD2) came into force across the EU in January 2018. PSD2 created the legal category of PISP and required all banks to provide secure APIs for third-party access. Key requirements for PISPs under PSD2:
Must be authorised or registered with a national competent authority (e.g. BaFin in Germany, DNB in the Netherlands)
Must hold professional indemnity insurance or comparable guarantee
Must use Strong Customer Authentication (SCA) for every payment
Must not hold customer funds at any point
Must communicate with banks via secure, standardised APIs (not screen scraping)
PSD3, currently being drafted, is expected to further strengthen Open Banking rules and extend PISP access to instant payment rails across all EU member states.
FCA and Open Banking UK
In the UK, PISPs are regulated by the Financial Conduct Authority (FCA). The UK's Open Banking Implementation Entity (OBIE) went further than PSD2 by mandating a standardised API specification that all CMA9 banks (the nine largest UK banks) must support. This made the UK the most advanced Open Banking market globally.
As of 2025, the FCA register lists over 100 firms authorised as PISPs in the UK. The Joint Regulatory Oversight Committee (JROC) has taken over stewardship of Open Banking from the OBIE, with a focus on expanding Variable Recurring Payments (VRP) — a form of ongoing PISP payment that could eventually replace Direct Debit.
Limitations of PISP Payments
PISP payments are not a universal replacement for cards. There are genuine limitations that merchants and platforms need to consider:
No recurring payments (yet). Standard PISP payments are one-off. Each payment requires the customer to authenticate again. Variable Recurring Payments (VRP) are being rolled out in the UK, but coverage is still limited to sweeping use cases (transferring between your own accounts). Commercial VRP — which would enable subscription billing via PISP — is still in pilot stages.
Consumer awareness is still growing. Many consumers are unfamiliar with "pay by bank" and may not trust it at checkout. Conversion rates depend on how well the payment option is presented and explained.
Bank coverage varies. While the major UK and EU banks all support Open Banking APIs, smaller banks, building societies, and international banks may have inconsistent or limited API support. This means some customers may not be able to use PISP payments depending on who they bank with.
No native buyer protection. Card payments come with Section 75 and chargeback protections in the UK. PISP payments are irrevocable — which benefits merchants but means consumers have fewer dispute mechanisms. Some PISPs are building refund capabilities to address this.
UK and EU focused. Open Banking regulation is most mature in the UK, EU, and a few other markets (Brazil, Australia). The US, Middle East, and most of Asia do not yet have equivalent PISP regulation, limiting global applicability.
PISP and the Future of Payments
PISP payments are growing rapidly. UK Open Banking payment volumes exceeded 11 million per month in 2024, up from under 1 million in 2021. The trajectory is clear: account-to-account payments are becoming a mainstream alternative to cards.
Several developments are accelerating this:
Variable Recurring Payments (VRP). Commercial VRP will allow PISPs to set up ongoing payment mandates — like Direct Debit, but instant and with more granular consumer controls. This would unlock subscriptions, utility billing, and regular invoicing via PISP rails.
PSD3 and PSR. The EU is drafting PSD3 alongside a new Payment Services Regulation (PSR) that will extend Open Banking requirements, improve API reliability, and create a level playing field across all member states.
Embedded finance and payment orchestration. Platforms that embed payments into their software can now offer PISP payments alongside card payments, giving merchants a choice. Payment orchestration layers make it straightforward to route transactions to the optimal payment method — whether that is a card acquirer or a PISP — based on cost, speed, or geography.
Global expansion. Brazil's Pix system and Australia's Consumer Data Right are building their own PISP equivalents. India's UPI is already the world's largest real-time payment network. The direction of travel is clear, even if the specific regulatory frameworks differ.
For platforms and merchants, the practical implication is that PISP payment acceptance is no longer experimental. It is a production-grade payment method that should be evaluated alongside cards, especially for UK and EU transaction volumes.
Frequently Asked Questions
Is PayPal a PISP?
Not exactly. PayPal holds an e-money licence and operates as a payment institution, but it is not primarily a PISP in the Open Banking sense. PayPal acts as an intermediary — it holds funds in PayPal wallets and processes payments through its own network. A true PISP initiates a direct bank-to-bank payment without holding funds. That said, PayPal does use Open Banking (AISP) to allow users to connect bank accounts for top-ups, and it has experimented with PISP-style "pay by bank" flows in some markets.
Do PISPs Need a Licence?
Yes. In the UK, a PISP must be authorised or registered with the FCA as a Payment Institution. In the EU, PISPs must be authorised by the relevant national competent authority under PSD2. The licensing requirements include minimum capital (or professional indemnity insurance), robust IT security, and compliance with Strong Customer Authentication (SCA) requirements. Operating as a PISP without authorisation is a criminal offence.
What Is the Difference Between a PISP and a Payment Gateway?
A payment gateway securely transmits card details from the customer to the acquiring bank and card network. It facilitates card-based payments. A PISP bypasses cards entirely — it initiates a bank-to-bank payment via Open Banking APIs. A merchant might use both: a payment gateway for card transactions and a PISP for "pay by bank" transactions. Increasingly, payment platforms offer both under one integration.
Can a PISP Access My Bank Account Without Permission?
No. Every PISP payment requires explicit consent from the account holder via Strong Customer Authentication (SCA). This typically means authenticating in your banking app using biometrics or a PIN. The PISP cannot initiate a payment without this authentication step. Additionally, PISPs never have access to your banking credentials — authentication happens entirely within your bank's own app or website.
How Much Do PISP Payments Cost?
Pricing varies by provider, but PISP payments are typically significantly cheaper than card payments. Most PISPs charge either a flat fee per transaction (often 0.20-0.50 GBP/EUR) or a low percentage (0.1-0.5%). Compare this to card payments, which typically cost 1.5-3% per transaction when you factor in interchange, scheme, and acquirer fees. For high-value transactions, the savings from PISP payments can be substantial.
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