Insight: Can EMIs keep their edge in the Open Banking era?

23 Apr 2020

Todd ClydeIn the recent issue of Open Banking Expo Magazine we caught up with Token CEO, Todd Clyde, as he gave readers an insight into Electronic Money Institutions and how the continual need for innovation is the only way forward to keep up with the Open Banking era.


For some time, Electronic Money Institutions (EMIs) have been rewriting the consumer finance rulebook. Innovative services based on eWallets and prepaid cards are commonplace and support a wide variety of use-cases, from state pension and benefit payments, to payroll, cross-border money transfers, FX and loyalty schemes. Through Open Banking APIs, however, a new market for innovative third-party financial services is evolving and it’s open to everyone – banks included. Is this an opportunity for EMIs, or does it threaten their place at the cutting edge?

Making a business out of staying ahead of banks is a delicate balancing act. Compared to most banks, the majority of EMIs are modestly resourced and must sprint to develop the services that keep them popular and front-of-mind. Consumers want an increasingly frictionless UX and smarter, more personalised in-app services. Investors want returns. Merchants want lower acceptance fees and to boost conversions, and everyone wants better security and fraud protection, together with quicker, faster and cheaper payments. For EMIs, time-to-revenue is critical, and, in this multi-stakeholder world, the pressure is on to call the right shots first time.

Can Open Banking help? You bet. While it’s true that over time API connectivity will enable banks to offer EMI-like services, like most things with banks, that’s going to take some time. In the interim, agile EMIs can use Open Banking to evolve their services and shore up their businesses at the same time. With research from Juniper suggesting that nearly 50% of the world’s population will be using some kind of digital wallet facility by 2024, the near-term market opportunity for EMIs is very real indeed.

A strategic outlook will pay dividends. Particularly now, considering that a high proportion of EMIs remain either unaware of their obligations under PSD2 or focused on integrating basic compliance APIs. EMIs that take longer-term positions and harness the right blend of market connectivity and developer support have a great opportunity to take charge of the sector and the next generation of digital financial services.

How? By looking beyond compliance and leveraging APIs to cut costs, enhance their customer UX and enable the development and introduction of new services quickly and at scale. Account-to-account (A2A) payments is a convincing first step. This service alone stands to change the wallet-load game for good, eradicating card scheme, processor and interchange fees and replacing them with one vastly reduced transaction fee. Funds also clear almost instantly, enabling a new last-minute-load experience for users.

The real potential for EMIs, however, lies beyond faster and cheaper. By leveraging Open Banking, EMIs can tap into a new age of hyper-connectivity to third parties. EMIs can also connect to a ready-to-go ecosystem of merchants, banks and other service providers, and work these connections to create new data and payment-based services uninhibited by national borders and old-world networks. Token’s market platform, for example, already has full bank coverage across Europe (defined as 90% of all accounts), via API-based connections to thousands of banks.

Token is getting EMIs up and running with A2A payments in a matter of days, via a single integration to its market platform. We’re enabling EMIs to offer both open payment and data services to customers directly, from within their apps and under their own brand, transforming the UX and increasing conversions as a result. Digital wallet loading occurs without the customer leaving the wallet environment, and without the need to upload and maintain their card details. Instead, the user associates and verifies their bank account once, and they’re done.

Across Europe, Token is helping all types of business stay ahead of changing market dynamics and evolving customer expectations. We are providing EMIs with a new playground for innovation, connecting banks, merchants and third-party providers to enable wallet loading, eCommerce payment, account aggregation and a host of other digital payment and data services.

Is Open Banking a threat to EMIs? Well, that’s a matter of perspective. It wasn’t long ago that banks viewed Open Banking simply as a PSD2 compliance exercise. Only recently have these tankers started to turn and refocus on developing commercialisation strategies. EMIs, on the other hand, have agility and innovation woven into their DNA. With the right start they can mobilise quickly to deliver tangible value to their customers. Having carved out their niche by moving faster than the competition, there is every reason to earmark EMIs as early champions in banking’s new digital age.