Payment Initiation
Payment initiation is the process by which an authorised third party (typically a payment service provider) submits a request to a customer's bank to transfer funds from the customer's account to a merchant. Unlike card payments (where the card network intermediates), payment initiation happens directly between the payer's bank and the recipient, via APIs governed by regulations like PSD2 and PSD2.
The mechanics work as follows: a property management company integrates with a payment initiation service; when a tenant authorises a payment, the payment provider sends an instruction to the tenant's bank; the bank deducts the amount and transfers it directly to the property company's account; the property company receives instant confirmation. The entire process takes seconds.
For real estate, payment initiation has three major advantages. First, cost: unlike card payments (1.5–3% fee), payment initiation via open banking costs a flat €0.10–0.50 per transaction regardless of amount. Second, speed: SEPA Instant Credit Transfer (mandatory for eurozone banks since October 2025) settles in under ten seconds, 24/7/365. Third, certainty: once a payment is initiated and confirmed, it cannot be reversed or disputed like a card chargeback.
The customer experience is straightforward: the tenant receives a payment request, approves it through their banking app using their biometric or PIN authentication, and the payment is confirmed. No card details need to be stored; no recurring standing orders need to be set up.
From a regulatory perspective, payment initiation service providers (PISPs) are governed by PSD2, but the actual funds never touch the PISP's account. The money goes directly from payer to payee, which simplifies compliance and removes counterparty risk.