Open banking is one of the most pronounced words in the fintech sector. In 2020 we should see concrete results after the entry into force of PSD2 on 14 September 2019 and the many promises made for of following months. Marco Scaccia, Business Developer at Fabrick, held a mentorship session on this, to the startups of our community, to explain what open banking can mean for a fintech with examples and case histories.
Why is open banking considered “revolutionary”?
Because it offers an opportunity to all European Financial Institutions at a very special time for traditional banking players. Industry players know that, for example, margins from transactional services are increasingly shrinking. This can put many banks, that have relied on these revenue lines for decades, into difficulty. These “commoditization” dynamics are also occurring on other fronts. Open banking allows banks to “open up”. Indeed, thanks to PSD2, it obliges them to do so. This offers many opportunities for creating new value-added services and shifting investments to the construction of new use cases.
What concrete opportunities do you offer fintech operating in Italy?
From my point of view, fintechs should not necessarily be perceived as a competitor of banks. On the contrary, they are very often the essential partners of Financial Institutions that want to take advantage of the opportunities provided by PSD2 and open banking in general. In this context, Fabrick puts itself forward as a reference platform connecting the ideas and technological skills of fintech with the needs and investment capacity of incumbents. This is the first concrete opportunity for Fintech and, at Fabrick, we are seeing these synergies more and more frequently.
The second opportunity is definitely PSD2. The two major innovations it introduces are AISP and PISP.
- AISP (Account Information Service Provider) are third party providers (TPP) accredited by the regulator of the reference country (Bank of Italy in the Italian case) that can perform multi-account information operations, potentially within all European payment accounts. AISPs can also analyze the data obtained to gain insights and develop value-added functionalities to propose to their customers.
- PISPs (payment initiation service provider) are TPP that, on the other hand, initialize payments within accounts. PISPs must also have a specific license in order to operate. It is clear that both AISPs and PISPs have the possibility to rethink traditional banking services and to create new ones.
Two tips you would give to fintech to make the most of things
The first piece of advice is to think about your business strategy with, amongst other things, a view to a partnership with banks and trying to understand how the technical skills developed can be complementary with traditional banking services. For open banking to be truly successful, the relationship between fintech and incumbent will be fundamental.
The second one, with reference to the opportunities dictated by PSD2, is to choose a partner that is able to simplify the activities necessary to operate as AISP and PISP. An example could be by adopting a model that simplifies the regulatory and compliance requirements of fintech. This would allow them to focus on their core business. The PSD2 solutions provided by Fabrick are able to provide fintech and banks with the technology infrastructure and simplify compliance aspects.
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