We first started talking about the second payment services directive, PSD2 about one and a half years ago.
Back then, no one really understood what we were talking about, or seemed to care that much. Although, this has changed dramatically recently, because today you can’t talk about banking or fintech strategy without talking about the impact of PSD2.
We recently ran a survey across 1,500 bankers across Europe and it turned out more than four in five, 82%, had a plan in place for becoming compliant. However, most bankers were at the same time fearful of disruption. They worried that their existing channels wouldn’t be good enough to withstand third-party disruption from new types of competition, the AISPs and PISPs, but also, more importantly, from other banks. It turns out that there is a clear gap between becoming compliant and leveraging on the opportunities of PSD2.
So, the only viable option for banks, the way I see it, is to either improve or replace existing digital channels (such as the mobile banking application) in order to withstand the competition.
All of the solutions above are profitable mobile wallets, and all, apart from AliPay, are issued by Scandinavian banks. In fact, Scandinavia is the only region in the world where mobile wallets have become one of the most important revenue channels for banks. In Scandinavia, 65% of the population have adopted the bank-issued solutions and use them on a daily basis. What’s even more remarkable is that brand recognition for the Scandinavian mobile payments apps are close to Facebook or Google in their domestic market. As a result, Apple has not yet launched Apple pay in Norway. Wonder why?
Auka started as the technology company behind mCash which was the first mobile wallet to be launched in Norway. It was undoubtedly the launch of mCash that drove the country’s largest bank, DNB, to launch and market Norway’s now most widely used mobile payments solution, Vipps.
Auka now partners with banks to help them rapidly build and launch white-label mobile payments solutions which follow the same blueprint as the successful solutions in the Nordics (and in fact, all successful mobile wallets – bank-issued or not). With the deadline for PSD2 looming and the very real threat of third-party disruption hanging overhead, banks are feeling the pressure.
We believe that clever partnerships can help take some of this stress away. But – are fintech partnerships just a bit of a buzzword term of phrase that banks and consultancies use to sound cool and innovative? Is it just a ploy to drive some publicity? What we’ve noticed is that like some MOUs, often these “partnerships” are just a public handshake. No one talks about how the partnership will generate profit – for either party.
There are many fintechs and consultancies who can help with PSD2 compliance and the building of new digital channels, but there aren’t many who have built, launched and helped drive massive regional adoption with their own solution. When we partner with a bank, we’re not just bringing capability, we’re bringing expertise and previous experience that will help inform how the bank builds, launches, maintains and markets their new channel.
Partnerships for us are taken seriously. We believe that our mobile payments products can save banks in their deployed regions from total third-party payments disruption. The way we see a profitable partnership working is when both parties equally share the risk. No shared risks and incentives on both sides – between the bank and the fintech – mean little chance of driving revenue. If a fintech just sells a bank a licence and then gets the hell out, the bank has a much lowered chance to see commercial success.
We think that the true measure of whether a fintech is serious about a partnership is by assessing the risk they’d incur should the product or service fail. The way that Auka’s model works is that unless the bank drives adoption and makes money, we don’t either.
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