What is Payment Initiation Services (PIS)?

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What is Payment Initiation Services (PIS)?

According to Michelle Phan: “The beauty of the Internet is there’s a niche market for everything, and if you can focus on it, you can build a sustainable and viable business of it.”

A niche that has taken great advantage of the beauty of the internet is the payment system. Before now carrying out online transactions for transfers or purchases was solely a bank affair, but with the advancement of technology, payment initiation services (PIS) take online transactions to a different level.

We would focus on what PIS is, how it works, and how they benefit us. Let’s get started.

What is PIS?

Payment initiation service is a form of open banking whereby you give consent to a third-party payment initiation provider to link to your bank account and initiate payment on your behalf. These services are rendered by Payment inflation service providers (PISP).

With PIS your days of scampering for your credit card to type in card numbers are over and so are your days of opening mobile banking apps to commence payment.

It’s important to note that, unlike banks that manage their customers’ money, PIS does not receive customers’ money; they only trigger transactions.

 Also, your private data is not open and no PISP can initiate a transaction without customer consent and approval.

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How does PIS work?

To understand how PIS works, let’s imagine a lady, Lucy, who is about to pay for the dress she selected on an online store. This is what Lucy would do, she has to grant the third-party initiation payment provider access to her banking details.

Then the PISP would request her information, after that she chooses her bank, enter her online banking credentials to complete the process

Then her bank validates the credential provided, authorizes the payment request, and requests for a digital signature. Usually, this digital signature is a Strong Customer Authentication (SCA), once this authentication is carried out and approved, the transaction occurs and the payment is made.

Amazing! The creation of PIS makes it possible to make transactions without searching for your card.

You might wonder, what are the advantages of PIS? We’ll discuss a few.

Advantages of PIS

With every innovation, comes a solution to an existing problem or a way to make life easier. With PIS the same principle applies, let’s take a look at some of the advantages of PIS:

  • Wide range of options: The introduction of PIS gives customers a wide range of payment options to choose from. PIS is more than just an option, it’s a convenient option. With PIS customers can successfully make payments without the hassle of making bank transfers or opening multiple bank apps.
  • Increased conversion rates: For businesses that integrate PIS, it simply means better conversion rates. As they would see a decline in cart abandonment rates due to seamless payment process. Their customers are more satisfied and they keep them within their ecosystem from the start of the transaction to the end.
  • Cost efficiency: Establishing partnerships with card acquirers and other payment methods can be quite expensive for business owners, unlike partnerships with PISPs which are cheaper and more efficient.
  • Chargebacks: With PIS there are no chargebacks since transactions are made from account to account, no payment cards are used in the transactions. Better yet, the use of two-step authentication eliminates the mistake of making accidental payments.
  • Fast service: PIS is instant, so payment is made swiftly. As with other new payment innovations, PIS saves time and energy.

The Pros of PIS make it a great addition to the finance system, but as with every “Pro “, there is an accompanying “Con”. So, that being said, what are the cons of PIS?

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Disadvantages of PIS

Some of the disadvantages of PIS include:

  • User adoption: As with every new invention, it takes a while before users get comfortable around it and want to adopt it. So, with PIS customers might be sceptical to accept it, especially older ones.
  • Security risks: PIS has strong safety protocols and precautions, but of course new technologies have security risks like breaches, theft and the likes but the IPS developers are aware of this and are already trying to introduce risk management measures.

Well, the Cons of the PIS thankfully,  do not outweigh the Pros, which makes it a good innovation. What should you look out for when you choose a Payment Initiation Service Provider? Let’s take a look.

Read: Future of Online Banking: What Can We Expect in The Next 10 Years

What should you consider when you choose a Payment Initiation Service Provider (PISP)?

When it comes to choosing a Payment Initiation Service Provider, making a choice is based on location. You might wonder why?  Well, if you are a business owner, and the location of your business is not under the geographical location that PISPs cover then it won’t work for you and your customers don’t get to experience it. 

As for cost and time, setting up Payment Initiation Services is quite easy and seamless. You can always contact the providers for information on their products.

Finally, it’s always a welcome development to use innovations that make the business place better, create better customer experiences, and overall grow the business. So, find out the PISPs available in your location and grow your business.

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