The fact that the UK’s API standards are in prime position to be embraced across the European Union puts the country’s banks and fintechs – already conforming to those standards – at a distinct advantage over their counterparts in the rest of Europe.
“The UK is the first mover on this [Open Banking] across Europe and globally,” said Alan Ainsworth, head of policy at the Open Banking Implementation Entity (OBIE), at an industry event this week in London. “So it is important that we enable the UK businesses and fintechs to take advantage of the opportunity by being the first mover, by ensuring rigorous implementation of Open Banking standards, so that the fintech community not just in London, but throughout the UK can start to offer services globally,” said Ainsworth.
“The standards that we have created are standards that can be used anywhere in the world. They are not simply bespoke to the UK.”
“From a third-party provider point of view, if you want to offer these services to as big a market as you can find, you want those standards to be universal,” he said.
However, it will be a commercial solution that will bring about a European level of API standardisation, according to Francesco Simoneschi CEO and co-founder of TrueLayer.
“There is going to be fragmentation for the next few years. While standardisation is something that we like, and we want to see more and more, it’s going to be quite hard to see banks coming along with one single solution across all of Europe. Many companies like ourselves will try and enforce a standardised commercial solution to access all the different infrastructure through one universal interface,” says Simoneschi.
"We would like to see from the regulator firm standing, and position to say these are the behaviours that we want to discourage, and these are the measures that we are putting in place to ensure that there is a spirit of collaboration.”
Without a Europe-wide standard, problems may soon arise over which country’s standard must be followed, according to David Gardner, partner at TLT law firm.
“It’s difficult to see at this point if there is going to be one winner. We had a comment from one of our events about whether it is going to be a VHS, Betamax scenario where people don’t know which standard they should adopt,” says Gardner.
“I think at the moment in terms of global standards that is further down the track because if you are a provider in Europe then you’re keen to make sure that you are compliant with PSD2 requirements and Open Banking where that is relevant.
“But if they were and if they are shown to work it may be that they end up becoming the base standards for broader adoption around the world were Open Banking isn’t currently set up.”
While there is a need for large international companies to access Europe as a whole, “banks biggest problem right now is to just comply with regulation,” says Simoneschi.
“I think they [the banks] are very much concerned about what will happen in September if they don’t comply with RTS and PSD2. It’s a bit of a short-term mindset, and it is very much towards how can I make sure that the regulator will look at our API solutions and will grant us an exclusion to be able to discontinue anything like credential sharing or screen scraping at the moment?
This comes after TrueLayer launched a data API in Germany opening up access to bank data from major German banks Deutsche Bank, Sparkassen and Commerzbank.
“Germany has been very much at the forefront in terms of Open Banking innovation for the past few years and there is already significant infrastructure in place, significant technology that allows companies like TrueLayer to connect with all the banks, and access both data and payment capabilities,” says Simoneschi.
“So, this is not targeted at the internal German market but more for the integration companies that are looking at scaling across countries in an easy way.”
With the final implementation date of PSD2 being the September 13, 2019, while API standardisation will begin at a European level, banks focus will be directed at getting ready for the deadline, says Ainsworth.
“Over time I think you start to see harmonisation of those initiatives and you will start to see far more in common between those initiatives over time. Clearly, we have to get to the September piece before anything can change, certainly no bank would want to see further change. They are building to something and that needs to be stable,” he said.