Europe is seeking to drive innovation in financial services, while at the same time it is strongly committed to safeguarding the safety of the financial market infrastructure. The EU is actively looking to embrace the digital transformation occurring in our society and deliver efficient and meaningful services to participants in its economy.
In the context of these developments, there is a certain demand for instant payment solutions by end users. The financial industry is expected to deliver these to support innovation and stay relevant in the global race taking place in this field.
The Revised Payment Services Directive (PSD2)
For an integrated financial market to flourish, the legislators and regulators must provide a clear legal framework so that innovative payment services can be developed for the European market.
The revised Payment Services Directive (PSD2), which must be implemented by early 2018, is one of these frameworks. It aims to increase pan-European competition and participation in the payments industry, including by non-banks.
The directive is designed to improve consumer protection and increase competition and innovation in payments. To attain its goals, the directive seeks to introduce stricter security requirements for the initiation and processing of electronic payments and the protection of customers’ financial data.
Liberating APIs
A London startup has built a developer platform to make it easy for Fintech companies to access bank APIs and leverage the soon-to-be-applied PSD2. Its name is TrueLayer, and it has raised $3 mln in Series A funding.
Anthemis Group and Connect Ventures were the main participants in this round and the startup plans on using the collected funds to expand its team and increase coverage of supported banks. Its roadmap indicates plans to have a significant portfolio of supported banks before launching an alpha version in the second half of 2017.
“We believe that PSD2 will be a once in a lifetime opportunity for startups to displace incumbent banks and financial service providers,” says the startup’s co-founder Francesco Simoneschi. “We want to provide developers with a simple, secure and universal API to access the bank infrastructure and enable the next wave of financial services.”
As of today, TrueLayer, which is in beta version, already supports many financial processes. Account verification, KYC processes, credit scoring and risk assessment are all available on its developer platform for UK users. 2018 will be a decisive year for TrueLayer as the startup is seeking to add more countries to its list, as well as implement a full PSD2 support.
The startup, if it obtains the PSD2-related licenses to operate in the UK and abroad, has the potential of becoming “the regulatory as well as technical gateway for fintech startups and other kinds of businesses to go in search of PSD2 gold.”
Blockchain and PSD2
Within the new world of possibilities offered by PSD2 and TrueLayer, Blockchain could find a catalyst place. It is a technology with the ability to boost the performance and efficiency of financial institutions, which makes it particularly fit for using bank APIs via TrueLayer.
By harnessing its powers, both startups and banks can offer improved products and services to their end users. Payment systems powered by Blockchain enable real-time transaction reconciliation, which could dramatically reduce operating costs. Therefore, banks can focus on enhanced services or become the infrastructure third parties need to create innovative and tailor-made services.