The PAYTECH Book

The Hidden Value of Greater Standardization for the EU-Wide FinTech Market

By Mihaela Breg

Advisor – Risk and Regulatory Compliance, SmartBill FinTech Startup (Smarter Financial Ltd)

The major EU regulation, Europe’s second Payment Services Directive (PSD2) that came into force in January 2018, is an interesting test case for promoting an open and collaborative payments ecosystem. According to the PSD2 framework, banks are required to open appropriate communication channels for third-party providers (TPPs) and share customer data upon approval from the customer.

The main benefits of the PSD2 open environment were expected to come via the application programming interface (API)-based solutions of TPPs. The API-enabled environment has indeed opened doors to stakeholders to play roles such as account information service providers (AISPs) and payment initiation service providers (PISPs), eventually improving the collaboration between incumbents and new players at local level. However, there is still an important challenge to be addressed. There are clear concerns regarding the lack of harmonization due to the absence of common global API standards and a centralized API infrastructure. This may lead to joint API infrastructures developed in silos by local banking communities.

The Journey from API to Open API and Open Banking

To make sense of this, it’s essential to understand that the newly introduced PSD2 framework is not in any way a set of technical standards, and the regulatory ...