The age of FinTech has created yet another new business model: whilst Payment Initiation Service Providers (“PISP”) – like PayPal or Skrill – are already well established, now a new line of business has developed in the form of Account Information Service Providers (“AISP”). AISPs gather all the information from their customer’s accounts (current, savings and credit cards), consolidate and pimp them with fancy diagrams and then present all the details in one app, guaranteeing customers a real-time update of their financial status.
Using search terms such as “money management app” or “spending tracker apps” the internet will guide users to a number of AISPs. The advantage of the apps for the customer lies in a simplified overview of their various accounts. AISPs promise easy tracking of spending, support with personal budgets to reach financial goals and wiser financial decisions in general. It is often free to sign up, as AISPs make their money from the data. They take advantage of their ability to track the customer’s behaviour and use that knowledge to tailor individual offers. They make that part of their services – not only to their customers but also to third parties that might want to use this distribution channel.
There are already AISPs active in the market, but come 2018 they will fall within the scope of EU regulation. They will now have to apply for registration. At the same time, the AISPs’ legal position vis-à-vis more traditional financial institutions that might want to limit the third party access to their data and systems is going to be strengthened. Online access to account information will be made the subject of legislation. All providers will have to communicate in a safe way. Banks will be required to treat a request by an AISP as if it were a direct request from the customer and must not discriminate the AISP.
Regulation and access will both be subject to the Payment Services Directive 2 (EU/2015/2366; “PSD 2”). Member states are required to transpose PSD 2 into national law by 13 January 2018. In the UK PSD 2 is implemented through the Payment Services Regulations 2017, while in Germany the changes are implemented into the existing Payment Services Supervision Act (Gesetz über die Beaufsichtigung von Zahlungsdiensten = ZAG).
How does this affect insurance? Well, the premium collection process can impart quite a lot of information. It is not just the name of the recipient (i.e. the insurer) that is revealed; the payment reference usually gives scope to draw conclusions as to the line of business and the type of product and therewith allows an educated guess at the scope of cover and sometimes the limits. All of it can be captured in algorithms. An appropriate evaluation of all this data offers insurers the opportunity to develop competing offers and to recommend switching to them.