Event Recap: Focus on International Payments, with Jacques Pütz
Our CEO, Jacques Pütz recently participated in Luxembourg for Finance’s online event entitled “Focus on International Payments”. He discussed the topic of post-PSD2 platformization and its numerous opportunities, including account-to-account digital payments, in an interview with Chris Hollifield (Head of Business Development, LFF).
The discussion started with Jacques describing the initial purpose of LUXHUB, an Open Banking Fintech created by 4 leading Luxembourgish banks to create a mutualized platform to smoothen and facilitate their PSD2 compliance journey.
“All banks had the same obligation to publish technical interfaces to grant access to Fintechs – who can actually be the competitors and challengers of banks. Our initial product was then based on a legal framework. We managed to convince more than 40 banks located in 10 different countries,” added the CEO.
Yet, the Fintech rapidly went from purely compliance services to more innovative Open Banking products, that aim at facilitating the daily life of end customers. “The world we live in is all about innovation… and banks sometimes face challenges when having to innovate fast. And with PSD2, the pace of innovation is even faster,” highlights Jacques Pütz.
The LUXHUB team then developed an efficient product that enables banks to aggregate accounts…from competing banks. It is now possible to aggregate accounts from banks located in the local market, but also in neighboring countries (France, Belgium), as well as from several neo banks including Revolut, N26 and Paypal, turning Open Banking in Luxembourg an important and ever-growing ecosystem, that also includes payment initiation capabilities.
Beyond the banking industry
Last year, by obtaining the AISP and PISP licenses from local regulator CSSF, LUXHUB officially became a payment institution. The expert underlines: “Our journey started as a tech provider helping banks. Yet, we noticed an important demand from other economies/industries to take part in the new Open Banking and embedded finance world. For instance, by leveraging such solutions, all companies allow their customers to initiate payments within their ERPs, CRMs, websites, apps, etc. To provide these Open Banking services to non-regulated entities, we needed to obtain the AISP and PISP licences, to enable the use of the banks’ PSD2 APIs”.
This Open Banking-powered product gives interesting possibilities to all actors and enables their clients to pay wherever they are and send a SEPA payment whenever they want. These payments can be initiated from anywhere, whether it is from a PDF, an ERP, a CRM, etc. “This is really the beginning of embedded finance, and it represents a huge change of mindset as we witness innovation in finance, outside of the banks,” highlights the CEO.
LUXHUB’s A2A payments, notably through the Request to Pay functionality, can be used by anyone with a bank account, if supported by the merchant, of course. “It requires no additional KYC or onboarding. Payers do not have to share their banking information with any third party as they simply need to use their banking credentials – on their bank’s website or app – and validate the secure payment.
This is really the beginning of embedded finance, and it represents a huge change of mindset
Moving to Open Finance
Now that PSD2 is well known and that financial institutions are benefiting from the many Open Banking opportunities, several initiatives from the European commission are being launched and aim at fostering innovation outside of payment accounts.
According to Jacques Pütz, whose company is part of the Open Wealth Association in Switzerland, important opportunities lie in the asset and wealth management industries. “The Association is leading the way in the country, and they are starting to open up APIs for securities accounts, to standardize and facilitate reporting, taxes, and the interconnectivity between life insurance companies and depositary banks. If there is a standardized access to securities, this could mean a huge change in the whole industry,” comments the CEO. He adds: “a lot of old school tech is still used, and doing an “APIzation” of the securities account based on a legal obligation would bring a lot of innovation, more collaboration and even new business models”.
As a conclusion, Jacques Pütz explained that banks should sit and discuss with their competitors to see what and how they can mutualize, so that they can still play a significant role in the next 5 to 10 years. “Doing things on your own is not an option anymore. We need to get together and create platforms for the different key topics – regulation, reporting, innovation and more. Moreover, we need to create a more efficient ecosystem with better services for end customers”.