Finscale Podcast: From PSD2 to Open Finance
Claude Meurisse was featured in the latest edition of Finscale, the Fintech-oriented podcast recorded in Luxembourg. The CEO of LUXHUB and the podcast host, Solenne Niedercorn, discussed the first years of Open Banking, and its evolution towards Open Finance with the upcoming PSR and FiDA regulations.
Building a local Open Banking champion
LUXHUB CEO Claude Meurisse joined the Fintech company from its very inception, first as Chief Operating Officer, in charge of IT and Operations. At that time, in 2018, he already had 20+ years of experience in finance in different tech-oriented roles, notably at JP Morgan/Euroclear and BGL BNP Paribas.
In 2017, he participated in working groups around PSD2 (Second Payment Services Directive), which led him to later integrate the Open Banking pioneer, founded by four major banks in Luxembourg, namely Spuerkeess, POST, BGL BNP Paribas and Raiffeisen, to smoothen their PSD2 compliance efforts.
“Several banks got around the table to discuss the efforts that would have to be deployed to comply with PSD2. Four banks finally got together, chose the ‘mutualization’ approach, and decided to create LUXHUB. To me, this was the right choice to make when you look at the huge investments banks and EMIs had to make with regards to this directive. Today, as CEO, my mission is to go beyond Open Banking and lead to the way towards Open Finance. And the upcoming pieces of regulation will help us”, added Claude.
“The initial goal, as explained by the CEO – who was then COO –, was to offer this PSD2 compliance platform to all banks in Luxembourg and beyond, not just to our founders. They were our first clients, obviously, but for the last 2-3 years they do not account for the majority of our generated revenues anymore”. Claude also adds that several governance rules are in place, and that for instance, founding banks do not benefit from specific rates/prices. He highlights: “To me, having them as founders is a huge advantage: it leads to constructive discussions and helps keep the overall interest of LUXHUB at the center”.
Starting with 4 employees in 2018, LUXHUB is today composed of more than 30 experts, serving 60+ clients located in 10 different countries. Several millions API calls arrive each month on its API platform. Since its launch, TPPs (Third Party Partners) have opened more than 2000 tickets to consume the APIs of the banks.
How LUXHUB innovates in the era of Open Banking/Finance
As underlined by the podcast host, the “roadmap was clear” in the first years of LUXHUB, as “pain points were clearly identified”. Claude couldn’t agree more: “specifications were communicated in the RTS (Regulatory Technical Standards) or by the regulator. Open Banking standards (STET and Berlin Group) already existed. We ‘just’ had to define the technical standards to efficiently connect to core banking systems”.
Yet, LUXHUB never stopped innovating and worked on several Open Banking-related use cases that go beyond the required PSD2 compliance. “We offered banks the opportunity to consume the other banks’ PSD2 APIs. With a unique API, it becomes easy for them to aggregate many European banks as well as some neo banks,” highlights the CEO.
An on-going process within LUXHUB, even labelled as its “DNA”, the Open Banking pioneer continuously exchanges with its clients and partners to understand the needs of the market and which pain points it could help solve. “Regulatory monitoring is key for us. And we are convinced LUXHUB can have an important role to play, especially with the upcoming regulation that revolves around Open Finance.
There is also CESOP (Central Electronic System of Payment information), a new tax reporting obligation for PSPs (Payment Service Providers). They will have to report from January 1st, 2024, to their local tax/fiscal authority and potentially in several or even all European countries,” said Claude.
Finally, the LUXHUB team is keeping a close eye on an additional regulation, this time dealing with Instant Payments. At the end of last year, a proposal was published, asking all banks to offer an IBAN-name check service to all their clients, before each instant transaction. “Banks will rely on APIs and LUXHUB is once again well equipped to offer a platform in this respect”.
Moreover, in the context of the evolution of Open Banking, that is turning into Open Finance, the LUXHUB Marketplace will continue to act as an API distribution channel that facilitates exchanges between API producers and consumers. Claude Meurisse highlights: “The first ones that are available are, of course, the PSD2 APIs. For consumers, connecting to a central hub represents a huge advantage: finding most PSD2 APIs from Luxembourg on a single platform. More than 60 TPPs are active on the Marketplace.
On the API producers’ side, it makes sense to externalize the publication of APIs and therefore not having to manage their own platform. LUXHUB manages the entire API lifecycle, as well as technical and commercial documentation”. He also explains that in the near future, with the FiDA legislation (Financial Data Access), producers will be able to monetize their APIs. The current Marketplace’s elements and technical platform are already available and will become much more relevant for such actors.
PSD3/PSR & FiDA
On June 28th, the European Commission published several legislation proposals with regards to the review of PSD2: Payment Services Directive (PSD3) and the Payment Services Regulation (PSR).
“Rather than a revolution, it is more an evolution of PSD2. One important aspect to note is that PSR is a regulation, which means that it should not be transposed locally. It is directly applicable in each member state. This does not give room for interpretation,” explains Claude.
Banks will have to have a dedicated interface and put in place a permission dashboard. Their final users will use this dashboard to review and manage the access rights they granted to TPPs. Also, the 180 days SCA (Strong Customer Authentication) requirements, on the bank side, will disappear. This will be done by the AISP (Account Information Service Provider) and will reduce the friction for the final users and therefore increase adoption.
As underlined by the CEO of LUXHUB, “in other words, with PSD3/PSR, the regulator is clarifying the points that were subject to interpretation. Uniformization was needed, and that will be done through this regulation”.
Finally, talking about FiDA – or what we used to call Open Finance Framework – Claude finally drops the “revolution” word. “PSD2 was limited to payment accounts, but FiDA encompasses all types of accounts – savings, securities, etc. – and also concerns other players such as insurance companies. This will require gigantic efforts for such players to comply. LUXHUB has developed a wide range of technical assets that will be very handful once all these companies have to comply”, concluded Claude Meurisse.