Magazine BEAST #16 2019

26
#Business | FinTech
INNOVATION
IMPOSES
COLLABORATION
BY ALEXANDRE KEILMANN
In a period of deep transformation of the financial services
industry, Jacques Pütz, CEO of LUXHUB, advocates
collaboration between banks and innovative startups.
He tells us more about the first impacts of PSD2 on FinTechs
and traditional players, and also gives us a glimpse of the
financial industry of the future.
LUXHUB has been partnering with many financial institutions
in the context of PSD2, building a bridge between Banks,
E-money institutions and FinTechs. What is your view
on the ecosystem post-September 14 th , 2019 1 ?
Let’s first start with the impact on the FinTechs. Some providers
already successfully offered account aggregation or payment
initiation services over the last years in several countries,
notably in France, Germany and the Netherlands. Nevertheless,
these providers were not always providing these services in a
fully secured way. For instance, their screen scraping method
required the end-clients to put their credentials at the providers’
disposal, usually in breach of their contractual obligations.
This is one of the reasons why the European legislator decided
to legally frame such services and impose to institutions
holding payment accounts to collaborate with these providers,
through APIs, in a secure and standardized way. This
collaboration obligation does not come alone. Strong Customer
Authentication (SCA) also have to be implemented by banks to
ensure a higher level of security in their relationship with the
end-client. These SCA however represent a challenge for the
already existing account aggregation providers who accessed all
accounts data in the past, i.e. not only the payment account’s
ones. The business model of these providers will thus also need
to be adapted to the new regulatory framework.
And what about banks?
Many people thought that PSD2 was only relevant for retail
banking. This is not the case. Private and corporate banks
do also fall in the scope of PSD2 requirements and thus had
to open up to third party providers. Over the last months,
we have accompanied these financial institutions in their
PSD2 compliance journey and see this investment as a great
opportunity for their further development.
This is one of the reasons why we decided to launch «LUXHUB
One» last September. This product is helping credit institutions
and third-party providers to aggregate a large number of payment
accounts through one standardized single API (without screen
scraping). This service enables credit institutions and account
information service providers to offer aggregation services to
their end-clients in a simplified manner. The account aggregation
is the first feature of our One API and new services will soon come.
You recently said during an event organized by Silicon
Luxembourg that “the business model of banks is going
to change» and that «it is going to be a cultural change”.
We understand that PSD2 was a first step, what are
the next ones?
Most of the financial institutions have been built in silos, year
after year. Such constructions usually lead to difficult decision
process and slow implementation of these decisions. Their IT
systems are built on the same model, meaning that new projects
usually have to face this IT legacy.
Therefore, innovation becomes difficult in this context. Several
newcomers understood it well and the so-called neo-banks
and neo-insurers have rapidly emerged and disrupted the
industry codes. Lead by young entrepreneurs, these digitalfirst
companies offer a premium user experience to the current
generation of digital natives.
Yet, trust and solid business models remain the biggest
challenges faced by these newcomers. This is where established
financial institutions can actually make the difference, provided
that they accept to perform a cultural change and open their
doors to new partnerships to build together tomorrow’s financial
ecosystem.
PSD2 forced many financial institutions to open their eyes on
the outside world. FinTechs and RegTechs wishing to collaborate
are flourishing, but the selection, negotiation and connectivity
aspects are braking potential collaborations. This is the reason
why we are working on LUXHUB Marketplace which will answer
these pain points and aim to become the European API onestop-shop
for the FINANCIAL ecosystem.
How do you see the coming months and years?
Given the size of Luxembourg, it is in our DNA to feel European
and therefore quickly expand to other countries.
PSD2 is granting account aggregation and payment initiation
providers (including credit institutions) the possibility to offer
their services all over Europe. Everyone is speaking about the
United States and its a huge market of 327 million inhabitants,
but we should not forget that our European internal market
actually represents more than 513 million inhabitants.
New players will keep on emerging in this European market.
There will be room for both allies and competitors of banks,
insurance companies and investment fund industry stakeholders.
Innovation will be fostered within this ecosystem, to answer
more appropriately to customers’ expectations and the always
heavier regulatory burden.
There is no doubt that there will be huge changes in the
coming months and years and we do believe, at LUXHUB, that
collaboration will be the key of success.
BEAST MAGAZINE #16
1
14 September 2019 was the date of entry into application of PSD2 Regulatory Technical Standards, imposing to banks and e-money
institutions holding payments accounts accessible online to provide third party providers with a technical solution to retrieve information
and initiate payments in the name and on behalf of the payment service user.