PSD2 is officially here. But there are no common technological standards across European borders, and local governments interpret the directive differently. Nevertheless, the directive has already pushed the banking world in a more open direction, startups say.

The PSD2 Directive was adopted at the end of 2015 to increase competition and create more innovation in European banking. The directive allows customers of the bank to allow third parties – such as fintech startups – to manage payments or retrieve personal information just as customers can do from the online bank.

By the end of the year, the directive was implemented throughout most of Europe, and according to Finnish fintech startup, Scrooge, it has already changed the attitude among the European banks’. Today, they are more willing to cooperate with startups than they were only months ago.

”The financial institutions have the right mindset today. The banks are more open and willing to discuss and test new ideas. And this is what we need now. It was not unusual that it would take more than six months to initiate a dialogue with the right person in a large bank. Today, it happens within days, and they take startups very seriously,” Janne Haila, CCO at Scrooge, CEO at Scrooge says.

Ernit:”PSD2 will be standardised.”

The Danish startup Ernit have worked five years to build a digital piggy bank based on IoT-technology that connects to an application and a bank account. They spent the entire last Fall in 2017 to ensure the most difficult part: getting the solution integrated on a platform accessible for the Danish bank Spar Nord. They went live earlier in 2018.

Søren Nielsen CEO og medstifter af Ernit
Søren Nielsen CEO og medstifter af Ernit

“Integration with large companies is difficult. Many told us it would, but we were surprised how difficult it was. PSD2 has brought no clearer standards. PSD2 has given startups and banks a framework to work within, but the individual standards for integration are in the hands of the banks. We had not had any standards to refer to before EU presented the directive, “says Søren Nielsen, CEO and co-founder of Ernit.

The integration makes possible for Ernit to access and view the account balance associated with the savings price in real time. They can transfer from one account to another directly to the piggy bank account. And not least, they can create a new account directly from the Ernit app.

PSD2 is a transnational directive that applies across borders in European countries, but that does not mean that Ernt’s integration with Spar Nord can be transferred directly to other banks.

”There are more than 16 different banks in our pipeline, and many of those are not close to offering the same integration as Spar Nord. We are very grateful to have access to and manage the data that the integration allows us to,”  Søren Nielsen says.

Ernit has learned that there are similar opportunities when working with other Danish banks, but if they want to cross the borders and work with a foreign bank, Ernit have to apply to new standards.

Different approaches for country to country

With the use of an app the Finnish fintech startup Scrooge has made it easy for friends to split a bill.

When Scrooge wanted to offer their users to pay the share directly from the app they arrived at a dead end. Just like many other startups. They weren’t interested in being licensed as a bank, so they worked together with banks to create a solution normally used for P2P-transfers. But PSD2 has changed the mindset of the banks.

”The former PSD did not mention P2P-payments in the directive. But now that landscape has changed with PSD2. The banks are allowing the startups to use their data with the API’s,” Samu Saastamoinen, CEO at Scrooge says.

It’s not only because of the new directive that the banks are willing to cooperate. To showcase this Sanu Saastamoinen refers that Scrooge app is now powered by the Swedish P2P-payment.

The implementation of PSD2 has been postponed until May later this year in Sweden. Although, Swish has opened its API so that third parties can access the payment solution. Swish is owned by nine large banks in Sweden and has more than six million users. These events paved the way for Scrooge. As a result, Scrooge is now live with P2P-payments in the Swedish market.

“We are not looking to compete with P2P-payments but work together with them. We use their API to initiate payments. Especially in Sweden, where more banks are supporting Swish, they are very open to trying new things, “said Samu Saastamoinen, CEO of Scrooge.

However, the solution from Sweden cannot be transferred directly to Finland and Norway, where Scrooge also works to implement payments directly in the app.

“The local solutions are technically the same as Swish. In Finland, you have a thorough authorisation with an account – so without a credit card. But here we make some form of integration with each of the three banks involved in the Finnish P2P solution Siirto, “explains Samu Saastamoinen, CEO of Scrooge.

Founderteam Janne Haila, CCO and CEO Samu Saastamoinen, Scrooge

Aggregated future across Europe

Despite the young directive Ernit experiences a big difference when working with the banks to scale the piggy bank app to new markets outside of Denmark.

”Usually, the banks will act in two ways. Some see startups as an opportunity to offer the customers a new product. While other banks perceive us a contester,” Søren Nielsen says.

He is confident that the new directive won’t change which banks are willing to cooperate and which ones are not.

”Spar Nord has built an open platform to attract partners, and the platform will expand as the need arises. However, the minimum requirements for PSD2 are formulated so the banks can differentiate the APIs they provide. They can choose to provide some startups with less useful APIs and offer more attractive solutions to their partners. PSD2 is a start to standardisation, but it takes time, ” Søren Nielsen says.

Also, the European directive is interpreted differently by local authorities. And that means that there is a big difference in how much banks are forced to open up in individual countries.

“In Finland, they are very conservative. If they are uncertain, they will forbid it. For the banks to forbid the use of APIs is a safe choice while other authorities are more open,” Samu Saastamoinen says, adding that it might have something to do with the national mindset.

Therefore, he hopes that there will be an authority or company that specialises in integrating banks’ APIs across national borders.

“We are looking for a partner who aggregates within the EU. I think there is a market in managing APIs for all markets, and you can buy a comprehensive solution with them. At the moment it is very unclear how it should take place, but when the market stabilises, and the directive becomes effective, we are confident that things will happen.”