The Second Payment Services Directive (EU 2015/2366) is one of the world’s best-known financial directives. It establishes the rules, under which, payment and financial service providers in the EU have to operate. And since the EU is the world’s largest open banking market, it’s no surprise that this document is so important.
In this article, we’re going to shine a light on PSD2 regulations and their relevance today. In addition, we’ll also focus on AISP – one of the essential factors that allow open banking to flourish. Let’s begin!
AISP & PSD2 Explained
First up – The Second Payment Services Directive. The introduction of it saw many of the requirements of digital payment service providers, change. Most affected were the banks. This new directive allowed an entirely new business sector – open banking, to emerge.
PSD tries to provide the means for more payment transactions to be transparent, secure, and easy to authenticate. The 2nd Payment Service Directive covers a plethora of regulatory changes, including third-party providers and their access to banking data, responsibility and security of data handling as well as fees and surcharges.
AISP in PSD2 context is an enterprise called Account Information Service Provider. These authorized providers are enabled to retrieve information (within the boundaries of GDPR and PSD2) about the account holder and their account history.
This information is useful to many providers of financial services and software tools. They can help users manage their finance betters or help find the best deal or more personalized service as well as improve day-to-day lives, even.
So, to put it plainly – the PSD2 is the main regulation that allows AISP businesses to provide services and collect information about personal or business accounts with the consent of the user.
AISP Business Model & Regulation
Account Information Service Providers or AISPs are licensed and authorized to collect bank account information. Most tools allow the collection (as outlined in the directives) of:
- Account holder name
- IBAN number of the account
- Transaction history (amounts, dates, and recipients) of over 24 months
- Compounded (consolidated) information for all accounts, opened in the bank
AISPs work in a regulated manner and in order to get licensed, have to meet strict requirements and overcome rigorous checks.
An AISP connects the bank, the user, and the third party (the AISP) with one another. It all happens digitally.
- The user requests a financial service and expresses consent
- An information request is sent via a side interface to the AISP
- The AISP consolidates the information and sends a request to the ASPSP (bank)
- The user is redirected to a dedicated interface, hosted by the bank
- The user authenticates using SCA (2 out of 3 factors)
- The request is authorized and the user is redirected back whilst the information is transferred
Regulators of AISPs are appointed by the ECB and the EBA. They are different from country to country but are responsible for the licensing and authorization of AISPs.
How AISP Technology is Implemented?
Account Information Service Providers have been able to improve service and product quality in many areas. AISP PSD2 has been implemented throughout a broad range of businesses to ensure higher value and worth in exchange for the consent of data collection.
Account Information technology is first thought to be applicable to personal finance, expense management, and similar areas. And yes, it is implemented in all of them.
For example, in the context of personal finance and expense management, by accessing your spending information in real-time and gathering info on past transactions, tools, with the help of AISP, can find you opportunities to save more money and to better manage your resources.
Furthermore, you can see increasing uses in the fields of consumer loans as well as mortgages, even. These processes require thorough creditworthiness evaluation and income verification. In the past, consumers had to gather paper documents and get them signed.
That took a very long time and with the whole world moving towards digitization, it’s about time that lending progressed too. Thanks to the implementation of AISP PSD2, customers in specific markets can now provide the necessary income verification with just a few clicks.
They are also present throughout other areas where there is a need for personal or financial verification. For example, a more unique idea is to implement AISPs in online casinos which have been done for a few years now.
In addition, by combining the AISP technology with AI tools and machine learning, some service providers can instantly analyze anyone’s financial health and offer the best insurance, savings plans as well as other services that might be relevant.