Getting PSD2 Ready: Calling FinTech Startups

Reimagining banking and payments with beacons

Online banking, mobile banking, round-the-clock banking… Banking sure has changed over the last few years. Regular accounts and physical bank branches are not enough anymore — what customers want is their bank’s mobile app, contactless payments, expense tracking, peer-to-peer payment systems, e-receipts…
On top of that, the upcoming years are going to be even more game-changing for banking. At least from January 2018 in Europe, where the new
Payment Services Directive (PSD2) is going to reshape the way banks operate.

Jargon Buster: PSD2 in plain English

So what does implementing the new directive mean for the market?
All those PISPs, AISPs or TPPs seem tricky, but let’s try to break down
the two most significant implications of PSD2.

First of all, PSD2 forces banks to provide third parties (TPPs) with account access and information through APIs. TPPs will be able to aggregate bank data in one place (acting as Account Information Service Providers, AISPs for short) or initiate payments on behalf of the customers, obviously once they have granted their permission to do so (acting as Payment Initiation Service Providers, PISPs for short).

Second of all, PSD2 requires service providers to implement multi-factor strong customer authentication to improve payment security.
The authentication will have to combine two out of three elements: knowledge (something the customer knows, e.g. a password), possession (something the customer possesses, e.g. a token), or inherence (something unique the customer has, e.g. fingerprints).

Let’s focus mostly on the first implication and how it democratizes banking.

Banking democratized

PSD2 is certainly going to be a new chapter in banking and payments.
The changing market calls for innovation. Actually, as early as 1994, Bill Gates said provocatively:

“banking is necessary, banks are not”

Under PSD2, this statement seems to take on a new meaning. What we understand by banking now is logging into your bank account and performing operations. But with PSD2 entering into force, any service provider can basically act as a bank. For example, with our permission, any mobile app will be able to access our bank account information and initiate payments
on our behalf.

So, logging into one’s bank account and transferring money? No longer needed. Payments will be made between mobile apps, with just one tap.

The drawback for new market actors? There are plenty of money transfer mobile apps or other banking services available. What new players simply must do is offer great value for clients to use the service provided by them. Just like Danske Bank did: they created MobilePay, a mobile app making money transfers as simple as sending a text message. The curious thing is around 70% of MobilePay users are customers of other banks than Danske Bank, the app’s creator.​ This is how you do it.

Banks, move over! It’s FinTech time

Now, since the revised law democratizes the financial market so much,
is PSD2 bad news for banks? Are they going to lose their monopoly?
Or is the new regulation actually pushing banking forward?

Yes, PSD2 might seem for banks like stepping out of their comfort zone,
but keeping up with the pace increases competitiveness and banks could actually benefit from the new regulation.

Indeed, PSD2 opens up new opportunities for both traditional and non-traditional players. No wonder the market saw a FinTech startups boom
after PSD2’s announcement.

We witnessed this boom at The Heart Warsaw, on June 20, where PSD2 Matching Day took place. The 10 best scaleups came to Warsaw to pitch their solutions.

Netizens team at The Heart, soaking up FinTech knowledge

To give you a taste of the event, here’s a selection of the startups pitching their ideas for monetizing PSD2.

1. Auka, a Norwegian startup enabling banks to launch their own mobile payment solutions.

2. Braintri, a Polish startup that created Jiffee, a BLE-based mobile payment system that works with any phone.

3. Personetics, a startup that specializes in cognitive banking: they enable banks to anticipate customers’ banking needs through artificial intelligence.

4. Token helps banks meet the PSD2 compliance requirements and generate new income.

“The amended directive is going to change and disrupt so many markets”, claims Brian Linthicum, Director of Sales Operations at Token.

The abundance of FinTech companies is striking. This doesn’t come as a surprise though: the report “FinTech in Poland” shows that cooperating with FinTech startups is the best way to for banks to adapt to the new law and to meet the regulatory compliance standards.

So, teaming up with FinTech startups seems like a great idea for banks.
FinTech companies know how to help traditional players seize the opportunity and monetize PSD2. The good old “if you can’t beat them, join them” seems to be the best kind of approach under PSD2.

Power EON: your business idea, EON Beacon-enabled

Speaking of FinTech startups, the introduction of PSD2 is the perfect moment to announce something we’ve been up to for months: we are launching our Power EON program! At Netizens, we know how to help FinTech startups take even more advantage of PSD2 using beacons.
The financial sector is perfect for our mesh beacons: they are great for beacon-based mobile proximity payments.

Now: how do beacon payments work? All we need is a POS system connected
to a beacon. The client approaches the beacon and gets identified,
the transaction is then authorized and the payment is completed via an app.
It literally takes seconds. When it comes to security, the connection is encrypted and no sensitive data is either stored or exchanged via beacons.

For us, the potential markets to explore and implement beacon payments in are: food-related businesses (restaurants, food delivery, vegetable stands) and ticketing (zoos, museums, ski resorts, toll roads).

Why is food business so great for beacon-based payments? For instance, delivery guys don’t always carry payment terminals around and we don’t always have cash on us. But our phone? Always.

Or imagine just walking into a restaurant, ordering a meal, eating it, and then just leaving, without even reaching for your wallet or taking your phone out
of your pocket. Seamless paying experience, just like that.

Or picture arriving at a zoo and simply passing through the entrance with your phone in your pocket, doing simply nothing, seeing hundreds of people waiting in line to buy tickets the old-fashioned way.

But why choose beacons over any other payment solutions?
For example because most contactless payments are NFC-based, and iPhones simply don’t support it. Beacons, in turn, work with all operating systems. Another advantage of choosing beacons is the possibility to use them as
a marketing opportunity and provide your clients with, for example,
a personalized, contextual discount.

Now, getting back to our Power EON program: we want to offer beacons
to startups who can’t afford to buy expensive devices on their own: on a subscription based model that takes the burden of technical responsibility
off you. But providing technical support and maintenance is not the only thing we take care of: we also offer our extensive know-how and experience.
All in all, our goal is to build a FinTech beacon-powered community around Netizens.

Remember the queue-free, wait-free zoos, effortless payments? That’s a really tempting vision of the future, isn't it? Made possible thanks to beacons. Become a part of it. FinTech startups, we are here for you! Come to us, bring your business idea, let us do the (beacon-related) rest.
Netizens & FinTech is waiting!