A growing trend in the digital payments sector, payment initiation is an effective solution to address the shortcomings of card payments. It provides businesses with a reliable and secure way to speed up financial transactions and improve accounting processes. But what is payment initiation, and how does it work? Follow this guide to explore the potential of this innovative service.

Payment Initiation: Definition

Payment initiation refers to the process where an individual or a business initiates a payment operation, such as a transfer, via a mobile or online API that differs from the one provided by their bank. Users don’t need the beneficiary’s IBAN to complete the transaction.

At checkout, customers can choose from various payment methods, including card payments, gift cards, online transfers, or payment initiation. In the latter case, they are redirected to an interface to finalize the payment steps.

This mechanism ensures secure, smooth, and traceable online transactions. Customers with accounts at multiple banks can also easily make payments using a single API.

How Does Payment Initiation Work?

Similar to NFC payments, payment initiation starts with the merchant creating a payment order on the API, specifying the amount and transaction reference. This step initiates the process. Merchants must select a regulated and authorized provider to facilitate account-to-account payments.

Once the payment order is created, Payment Initiation Service Providers (PISPs) or Payment Service Providers (PSPs) process the request by contacting the customer’s bank to activate the payment. Open Banking platforms enable interaction between PISPs and banks, granting payment service providers access to banking data.

After the payment initiation process begins, the buyer must validate the transaction using strong authentication (PIN code, face ID, or touch ID). Upon validation, the bank transfer is executed, and the customer cannot reverse it.

Key Point: Payment initiation can be performed via standard or instant transfers. Standard transfers take 1–3 business days, while instant transfers are almost immediate. PISPs choose the best option, with some offering only one type of transfer, while others select the most suitable one for the client.

What Are the Benefits of Payment Initiation?

Enhanced Efficiency and Transaction Speed


Unlike traditional bank transfers, where customers manually configure payments, payment initiation offers a seamless and uninterrupted process. Merchants benefit from higher conversion rates, as customers don’t need to leave the site to set up new beneficiaries or initiate transfers.

This method also allows for higher spending limits compared to card payments—up to 30 times more—making it advantageous for merchants aiming to boost revenue. Additionally, businesses save time by receiving direct bank transfers without manually reconciling each transaction, streamlining accounting workflows.

Increased Security for Users


Security is a top priority for online shoppers. Payment initiation minimizes fraud risks with ultra-secure protocols like strong customer authentication, ensuring that only authorized individuals can initiate payments.

By leveraging a single API, this payment method offers a fully digital and mobile-friendly shopping experience. Customers can complete payments online securely and efficiently, with pre-filled payment details (e.g., beneficiary IBAN, order reference, and amount), reducing the risk of errors.

Are There Any Drawbacks to Payment Initiation?

Despite its many advantages, integrating payment initiation can pose challenges. Both merchants and customers require dedicated interfaces, which can be complex for businesses to implement without proper support.

Accounting management may also become tricky if companies are unprepared to incorporate this payment method into their financial systems. A solid action plan is essential to ensure a smooth transition.

Differences Between Payment Initiation and Traditional Bank Transfers

While both processes involve transferring funds, they differ significantly. Traditional bank transfers require customers to manually enter the merchant’s banking details, which can be tedious, especially for users with multiple bank accounts.

If the customer’s bank doesn’t support instant transfers, funds can take several days (4–5 days for international transfers) to arrive. Payment initiation, however, facilitates faster transfers and eliminates the need to input banking details manually, as everything is managed via an API.

How Does Payment Initiation Ensure Transaction Security?

Payment initiation transactions are far more secure than card payments. Strong customer authentication is a critical security feature, requiring users to provide at least two of the following three factors:

  • Identification on a personal device (e.g., smartphone, tablet, or computer)
  • Confidential information, such as a PIN or password
  • Biometric identification (e.g., facial recognition or fingerprint)

This service complies with the European PSD2 directive, effective since 2018. Businesses must use approved providers like PISPs, which rely on advanced technologies for secure and reliable services.

Choosing the Right Payment Initiation Service Provider

Whether opting for contactless payment or payment initiation, selecting the right service provider is crucial. Key criteria include:

  • Solution Quality: Look for real-time transfers, immediate payment confirmations, payment reconciliation, and support for multiple transfers.
  • Innovative and Easy-to-Integrate API: Ensure the provider offers comprehensive documentation and a user-friendly interface without frequent bugs.
  • Customer Support: A responsive and available support team is essential for troubleshooting.
  • Compliance with PSD2 Standards: Verify that the provider guarantees payment confidentiality and security.

Consider costs and pricing transparency when comparing providers. Review market averages and the provider’s reputation for reliability.