Open Banking (OB) which was launched in January 2018 imposed a legal requirement on nine major UK banks to share their customers’ information with approved third party providers.
OB was an initiative led by the Competition and Markets Authority (CMA) to promote greater competition in the UK retail banking sector and financial services industry.
The idea behind it was to challenge the dominance of more established banks or building societies and offer a greater choice to consumers and small businesses.
The introduction of OB has led to scores of new open banking apps being offered to consumers by approved third party providers (TPP).
What does AISP and PISP mean?
To become an approved TPP, the companies behind the apps must be registered and authorised by the Financial Conduct Authority (FCA) to carry out one (or both) of the following activities:
1. Account Information Service Provider (AISP)
This approval enables consumers to gain access to a wide range of money management apps and budget planning tools. Consumers share their financial information with the AISP and can view bank current accounts, savings accounts, credit cards and loans; all from one place (dashboard).
2. Payment Initiation Service Provider (PISP)
This activity enables consumers to arrange payment from their bank account through a PISP as an alternative to using say PayPal or a VISA credit card.
What other approvals are needed?
Once a TPP has secured FCA authorisation, it must then be registered with the Open Banking Implementation Entity (OBIE), the organisation tasked with implementing the Open Banking regime.
The OBIE maintain an Open Banking Directory on which all regulated TPPs are registered. Enrolment on this directory means that banks and building societies can safely share financial data with registered TPPs using Application Programming Interfaces (APIs): these allow different software applications to ‘talk’ with each other.
How can you check if a TPP is authorised?
There are two checks that consumers can carry out before downloading Open Banking apps:
1. To confirm whether a TPP is regulated by the Financial Conduct Authority you can check the FCA Register by clicking here. You can search by the name of the company (which may be different from the app brand name), the Firm Registration Number FRN or even their postcode.
2. To confirm if a TPP has been registered with the OBIE you can check the directory by clicking here. You can search by the name of the company or by app brand name.
