PSD2 News from EBA – July 2017

July was a pretty busy month for EBA in terms of PSD2 updates.

No wonder, actually, as implementation is due in less than 6 months.

7 July – Final Guidelines on Professional Indemnity Insurance (PII) under PSD2

These Guidelines, applicable from 13 January 2018, address the criteria on how to stipulate the minimum monetary amount of the professional indemnity insurance (PII) or other comparable guarantee for payment initiation services (PIS) and account information services (AIS).

Companies that intend to carry out these services will need PII cover or a comparable guarantee as a prerequisite to be granted authorization, thus strengthening the liability regime governing the interactions between the different actors involved in electronic payment transactions.

11 July – Final Guidelines on Authorization and Registration under PSD2

These Guidelines focus on the information to be provided by applicants intending to obtain authorization as payment and electronic money institutions as well as to register as account information service providers (AISP) under PSD2.

The detailed documentation that applicants are required to submit to national competent authorities for the purpose of authorization or registration varies depending on the type of service(s) an applicant intends to provide, as: payment institutions, account information service providers, electronic money institutions, or competent authorities.

24 July – Consultation on the Future EBA Register under PSD2

The public consultation, which runs until 18 September 2017, addresses the draft regulatory technical standards (RTS) and implementing technical standards (ITS) on the EBA electronic central register, which respectively set requirements on the development, operation and maintenance of the register and the information to be contained in it.

The register ‎will include information about payment and electronic money institutions, account information service providers, their agents and branches, which are authorized or registered in the Member States.

Its purpose is to ensure transparency of the operation of these institutions in the EU, enhance cooperation between the competent authorities in the Member States and ensure a high level of consumer protection.

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Let’s take a look at what June had to offer us in the banking and FinTech bubble.

HINT: it’s mostly about cooperation in the industry, RegTech and open banking, with a dash of cybersecurity and trends.

Cross-border Cooperation in FinTech

After signing a FinTech co-operation agreement with Indonesia earlier this year, Australia pushed the fast-forward button in June and inked 3 more such agreements, with Japan, Malaysia and Hong Kong.

The Australian Securities and Investments Commission (ASIC) announced the completion of these co-operation frameworks in order to promote innovation in financial services in their respective markets and more agreements are expected in the following months.

Moreover, according to recent research, Australia is significantly ahead of the UK and the US in the payment technology race and their cashless future with instant payments is galloping to become reality.

But Australia isn’t the only one to embark on the FinTech collaboration journey at full speed. Singapore is breathing down its neck after signing a similar co-operation agreement with Denmark, right after the Money 20/20 Europe conference in Copenhagen.

“Financial innovation is not confined to national borders.” Thomas Brenoe,

Deputy Director General, Danish FSA – on Singapore-Denmark agreement


This collaboration aims to help FinTech companies in both countries expand into each other’s markets, as well as explore joint innovation projects together, sharing information on emerging market trends and their impact on regulation.

Furthermore, Singapore regulators have recently proposed rules that will make it easier for banks to conduct or invest in non-financial businesses such as e-commerce and digital-payment platforms.

Singapore’s proposals come as financial technology and e-commerce giants are expanding financial services including digital payments in Southeast Asia as part of their global strategy, thus helping banks to better compete with non-bank firms in the area.

“The future belongs to the technological giants and to the banks that copy, acquire or collaborate with FinTechs. It’s neither cheap nor easy, but the alternative is irrelevance.” Brett

King, CEO, Moven


RegTech Status in Asia-Pacific. Brief Pit Stop in Bahrain

According to the latest news, RegTech is getting ready for a great start in Southeast Asia, where financial institutions often have to deal with more than a dozen different regulatory regimes. But there are 2 sides to this coin…

Though RegTech is meant to maximize financial performance and risk management, some international banks anticipate the costs of complying with the new rules to be so high that they are considering leaving the Asia-Pacific region.

Turning to the Middle East, it’s worth mentioning Bahrain‘s central bank (CBB), who launched on June 18 a regulatory sandbox which will enable FinTech companies to test out their products and services. The bank’s governor explained this move as: “We are witnessing how technology is defining financial services and CBB remains at the forefront of these developments to enable the industry to advance similarly.”

The Latest Studies in the Financial Industry

A. Cybersecurity Insights

Cyberattacks impacting financial institutions are largely executed for direct financial gain, very few aiming to hurt the brand or customer loyalty. However, these are prominent side effects, of course.

More important is how these attacks take place: 88% of security incidents are either web app attacks, DDoS attacks, or payment card skimmers, with a vast majority targeting ATM machines – 66%. More information on this topic can be found in Verizon’s annual Data Breach Investigation Report (DBIR).

B. Top Trends

Can you guess what all the latest buzz is still about? Suuure… Artificial Intelligence, blockchain and open banking. The prediction goes like this: AI will become the main way banks interact with their customers in the next 3 years, blockchain adoption will lead to faster transactions and lower costs, while open banking will keep increasing competitiveness.

Another aspect to take into account is the necessary transformation of commercial banks in the direction set out by all those disrupting FinTechs that focus on the customer. This is expected to benefit banks in terms of increased profitability and efficiency, with a plus on the safety and soundness side, building engagement on a digital experience.

C. Open Banking and APIs

This is what the future of banking relies upon: third parties developing new products and services through use of APIs, followed by a FinTech-bank collaboration to leverage their complementary strengths and enhance the customer experience.

Recent studies underline an otherwise expected fact: FinTechs are more likely than traditional banks to provide positive banking experiences, and that is partly because they’re not dragged down by the legacy technology and the outdated processes that banks still have to deal with.

Over 90% of banks and 75% of FinTech companies say they expect to collaborate in the future, since open APIs will likely lead to a more effective use of data, the rise of new business models, and enhanced customer trust. All these and more, in the World Retail Banking Report 2017.

Now that Money20/20 is still fresh in our minds, and before moving on to other topics of interest, let’s take a look together at the agenda of the events we attended, the debates that really matter in order to shape up the future of the financial ecosystem.

General sessions (mostly mentioned in our previous blog posts) were alternated with networking breaks focused on specific points of interest (such as shared ledgers, InsurTech, PSD3, biometrics) and track sessions tailored to everyone’s needs.

Among others, track sessions focused on case studies and provided insights on hot topics like alternate financing, algorithm-based innovation, legal and regulatory aspects, mobile payments, open banking, legacy systems, machine learning, user experience, cross-border disruption, as well as risk, security and fraud.

Bronze, Silver or Golden Bullets?

  • Open banking will revolutionize the banking sector and payments landscape, but customer trust will be crucial to succeeding in this new age.
  • The business model of the bank should transform towards an orchestrator of financial needs, linked to the financial heartbeat of its customers and beyond the traditional product orientation of the past.
  • Convenience, continuity between the physical and digital world, mission-critical security and the human factor will be the magic combination to shape the future of payments.
  • There needs to be a paradigm shift in the business model for core banking services – to be quicker, more cost-effective and more flexible in order to satisfy the digital global economy.
  • Banks’ greatest strengths (their size, scope and scale) can complicate the delivery of new capabilities. Collaboration with FinTech startups can be the path to creating next-generation services for global banks.
  • In light of PSD2, strategies should combine transparent security and strong authentication to unleash the potential of open banking.
  • There are many key factors that are both disrupting the underlying market infrastructure and creating a much more open ecosystem. Financial institutions need to transform themselves amid dramatically changing consumer expectations and mass adoption of new technologies.
  • What do the financial crisis, Brexit and the rise of FinTech all have in common? They have served as a catalyst for a dramatic shift in the balance of power: from traditional sources of information and firmly back into the hands of customers and innovators.

There’s Something Else on Our Minds…

…the Unbanked and Underbanked

Whether we talk about the poor access to mainstream financial services, or even the lack of a bank account, there are about 3 billion people in one of these situations throughout the world. That’s a huge and sad number, no doubt, but it can also be seen as an unrivaled opportunity. It’s not just about connecting these groups to the financial services ecosystem, but also transforming their lives and reducing global poverty.

Micro-loans, payments, remittances and mobile banking are just some of the many services that countless communities lack access to, and years to come will see an increase in debates on financial inclusion and developing commercially viable solutions.

On one hand, banks should partner with FinTechs, in order to benefit from new technologies, and on the other with microfinance institutions, since they are the ones that have most interacted with the underbanked, got to know each other very well and built trust, being able to convince them to take a step further and move from cash to digital.

The government plays three key roles in this whole process: as policy maker and regulator, in terms of infrastructure (public offices that would bring banks closer to people), and as initiator of payments to unbanked and underbanked by means of social services.