Europe is often talked about as one, homogenous, entity. But which countries are home to the most compelling commercial launches and how are EU-wide regulatory changes influencing development at country level?
Ellie Duncan investigates…
Europe is often referred to as one entity that is presumed to be working towards Open Banking adoption at a consistent pace, in line with EU-wide legislation. But this ignores the fact that individual countries have their own rates of adoption and different ideas.
It is beneficial for European countries to be unified from a regulatory standpoint on Open Banking. But it is also important that legislation does not stifle innovation at country level. Some of the most interesting developments are now around wider Open Banking initiatives that are not solely regulation-driven, says Brian Jamieson, chief executive of UK fintech Centtrip.
He says other developments in Europe are more market-driven, serving to drive and promote collaboration across industries to ensure effective and secure access to data.
“It is in this area that we are seeing exciting developments from non-bank companies. Companies such as [UK-based] Bud are delivering excellent platforms designed specifically to serve the Open Banking initiative and providing easier access to the network for companies not yet capable of integrating directly with banks.”
“In a similar vein, [UK-based] Codat has created a hub connecting accounting software and bank accounts. Our own technology is focused on providing an intelligent treasury solution to businesses, utilising the Open Banking network to connect customers to a host of transactional, descriptive and predictive analytic services and providers.”
Nordigen’s co-founder and chief executive, Rolands Mesters, flags two important developments when it comes to Open Banking in Europe.
“The first is a major optimisation in the way people understand their own financial health,” he says. “Myriad fintech apps have sprouted, including personal finance management solutions such as Spendee [founded in the Czech Republic], which help individuals be savvy with their money.”
But he says: “The real game changer is the new approach banks and lenders are taking to assessing the creditworthiness of a loan applicant. Rather than relying on credit bureaus, which have an incomplete picture of an applicant’s financial health, European banks now have access to account transaction data at scale.”
This means there are far more robust and fair assessment processes now in place, increasing the efficiency of loan assessments and improving financial inclusion.
James Buckley, vice president and director for Europe at digital banking application provider Infosys Finacle, says the most exciting examples of Open Banking developments in Europe are many and widespread. These range from “the standard personal finance management offerings of companies like Emma and Yolt, which take advantage of the digital nature of Open Banking to allow customers to consolidate all their financial digital data, to the more ‘bricks and mortar approach’ of [Swiss-based] Sonect, which uses Open Banking APIs to convert retail premises into ATMs”.
Emma, which launched in January 2018, was established in London by chief executive and co-founder Edoardo Moreni. Yolt launched in the UK in June 2017 and has since expanded into Italy and France, having clocked up 500,000 registered users within 18 months. It is a venture of ING Bank NV, the Dutch multi-national banking and financial services company.
“One of the more interesting uses of Open Banking is the ‘Open Banking for Good’ approach of Nationwide Building Society,” Buckley adds, who says it is not just looking at Open Banking as a way of creating monetary value, but also as a way to create value for society.
“This has led them to back apps like Toucan – a money and mental health app that alerts a nominated trusted ally if the going is getting tough – or Openwrks, an app that lets people create accurate income and expenditure statements in minutes.”
Tim Hooley, chief technologist, EMEA FSI at open source technology firm Red Hat, cites yet another example of the best Europe has to offer, this time in Spain.
“On a banking level, Spanish banking group BBVA has adapted quickly to Open Banking developments by building a single, global platform that is fully automated, self-served, and data-centric,” he says. “It has also made eight of its APIs commercially available, enabling companies, start-ups, and developers to build new products and services by accessing and integrating customers’ banking data – with their permission – into their applications.”
At the frontier
Hooley also mentions Yolt as having “truly embraced the Open Banking vision”.
Yolt’s chief business officer, Leon Muis, says while there have been some innovative Open Banking launches in Europe, none have been quite as exciting as those that have come out of the UK. He believes the UK is at the forefront of Open Banking – not just in Europe, but globally.
“I think the great thing is that the second payment services directive (PSD2) is European legislation and the UK is still part of Europe, but under the Competition and Markets Authority [Open Banking] order the UK went ahead of its time,” he says.
The UK has also benefitted from having a less complex regulatory system than somewhere like the US, he says.
“As a result, the UK has gained good recognition as a leader in Open Banking, which is why we see fintech companies from elsewhere launching their products in the UK first, as they find the regulatory space easier to navigate,” he says, adding that companies which have done this include Silicon Valley-based Open Banking platform provider Token.io and Amsterdam-based Yolt, both of which are “running on UK-based cloud infrastructure”.
Some have found that the fragmented market in Europe is more of a hindrance than a help though, and that regulation has only exacerbated this.
“The revised Payment Service Directive (PSD2) is setting the direction for each country. However, it hasn’t been effective in setting the pace globally,” says Hooley.
He cites the results of a survey by Swedish Open Banking platform Tink of 442 European banks, which revealed that 41 per cent of European banks failed to comply with the March 2019 PSD2 deadline, requiring them to provide a testing environment for third-party providers. Meanwhile, in contrast, UK regulators “have been proactively embracing regulatory changes”.
Vivek Awasthi, chief information officer at Currencies Direct, says some countries in Europe, such as the UK, Sweden and the Netherlands, are pioneering in the payment space. But he notes that others are hindered by an historical misunderstanding of the scale of the changes required in banking applications and infrastructure.
“France and Belgium have made less progress in adopting Open Banking than expected, and Italy is adopting a more conservative ‘wait-and-see’ approach. What is evident is how a pan-regional regulation such as PSD2 is read differently in markets with different digital dynamics,” he adds.
According to Buckley, EU-wide regulatory changes, such as GDPR and PSD2, are creating a distinctively European market in Open Banking.
“This is forcing individual countries to make a choice between trying to carve out a distinctly national offering – as is happening in the UK where fast-moving challenger banks are taking a lead – or working in a pan-European context, which might mean moving slower, but may ultimately mean a larger market,” Buckley says.
He cites the Berlin Group, a pan-European payments interoperability standards and harmonisation initiative,as an example of the collaborative approach, and which “may deliver more value in the longer term but currently offers less immediate opportunities than countries like the UK”.
Strategically, Europe is likely to gain some advantage from aligning its Open Banking developments as it seeks to hold its own among some of the technology behemoths, such as Facebook and Amazon.
“If European Open Banking companies are going to survive in a world dominated by Asian and American ‘big tech’ companies, they are only going to be able to do this by working together to make a genuine European ecosystem,” cautions Buckley
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