Technical Service Provider (TSP)

In the context of open banking, a Technical Service Provider (TSP) plays a crucial role by collaborating with regulated financial institutions to offer technical solutions and services. TSPs facilitate the secure and efficient exchange of financial data between banks and third-party providers (TPPs), enabling the myriad functionalities envisioned by open banking frameworks.

The role of TSPs is particularly significant under regulations such as the PSD2 (Revised Payment Services Directive) in the European Union. PSD2 has created a regulatory framework that encourages innovation, enhances security, and promotes competition in the financial services industry. TSPs are distinct from Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs) in that they do not directly handle payments or access consumer banking information. Instead, TSPs provide the infrastructure, security, and connectivity solutions that enable these services.

Key functions of TSPs include:

TSPs are instrumental in implementing the technical requirements of PSD2, which mandates strong customer authentication and secure communication channels. By providing these essential services, TSPs help banks and other financial institutions comply with regulatory requirements while fostering an environment where innovative financial products can thrive. This role is integral to the success of open banking, ensuring that it not only meets the rigorous demands of financial regulation but also delivers the benefits of increased transparency, choice, and improved customer experience in the financial sector.