The introduction of open banking in 2019, enabled by the revised Payment Services Directive (PSD2), has significantly transformed the digital payments space in Europe, with the data sharing consented by customers boosting competition in the banking industry.
In the instant payments space, in particular, the regulatory infrastructure has been driving growth in recent years, facilitating account-to-account (A2A) payments without the need to input card or personal data.
“We benefit greatly from instant processing infrastructure in Europe and now elsewhere in the world,” Lena Hackelöer, CEO at Stockholm-based instant payments provider Brite Payments, told PYMNTS in an interview.
“If you take a world map and map out where instance schemes for instant processing of bank transactions are already launched or a step to launch and it’s getting better and better — [it’s Europe].”
Also, consumers are now more inclined toward convenience and are embracing payment methods that are easy to use. That trend, accelerated by the pandemic, is the main driving force behind the uptake of open banking payments in the region, she said.
But as much as open banking has been transformative to Europe’s payments and finance sector, the infrastructure delivered by banks in the region is still far from reaching maturity.
One of the key issues Hackelöer highlighted is the lack of standard regional rules guiding banks on how to set up application programming interfaces (APIs), which in turn complicates integration for FinTechs like Brite operating across multiple countries in the fragmented EU market.
“There is still no universal standard which dictates how a bank should deliver an API. We still see discrepancies between the guidelines that are issued centrally, versus locally, by regulatory bodies,” she pointed out.
And as a business that depends on the availability of APIs to process payments, even the slightest technical issue from any bank could have a huge impact on everyday operations.
“If an API is down, that means we cannot offer customers of that particular bank [the ability] to make a payment. In the world of payments, that’s fairly dramatic, and even if from a bank point of view, it may be sort of a small technical glitch, for us it sets our whole operations team into a tailspin,” she explained.
The region is also home to the General Data Protection Regulation (GDPR), considered one of the toughest data privacy laws in the world, creating another hurdle for FinTechs to tackle due to the disparity in approach that often exists from one country to the other.
“That [law] has an impact on our business,” she said. “It’s not so much from a data privacy point of view, but often from an authentication point of view, and that means that will have an impact on the consumer experience that we’re able to offer.”
Open Banking Tailwinds
Despite the challenges faced so far, Hackelöer argued that it isn’t all doom and gloom. Even though risk and online fraud have heightened in the wake of the pandemic, the FinTech firm has been uniquely positioned to help remove some of those pain points for merchants, capitalizing on the low prevalence of fraud with instant payments due to the speed of the funds transfer.
“We’ve seen very little fraud and have had extremely low fraud losses on behalf of our merchants, so I think that that has been a way to combat the problem,” she remarked.
Today, the Swedish instant payments provider, launched in 2019 with the aim to revolutionize the industry, offers consumers the ability to make online payments directly from their bank account, and has recently launched a product to simplify that process with only one authentication step required.
“We essentially cut the time to payment for a consumer in half, down to just one authentication step, so we’re combining the authentication where we access the consumer’s account, and then the confirmation of making a payment, into one step,” she said of their Brite ‘Single Sign’ solution.
According to Hackelöer, that innovation is part of what makes them a second-generation FinTech challenger, helping to not only boost consumer convenience, but also make instant bank payments more attractive to consumers than rival card payments.
“This functionality is built on open banking technology, and as such, it fulfills strong customer authentication requirements to be able to process those payments. [This has] enabled much improvement on the consumer side,” she said.
Partnerships Key to Business Growth
Partnerships with banks and other payment firms are a critical part of the model Brite is seeking to set up, and per Hackelöer, building a collaborative approach as they engage with banks will go a long way to strengthen their consumer relationships moving forward.
Against that backdrop, the Swedish firm recently announced a new partnership with SOFORT, one of the market leaders for online bank transfers in Europe, that will enable merchants using the SOFORT platform to opt for Brite’s payment solution without any additional technical effort.
And pursuing its goal to cement its place as a second-generation payments company, Hackelöer said leaning on those partnership opportunities will be key to business growth and success.
“[It] helps us to become relevant to the consumer population and together then deliver a better product than what we could have offered individually.”
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