How to become a PISP (Payment Initiation Service Provider)

If you’re a payment service provider (PSP), you may want to add Pay by Bank payments to your offering. Supporting these open banking payments means your merchants can benefit from more affordable, instant transactions, giving you the edge among your competitors.

However, to offer Pay by Bank payments, you’ll need to do one of two things:

Get authorised by the Financial Conduct Authority (FCA) as a Payment Initiation Services Provider (PISP), so that you can request open banking payments from bank accounts yourself. This requires you to meet the rigorous criteria required of registered financial services institutions.
Work with a third-party provider (TPP) to use their payment initiation services. Instead of becoming a PISP yourself, you can take advantage of other open banking platforms who can initiate payment on your behalf. This way, you don’t have to put in the hard work of meeting the FCA’s criteria.

In this guide, we’ll share the pros and cons of both options. However, whichever you opt for, you’ll need to integrate with different institutions’ open banking APIs—namely the interfaces that enable you to connect to end users’ bank accounts and initiate payment. You can do this either by building a solution yourself, or relying on an open banking solution that can supply the technology for you.

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Want to find out more about offering Pay by Bank? Reach out to us to speak to an open banking expert.

Option 1: Get authorised as a PISP

One option you have if you want to take advantage of open banking payments is to become a PISP yourself. This requires you to get authorisation from the FCA.

So, how do you become a PISP?

The first thing to know is that to get this authorisation, you need to be recognised as a financial services firm. If you don’t have this recognition from the FCA already, this step alone requires that you fulfil a number of obligations.

There is technically no ‘PISP license’: the FCA provides your firm an authorisation to provide these services and you become a regulated financial services firm. Here’s what you typically need to do:

Demonstrate that you comply with the FCA’s principles of business. These include maintaining adequate financial resources and ensuring that your customers’ assets are adequately protected. You can find full details here.
Meet the basic minimum standards expected of online payments and e-money firms. Again, you can find the full details on the FCA website.
Show why you’re looking to get authorised now and whether you’ll be able to fulfil your obligations from the moment at which you’re authorised.
Register and submit a detailed, complete, and accurate application. Be aware that the FCA can take up to six months to assess an application.
Submit a regulatory business plan that includes details on your governance, compliance, specific activities, and your customer journey.

Making such an application is a significant commitment—and it’s not something that should be entered into lightly. You’ll likely need to hire a legal consultant to ensure you’re fulfilling all the necessary requirements and avoid the FCA asking you to withdraw your application for resubmission, or even worse, reject it outright.

Plus, it’s worth being aware that most firms are required to update/amend or change their application due to feedback from the FCA during the process, extending the time required to achieve an authorisation

The pros and cons of becoming a PISP

As you can see, getting authorisation as a PISP yourself is quite a committing process that requires a lot of work—and takes a lot of time—to ensure you’re compliant.

In reality, this won’t be the best choice for many firms. The large amount of work required—such as any necessary business restructuring and investment in meeting regulatory compliance requirements—may not be worth it if you’re simply looking to add Pay by Bank functionality to your offering, for instance.

However, there are advantages to this approach. Most significantly, you’ll get full control over the product you build, so you can fully design the customer experience of payments with your own brand, visuals, and flow. This can help you build trust among your customers—and in some cases maximise the rate at which they convert.

What’s more, after the initial investment required for setup, compliance, and building the infrastructure, the costs can be lower in the long term. For example, you won’t need to pay an open banking provider the per-transaction fees.

There’s no doubt that these are substantial benefits, but you shouldn’t underestimate the costs and work involved. Consultants don’t come cheaply, nor does the labour required to build, test, and maintain an API.

Similarly, don’t underestimate the work required to optimise the user flow from a conversion and regulatory perspective. You’ll need the expertise in-house to ensure you’re building the user experience to the necessary standard.

Option 2: Partner with an open banking solution

An alternative way to offer Pay by Bank payments—or to leverage another open banking service—is to work with an open banking platform that can provide these services on your behalf. It’s a way to leverage open banking without the need to get authorisation as a PISP yourself.

The benefit of this option is that any open banking platform will already be authorised to supply PIS services. All you’ll need to do is integrate with that platform and then you can easily support Pay by Bank through your own website, app, or platform.

This option doesn’t require you to develop or maintain the API technology yourself at all—or to build a user flow. As such, you can get to market much more quickly.

The pros and cons of partnering with an open banking solution

Compared to becoming a PISP yourself, the main disadvantage of partnering with an open banking platform is that you’ll give up a degree of control over your users’ experience of payment. You’ll also need to pay a minimal fee for each transaction—which wouldn’t be necessary if you built the solution yourself.

However, there are significant benefits to this approach that shouldn’t be overlooked:

You don’t need to build the expertise in-house. You won’t need to hire the regulatory expertise, or to create a technical team, to develop and maintain your own API. Instead, you can outsource all of those functions entirely.
You can get started straight away. Partner with an open banking provider and you don’t need to wait (for six months or more) in order to get authorised by the FCA. This could be time in which your competitors are already serving merchants with open banking payments. Instead, by working with an open banking provider, you can get to market much more quickly.

In short, partnering with an open banking provider means that there’s much less for you to do in general. You can outsource the entire technical process—as well as the risk and the compliance requirements.

How Yapily can support you with all your open banking needs

At Yapily, we’re an open banking solution and PISP that can support you to offer open banking payments. However you want to offer Pay by Bank, we can help.

If you want to get authorised as a PISP yourself, we can reduce the demands on your team by providing the technological expertise to help you connect to banks’ open banking APIs. We’ll be the technical service provider to build and maintain your API connectivity and maximise your conversions—but you’ll keep full control over the user experience.

Alternatively, you can use our PISP authorisation and let us initiate payment on your behalf. We’ll handle the payment transactions themselves and all the compliance requirements—and we’ll build and optimise your user flow for you. This way, you can start accepting Pay by Bank payments immediately.

What’s more, you’ll get access to a full range of open banking payments—including instant Pay by Bank, variable recurring payments, and bulk payment services.

Here are three reasons why you should work with Yapily.

1. Access the open banking expertise you need—without the costs of building an in-house team

Whichever option is the best fit for you, we can provide the expertise you need.

If you simply want to offer Pay by Bank payments on your site, you can outsource the entire technical process to us. It’s a great option if you’re not already registered with the FCA and just want to offer an additional payment option to your end users.

Simply embed our hosted pages into your site or app and start offering Pay by Bank payments immediately. You won’t need to get authorised, connect to different bank APIs, build a user flow, or manage the payment relationship with the customer. We’ll handle all of that on your behalf.

If you’re already an authorised PISP but you don’t want to put in the work of maintaining an API and its associated user experience, we can help too. We can maintain the open banking technology at the back end while you build the user flow yourself. Not all open banking platforms offer this kind of white-label infrastructure.

Either way, we can support you however you want to serve your customers—and we’ll ensure that payment conversions stay as high as possible.

2. Connect with accounts from thousands of banks with one integration

If you choose to become a PISP and develop your own API, you have to ensure that it integrates with a full range of banks. If you only have a limited number of connections, you won’t be able to serve all the end users of your merchants.

At Yapily, we’ve put in a lot of work to ensure that our API is robust and reliable, and that it has extensive coverage—so you won’t need to connect to various banks yourself.

All you have to do is integrate with our platform and you’ll be able to immediately connect with thousands of banks and financial institutions across Europe. We connect with around 2,000 banks in 19 countries across the continent, including key markets such as the UK, Germany, the Netherlands, and France.

Unlike many other open banking platforms, we also connect you with consumer and business accounts. This means that you can serve both B2B and B2C merchants.

3. Leverage both open banking payments and data

If you get authorised as a PISP, you’ll be able to offer open banking payments. However, if you want to support other open banking services—such as data—you’ll need additional authorisation.

To do this, alongside being a PISP, you’ll need to be recognised as an account information service provider (AISP). This allows you to access financial information on end users, for purposes such as account aggregation, instant account validation, know your customer (KYC) checks, or affordability assessments.

You’ll need to include that you want to provide this service in your initial application to the FCA. But if you don’t want to offer data services immediately, you’ll need to reapply for this additional authorisation when you do.

Partner with Yapily instead and you won’t need to get authorisation as a PISP or an AISP. Instead, you can rely on our services and authorisations entirely. We’ll make all the API calls for you—and handle all user permissions—so that you can access the customer data you need in real-time.

We also offer data enrichment services. We’ll standardise the transaction data that comes from the bank, normalise merchant names, categorise the transactions, and identify any patterns of recurrence. For business use cases, for instance, we have over 100 transaction categories—more than almost all other data providers.

How Crezco works with Yapily as a PISP

Crezco is a payment solution that helps SMEs manage invoices and payments. Specifically, it solves three pain points: late payments, high fees, and reconciliations.

To do this, Crezco uses open banking with Yapily. Thanks to our extensive coverage and connections with thousands of banks across the UK and the EU, the platform is able to serve 5,000 businesses to trade and access financial solutions more easily.

Crezco uses Yapily to serve instant, frictionless payments, including recurring payments—without the high charges associated with card transactions. What’s more, it leverages Yapily’s data services to instantly confirm customer and account details, to reduce the friction of onboarding.

Thanks to Yapily, Crezco has been able to:

Reduce debtor days by an average of 27% for accounts teams
Help customers save an average of £1,000 on fees for every 25 invoices
Increase account-to-account payments by 71%.

*Read the full case study: How Crezco + Yapily optimise payments for 5,000+ businesses

Reach out to Yapily for all the support you need with open banking payments

Whether you want to become a PISP or you want an off the shelf solution for open banking payments, Yapily can help. We have extensive European coverage and we support a range of open banking payments and data services.

Rather than building an internal team or your API technology yourself, simply rely on our open banking expertise.

*Ready to get started? Reach out to us.

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