Here are some of the most inventive fintech initiatives already meeting a wide range of challenges related to open banking today:

TrueLayer

TrueLayer has developed a platform to help third-parties enhance KYC compliance processes, open banking, and PSD2 qualifications. TrueLayer’s APIs, one for account data and another for payments, enable turnkey access to banking data, eliminating the need for companies to design their own integrations. TrueLayer has developed partnerships with a variety of financial entities involved in open banking, personal finance, and accounting. The startup is regulated by the UK’s Financial Conduct Authority (FCA).

Divido

Divido provides retailers with the ability to offer consumer credit at the checkout stage of an online purchase. The company pools several  lenders, so that when a customer applies for credit online or in-store, Divido submits the details to its connected lenders through an API for an immediate decision. Divido offers its services in multiple currencies to retailers, lenders and banks.

iwoca

iwoca provides loans to SMB companies in the UK, Poland, Spain and Germany. It also offers open banking in conjunction with several well-established traditional banks including Lloyds Bank, Barclays and HSBC, so that borrowers can instantly submit verified information. iwoca claims that its technology enables decision-making based on a company’s business performance and not just a credit score, thereby providing greater opportunities for SMBs.

GoCardless

GoCardless’ main niche is bank-to-bank payment methods. GoCardless defines itself as a platform enabling customers to access a variety of payments systems without having to integrate with each one separately. Through its direct debit offering, retailers can collect one-off or recurring payments automatically.The startup’s aim is to facilitate more direct payment methods across a wide range of locations.

DoPay

DoPay’s cloud-based payroll platform enables employers to pay staff who do not have a bank account (some 2 billion people worldwide) without any need to pay cash.

The platform facilitates various payroll processes like calculating salaries and submitting government forms. Salaries are paid into a DoPay account, while recipients are provided with a pre-paid Visa card to use in-store or online, as well as a mobile phone app to manage their finances.

Chip

Chip is an automated savings app which connects to the user’s current account. The Chip algorithm calculates how much the customer can afford to save and transfers the designated amount to a Chip savings account, which is held with Barclays. The sum is continuously adjusted based on the user’s spending habits. Chip has applied to the FCA to become a regulated account information service provider (AISP). Once the company qualifies, no bank will be able to deny its customers access to Chip’s services.

Yapily

Yapily aims its services at fintech developers, providing tools to connect their apps to retail banks, gain access to users’ account data, and initiate payments via its APIs.  Yapily features a transparent API that does not store any data. The service is charged per use rather than per user.

Yolt

The free Yolt app categorizes payments, predicts outgoings and has a partner marketplace for deals related to a variety of financial services. It also offers financial advice in-app.This user-friendly interface connects to a range of bank accounts and banks including Lloyds Banking Group, RBS and HSBC brands, as well as challenger bank Starling.

Smart Bill

Smart Bill focuses on the ‘subscriptions trap,’ which involves consumers who are being automatically billed for unwanted subscriptions that they have forgotten.Once granted permission, Smart Bill currently scrapes the user’s bank account to discover recurring payments and categorize them. Users can review the subscriptions and have Smart Bill cancel them. The app also identifies renewal dates for a variety of services and automatically ensures users will be getting the best deal at renewal.

New fintech companies are bringing greater financial opportunities to retailers, SMBs, banks, customers, fellow fintech startups, employers and a wide range of other entities. It is only to be expected that as open banking expands, many more fintech initiatives will develop to serve new needs and diverse audiences.

PSD2 (Revised Payment Service Directive) is a directive issued by the European Commission in order to fortify customer rights, facilitate competition in banking, and increase Internet payment safety via SCA (Strong Customer Authentication). The original European payment services directive came into force in 2007. The PSD2 directive expands considerably on the original version of PSD.

PSD2 in practical terms

The aim of the PSD2 regulation is to create open banking in EEA, while ensuring online payment security based on defined rules. For the first time ever, this directive authorizes bank customers to use the services of third-party providers through open APIs. Rather than rely completely on traditional banking services, PSD2 enables both customers and businesses to manage finances more conveniently and affordably via a wider choice of third-party providers.

Customers will be able to use various fintech services to analyze their spending, pay bills, take loans or make transfers, while their money is deposited in their bank accounts. European banks are obligated to create a system of open APIs that provide access to customer accounts. Third-party providers are authorized to provide financial services while using bank data.

PSD2 deadlines

The deadline for all EU member states to enact PSD2 into national law was  January 2018. Following the initial stage, two deadlines were stipulated:

• March 14, 2019

By March 14, 2019, all Account Servicing Payment Service Providers (ASPSPs) – which refers to any institution that provides and manages payments accounts – were supposed to have set up a testing or sandbox environment including APIs, support and documentation. The comcept was to provide a six-month period to test authorising payment services before the final date of implementation.

If a financial institution is incapable of setting up secure APIs independently, it can partner with a technological network with readymade API portals.

• September 14, 2019

The final compliance deadline is mid-September of this year. At this stage, SCA will be required as well as access to accounts (XS2A). SCA is a crucial element, which obligates customers to authenticate themselves by combining two out of the three following options:

• Something you have – using a device only available to the customer (such as a cell phone)
• Something you know – unique information (such as a PIN) only available to the customer
• Something you are – physical evidence unique to yourself such as facial or voice recognition
  

Optimizing the purchasing process

While robust security is vital, it is no less important for the merchant to ensure a frictionless user experience. To facilitate the process, some operators are adopting behavioral biometrics, which uses machine learning to analyze a user’s unique typing cadence, finger pressure or other personal parameters in order to ensure continuous authentication behind the scenes.

Other ways for merchants to ensure smooth purchasing processes include the use of e-wallet payment methods (which already include two-factor authentication), integration with payment platforms that optimize payment processing, and developing user-friendly mobile apps for seamless shopping experiences.