A payment initiation service (PIS) allows payments to be made directly between bank accounts through open banking. If you’re a payment service provider (PSP) or financial service, a PIS can help you overcome some long-standing frustrations associated with payments, such as:

• Having to deal with multiple intermediaries when processing payments. The process of transferring money between accounts has typically involved intermediaries such as card networks and acquirers. Thanks to these various stakeholders, conventional transfers can take as long as five days to settle.

• The high costs of card payments. Each intermediary also charges a fee, with card payments taking a percentage of each transaction. Every fee can add up to a significant percentage of the sum transferred. When you’re making a lot of payments at scale, these costs add up.

• Not being able to offer a great payment experience for customers. Conventional ways of transferring money require customers to enter their banking details or visit a third-party website to make payment. This can reduce trust in your brand, and negatively impact conversions.

Compared to traditional payment infrastructure, payment initiation services offer faster, cheaper, and easier payments.

In this guide, we share everything you need to know about payment initiation services.

We’ll cover:

• How does a payment initiation service work?
• What’s the difference between a PISP and an AISP?
• What are the top use cases for PISPs?
• Why choose Yapily as a PIS provider?
• How Yapily is helping Volume eliminate hidden fees and boost online payments efficiency

Interested in finding out more about how payment initiation services can help you? Speak with an open banking expert at Yapily.

How does a payment initiation service work?

Prior to open banking, pretty much every payment was processed in one of two ways:

1. By a card scheme, such as VISA, which would charge a significant percentage on the transaction
2. By a bank transfer, where customers would need to initiate the payment themselves through their bank.

Payment initiation services provide an additional way for PSPs and their end customers to initiate payments. Any one of these parties can initiate a payment directly from bank account to bank account via open banking.

In this form of payment, a payment initiation service provider (PISP) acts as an intermediary between the banks of the payer and the recipient. The end user authorises the PISP to access their account. Then, the PISP tells the user’s bank to transfer funds directly to the recipient’s account.

This entire process happens through a secured API (an application programming interface) that secures and standardises the connection between different IT systems. Every bank creates its own API to connect with PSPs or PISPs.

While an API is a crucial piece of infrastructure in open banking, every bank creating its own interface means that there are many different APIs out there. And that’s exactly why open banking platforms like Yapily exist. We aggregate different banking APIs, to allow PSPs to connect to as many banks as possible in a single normalised solution. We aim to absorb all of the nuances of banks, to deliver a standardised experience.

While this may sound complex, all of this is happening behind the scenes. With a PIS, the end user’s experience is actually much simpler, as they’re not required to enter their card details or wait for the payment to clear.

Instead, alongside conventional payment options, end users can choose “pay by account” as a payment method, or scan a QR code. This way, they’re not taken to a third-party payment gateway and they won’t need to leave the merchant’s site, giving them a frictionless payment experience.

PISPs initiate open banking payments using instant payment rails such as Faster Payments in the UK. However, while the payment initiation is instant, settlement times may vary depending on the banking network and processing times. In the EU, Yapily customers can choose between SEPA, or SEPA Instant, where SEPA Instant provides faster initiation, though final settlement is not necessarily immediate.

What’s the difference between a PISP and an AISP?

If you read about PISPs, you’ll likely see mention of AISPs too. Here’s how they differ:

• PISP. As you’ve seen, a PISP initiates payments directly from one bank account to another. To offer this service, companies need appropriate Payments Services authorisation from the Financial Conduct Authority (FCA) in the UK as well as from a regulator in the EU. Yapily holds authorisation to provide from the Bank of Lithuania. PISPs are not AISPs by default, however many of them also hold an AISP licence.

• AISP. An AISP is an account information service provider. These have a licence from the FCA in the UK or an EU regulator to access a bank’s API to access account and transaction information. Unlike PISPs, they’re not permitted to make changes to those accounts—meaning that they can’t initiate payments.

To understand the difference a bit better, imagine a personal finance app. It may start by offering users the ability to aggregate their transactions and view their balances across multiple bank accounts. In this case, they would need to be licensed as an AISP to read personal data from different banks in real-time.

However, if it wanted to offer more functionality by allowing users to send money between accounts, it would need to get an additional licence as a PISP.

Yapily has both licences, meaning you can offer a full range of open banking services, including both data aggregation (AISP) and payment processing (PISP).

What are the top use cases for PISPs?

Many different kinds of businesses can benefit from working with a PISP, including:

• Payment service providers (PSPs). PSPs provide various payment services to merchants, allowing them to connect to banks and offer a variety of forms of payment to their customers. If you’re a PSP, you can benefit from working with a PISP such as Yapily, as we let you offer account-to-account payment options to your merchants.

• Lenders. By partnering with a PISP, lenders can streamline loan disbursements and repayments, making the process faster and more secure for both the lender and the borrower. Instead of relying on traditional methods, loans can be transferred directly into borrowers’ accounts, and repayments can be automated, reducing missed payments. Plus, it’s more cost-effective—cutting out the middlemen like card schemes means lower fees.

• Ecommerce brands. Merchants and online vendors can work with a PISP to offer an additional method of payment to their customers. Customers can benefit from more choices, as well as an opportunity for easier and faster transactions—which typically means lower rates of cart abandonment.

• Investment, crypto, or neobank and iGaming wallet top-ups. Investment platforms such as Moneyfarm, or crypto wallets such as GetCoin, can also benefit from payment initiation services. Similarly, Revolut, Yonder, and any platform that wants to offer a wider range of top-up options can use PISPs to collect payment.

• Government agencies. Government bodies use PIS to accept payment for taxes, for example. But PISPs could allow other agencies to accept payment for other services, saving the government costs and making transactions easier for the public.

Are you one of these businesses? Get in touch with an open banking expert.

Why choose Yapily as a PIS provider?

With so many different players in the payment space, it’s difficult to know which one to use. So, to close this piece, we want to explain when it makes sense to work with a provider like Yapily.

Here are three key reasons:

1. You’ll only need to work with one provider, as we cover nearly 2,000 banks and financial institutions across the UK and Europe

One of the most important factors to consider when choosing a PISP is coverage. As a PSP or merchant, you’ll want to serve as many customers as you can in all the geographies as you operate in.

That means the PISP you choose needs to have an API that integrates with as many banks as possible. Otherwise, you won’t be able to serve some customers with account-to-account payments.

Plus, having a provider with wide coverage means you can have all your open banking needs in one place. So, you don’t have to work with an additional PISP to cover particular geographies.

At Yapily, we’re proud to be one of the providers with the most extensive coverage across the UK and Europe. We connect with nearly 2,000 banks and financial institutions across Europe, in over 19 countries, including key markets such as the UK, Germany, France, and the Netherlands.

This means that you can reliably initiate payments for end-users across Europe—no matter who they bank with.

And our coverage is not just for open banking payments. We also have some of the best coverage as an AISP as well. That means that you can integrate data from banks through our account information services—rather than just initiating payments. For instance, with Yapily Validate, you can use this data to speed up KYC checks.

Moreover, we’re a third-party provider (TPP). That means we can provide AIS and PIS licences on your behalf so that you can access the Open Banking network yourself.

2. You get a scalable open banking partner that grows with your enterprise

If you’re a PSP working with many merchants across Europe, you need a PISP that can handle the massive volume that comes with payments. Often, some APIs simply don’t have the capacity to handle high volumes, meaning your transactions can slow down or fail completely.

At Yapily, we’re built with enterprises in mind. Our API can easily support large request volumes without compromising the speed of transactions or customer experience.

Getting started is easy. Throughout setup, you’ll be supported by our dedicated onboarding team and receive assistance for any issues you have.

As a PSP, you have two ways to integrate Yapily’s PISs into your merchants’ payment flow:

• You can use our developer-friendly API to integrate directly into your customer journey. This can be completely white-label and maintain the merchant’s branding throughout.

• You can implement our hosted payment pages. This way, you can get to market more quickly, with an easier setup.

In any case, our team can also help you design your user flows and payment journeys so you can optimise open banking adoption.

Finally, it’s worth being aware that Yapily is ISO-certified, FCA licensed, and EU licensed, so you and your customers can trust what we do.

3. Your brand and product take centre stage with white labelling customisation

With most PISPs, customers paying for a product are taken out of a merchant’s brand payment journey and forced to enter their details in an interface dominated by third-party logos.

For merchants, this can cause a trust problem. Customers may not understand where their sensitive details are going, and it might raise questions about the potential for fraud. For instance, if customers are shopping at an ecommerce site they recognise, why are they seeing different and unfamiliar branding for their payment?

This uncertainty has concrete impacts. It can affect conversion rates, as customers may abandon the transaction altogether.

Yapily is one of the few PISPs that lets merchants’ brands take centre stage. We’re an infrastructure provider with a white-label approach. And so, we allow merchants to host payment flows without our logo anywhere throughout the customer journey (if they have their own payment licence).

It’s one way we help you build the best experiences for your customers and reduce rates of cart abandonment—helping you to improve your bottom line. It means that your entire user experience is consistent, from your site or app right through to payment and checkout.

How Yapily is helping Volume eliminate hidden fees and boost online payment efficiency

Volume, a London-based payment service provider, is using Yapily as a PISP to transform online transactions by eliminating hidden fees.

Traditionally, merchants have faced high transaction fees accepting card payments—and these costs are often passed on to consumers. Volume’s payment solution, powered by Yapily Payments, enables direct bank-to-bank payments, bypassing card networks and intermediaries. This drastically reduces transaction costs and settlement times, with payments now processed in just 2.5 seconds.

Using open banking, Volume provides a transparent checkout experience where consumers authenticate payments via their banking app.

This not only eliminates the risk of card fraud but also allows merchants to pass on savings to consumers, increasing conversion rates by up to 250%.

It’s one way that PISPs can transform the payment landscape—by driving efficiency, reducing costs, and enhancing customer trust.

Read the full Volume case study: How Yapily + Volume are killing hidden fees.

Reduce payment processing complexity and costs with Yapily’s payment initiation service

Payment initiation service providers enable PSPs and their merchants to benefit from faster—and more affordable—payments. Plus, they can improve the experience of end users too, thus increasing conversion rates for merchants.

Want to see how PIS can work for you? Reach out to us at Yapily to hear more about how PIS can help merchants build trust, reduce costs, and increase profitability.