The 14th of September was the date that banking changed forever. The long awaited, perhaps even feared, deadline for PSD2 arrived, making it mandatory for banks to open up their infrastructure to Third Party Payment providers through APIs. Will the day go down in history books as a pivotal moment?
Not really. While many banks have launched developer portals, only half of them indicate that their production APIs are ready. The remaining banks are only providing a sandbox environment with sample data. Access to the sandbox environment is there to ensure that developers can adapt their implementation to fit the bank’s API specifications and test full end-to-end user experience flows. Interestingly, a significant number of banks require a TPP1 license before allowing developers to access the sandbox-testing environment, thus prohibiting them from testing potential use-cases before going through the exercise of obtaining a PSD2 license. So how is adoption of PSD2 faring? (source: Innopay)
Adoption is going well in the UK
The number of licenses issued is still low. With little more than 170 licensed TPPs in Europe ( over half of which are in the UK), actual usage is limited. Out of those licenses, only about 10% are issued to parties not previously active in financial services.In the UK, it took 9 months for Account Information APIs to stabilize and AIS services to pick up, and up to 15 months for Payment Initiation services to get rolling. Last month, the UK processed over 100 million API calls, so volume is definitely picking up across the Channel.
Distribution was one of the factors which was hampering adoption of Open Banking in the UK, as fintechs underestimated the marketing costs of launching a new financial service. Gaining the public’s trust was a second hurdle which fintech players needed to overcome. Finding a sustainable business model was the third. Unlike mainland Europe, the UK did not appear to struggle with a lack of standards (or the existence of too many) They even went so far as to define the user experience to a large degree, which facilitated adoption.
What’s happening in the mainland?
The APIs currently in production in Europe are still generally poor in terms of quality (i.e. speed, availability, ...) and the use of the SCA redirect does not lead to an inherently good user experience, especially when this is badly implemented by banks. The silver lining is that this will be solved over time, as the UK has proved. In the UK, they are implementing and promoting Open Banking in three stages:
- Eco-system creation,
- Followed by user adoption.
The next steps are to go beyond Payments towards Open Finance (mortgages, loans, savings, investment, insurance) and even beyond this (encompassing energy and transportation). We see these next steps already being implemented in Australia. So although it’s taking some time for PSD2 to be in full effect, the 14th of September will go down as a pivotal moment in history. We just have to wait 15 months to realize it.
Need help connecting to the banks and getting ahead of the competition?
Visma Connect helps companies reap the benefits of PSD2 XS2A services. We are a Technical Service Provider (TSP) and offer a unified and standard API for Payment Initiation and Account Information services. We deliver these services on our payments SaaS platform.
Our team has vast experience and knowledge of business critical transaction processing and secure data integrations between different organizations. Visma Connect is the only NL SWIFT Service Bureau and successfully operates the Dutch Customs Single Window, processing over 300 million business-critical messages annually.
1: TPP is Third Party Provider, PSD2 License holding party, that is allowed to offer account imformation services and payment initiation services.