Rene Pongratz, Vice President of Marketing and Sales
On November 16, 2015, the Council of the European Union passed the revised payment service directive (PSD2), introducing new standards for banking organisations to adapt to cutting-edge technologies. The directive set new precedents for electronic payment—opening the gates for third-party developers to build application programme interfaces (APIs) through which banks can facilitate seamless electronic payment services for customers. This approach would help banks improve customer protection, boost innovation, and reinforce security in the financial domain.
Today, the PSD2 requires the banks to reinvent their existing processes through an open banking model. And, although the banks understand the potential of open banking, they have a lot of scepticism and reservation around embracing modern technologies. On this front, adorsys (adaptive organisational systems), a digital banking company, can be touted as a trailblazer that is helping traditional banks alleviate their doubts and making ‘banking modernisation’ an effortless affair. adorsys’ mission is to aid financial institutions in rethinking their banking processes according to PSD2 and unlock the lucrative opportunities of open banking models. The company perceives the PSD2 directive as an accelerator of growth for banking organisations, fintechs, and third-party providers (TPPs).
“Banks need to continuously innovate their processes to keep up with the changing consumer needs, and we want to be the guiding force for banks in their pace of incessant transformation,” says Rene Pongratz, VP of marketing and sales at adorsys.
To support this growth, adorsys provides banks with a wide range of innovative software solutions and IT services, along with practical advice to support banking organisations as they embark on their digital transformation projects. The digital payment solutions and services of adorsys—backed by its leadership team’s extensive finance industry expertise—are designed to help its clients improve customer experience and maximise growth.
adorsys’ cutting-edge products enable fast, simplified PSD2-compliant open API implementations. Among the plethora of products offered by the company, the XS2A Sandbox is the crown jewel. This product is a model bank that emulates open APIs to create bank accounts, trigger payments, and experiment with data for testing purposes. The product offers an isolated sandbox environment where the processes between TPPs and banks can be tested seamlessly. The XS2A Sandbox ensures that the bank systems are capable of delivering optimal user experience before they go live. Its intuitive user interface allows direct access to bank APIs and TPP certificates without having to use actual account data.
To further illustrate, Pongratz shares a client success story. When the PSD2 came into force, the regulatory agencies provided a deadline for banking and other relevant organisations to become PSD2-compliant. During this time, adorsys offered to develop a PSD2-compliant sandbox solution for a data centre company that provided data hosting services to banks in Germany. However, the company declined adorsys’ open-source process and decided to go forward with its in-house development.
Banks need to continuously innovate their processes to keep up with the changing consumer needs, and we want to be the guiding force for banks in their pace of incessant transformation
But even after a substantial investment in terms of people, money, and resources, they were only able to complete up to 60 percent of the development process. When the regulatory deadlines were right around the corner, the client contacted adorsys to seek their assistance. With adorsys in the picture, the client was able to develop a PSD2-compliant sandbox within three weeks. Thus, they were able to meet the regulatory requirements in time and avoid any adverse consequences.
But more than solving such technological setbacks, Pongratz believes that the main challenge lies in mitigating the implementation barriers; “The key to unlocking the potential of open APIs lies in having a standardised implementation.” While TPPs can use banks’ payment services and account information to offer new and innovative services to account holders, interacting with a range of different bank APIs can be an expensive and time-consuming challenge because fintechs have to implement a separate connector for each bank. Pongratz refers to these diversified implementation methods as ‘different flavours.’ adorsys is trying to streamline this bottleneck and unify these ‘flavours’ through its Open Baking Gateway—designed to harmonise the implementation processes of banks and establish a standard PSD2-compliant API. Through this solution, adorsys facilitates unified connections between banks, fintechs, and TPPs, enabling them to conduct payment initiation and account information services without a hitch. Thus, through its robust gateway, adorsys is pushing for a standardised, open-source development throughout Europe.
At this juncture, Pongratz also notes, “Hopefully, if all of Europe collaborates on the development of a robust and compliant set of solutions that address the same idea and the same law, it will be a big step towards a shared success.” Based on this notion, adorsys is working with Berlin Group, a Europe-wide initiative and open-source that defines open and common standards for interbank payment transactions. adorsys is playing a crucial role in implementing the Berlin Group’s detailed and robust NextGenPSD2 access to account (XS2A) framework, which is already being used by more than 3,000 banks in Europe.
The NextGenPSD2 XS2A framework enables TPPs to seamlessly connect with the bank interfaces and facilitate payment transactions. Since creating a PSD2-compliant framework is a must for banks, they can leverage adorsys’ XS2A Core solution to implement the NextGenPSD2 XS2A framework quickly and effortlessly rather than spending significant capital on the in-house projects. The framework can be connected to the account services payment service provider’s (ASPSP’s) middleware or the core banking systems of clients. Besides, the XS2A Core is fully compliant with the NextGenPSD2 implementation support program (NISP), which ensures that the clients adhere perfectly to the legal requirements of the PSD2.
Powered by such contributions and collaborations, adorsys is planning to expand the range of its offerings from Germany to the rest of Europe now. Moving forward, the company is striving to facilitate seamless connections between banks, fintechs, and TPPs, while providing value-added services that benefit all of them. The company is also preparing to invest in implementing artificial intelligence, smart data analytics, and other emerging technologies that would enhance its offerings and push the bounds of open banking. The moonshot goal of the company is to become the go-to technological provider for digital banking in Europe.