One of the most impressive companies presenting at this year’s Finovate Europe conference was Token, a software company offering a turnkey PSD2 compliance solution to European banks.
Bobsguide sat down with Co-Founder and VP of Marketing Mårten Nelson to learn more about Token’s PSD2 compliance software, why banks are starting to see the opportunities PSD2 is presenting them with, and which banks he expects to expand their presence in the market post-January 2018.
What is the major issue that financial services currently suffer from, and how is Token designed to solve these issues?
Token is a turnkey, PSD2-compliant, open banking platform. With Token, banks can be guaranteed of PSD2 compliance at a fraction of the cost and a fraction of the time it would take to do it themselves. The Token solution to PSD2 compliance eliminates security lapses or breaches, it reduces fraud, and most importantly of all it paves the way for new revenue for banks.
At Token we’re embracing and taking advantage of the opportunity presented by PSD2 by ensuring that banks meeting their regulatory requirements by January 2018, and by helping banks to focus on how they can turn PSD2 to their advantage. I think the turnkey aspect of the Token product is highly valuable to banks in regards to meeting the January 2018 deadline, especially to those that haven’t already got a head start in this area.
What do you think should be the priorities that banks should be keeping in mind as they look to comply with PSD2?
That the solution they’re implementing meets the basic requirements of PSD2 compliance is the obvious one, but there is a smarter way to think about the regulation in terms of how much more a solution can do for a bank.
Once the solution has checked the compliance box, I think banks need to take a much closer look at what the solution actually provides, as financial services are going to need to make an investment no matter what, most likely in some form of tech from an outside vendor. I think there is a really great opportunity for banks to go beyond pure compliance, instead of a defensive approach to PSD2 they should take an offensive approach, to leverage whatever software they use to comply with PSD2 to generate additional revenue that could more than cover the investment. And that could be anything from enhanced transactions to a variety of B2B applications.
Do you think banks are thinking about PSD2 in an offensive way, or do they currently have the wrong attitude to compliance?
I think there is currently varied attitudes in the market. But I would say that there are more and more banks that are starting to realise that PSD2 can be a great opportunity for them, rather than purely a threat to their business. I would say that during the last six months there has been a notable shift in the market, from a majority defensive approach to some identifiable appetite to be offensive. That said though, there are certainly still banks that are only looking at taking a purely defensive approach.
Can you name any banks that you have been impressed with for the way that they have attacked PSD2?
I can’t name specific banks but I can name a region. I’d say in the Nordics the banks are definitely more progressive and looking for opportunities to thrive post-PSD2. I think come January 2018 several of the Nordic banks will start to expand beyond their core regions.
What are your thoughts on blockchain rivalling APIs in areas of development such as PSD2 compliance? Do you see blockchain as a threat for the business you are targeting?
Just because you have blockchain technology it doesn’t mean you can immediately solve the world’s problems. I think blockchain is great for many applications, but I haven’t seen anyone successfully present a product that solves open banking or PSD2 compliance with a blockchain solution.
There are certainly companies that are looking to solve cross-border payments with blockchain and I think there might be a place for it there, but overall the issues for blockchain are scalability and latency. When you talk to large banks that need to conduct thousands of transactions a second, blockchain just doesn’t cut it. So again, I think there is certainly a place for blockchain within financial services including core banking, just not to do with PSD2, and there is some adaptability with regards to payments.
How was Token received by the financial services institutions at Finovate? And were you impressed with what you saw from other innovators at the show?
Finovate was great, we got a number of contacts and leads from the show, so without a doubt the show was successful from our perspective. As for the show in general, I really like Finovate, I think it’s a good format for companies like ourselves to showcase innovative products.
But as for the other pitches, to be frank I was a little bit surprised that there aren’t more companies specifically focussed on PSD2, knowing that compliance is at the very least a ‘top three’ priority for banks. There was a lot focus on digital services and applications, and banks do need to think about improvement there, but I was more surprised that most of the solutions that were presented did not address the key issues for banks today.
Do you think the lack of chatter about PSD2 at Finovate was specific to the event, or do you think there is a bigger issue here?
I don’t think there are that many companies that have created a complete solution to PSD2. There are a lot of components out there that would need to be cobbled together within a framework to create a system – so you can pick an API platform, you can pick a security platform etc. that you could knit together. But I am not aware of many turnkey solutions that address the issue as a whole. And maybe that is why there isn’t a much talk about PSD2 as there should be.
Is Token currently particularly focused on the UK banking market?
All events tend to be focused somewhat on the region in which they take place. So at Finovate you’ll get more UK attendance; we’re at the Fintech Pioneers event this week and it is much more German/Austrian focused. What banks should realise is that the PSD2 impact won’t just affect the bank regionally, now banks will begin to interact with third parties that potentially may be from all over Europe. And that is why there is an offensive solution for banks to PSD2 compliance.
How easy is the implementation of the Token API?
It does need access the bank’s underlying infrastructure, its core banking system, and the way we can interact with the bank largely relies on the architecture that’s available. So with Fidor Bank for example, who we presented with at Finovate, it was a very simple process to integrate Token into the core banking system, because Fidor has really well defined APIs already installed.
What do you think is going to have the biggest impact on fintech and the financial services industry in 2017?
By a distance PSD2 and open banking in general will have the biggest impact on banking this year for certain, and this will probably be the case for the next two or three years at least. And not just because of the compliance factor for banks, but also because of what is going to be enabled, and what is going to happen in terms of further industry regulation as a result of PSD2. I think what we are going to see is a ripple effect of the legislation for a long time.