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Roberto Medrano

When a government body identifies an opportunity that can be addressed through advancements in technology, and devises a functional plan that could lead to improvements in how organizations and society work, it’s something to be celebrated. The Revised Directive on Payment Services (PSD2) is an example of a regulation that pairs technology innovation with market opportunity, all under the auspices of a government-based plan. It is a sensible directive that will change how the world conducts business, and Akana has developed a solution that will enable banking, financial services and insurance (BFSI) companies and other organizations to use APIs to drive billions of units of currency across the globe, all in a PSD2-compliant manner. It’s pretty exciting. APIs will provide a framework for organizations to open up their applications, securely transact business, and encourage additional development and innovation from third-parties.

Payment modernization

Any financial organization that wants to do business with European banks, brokerages, insurance firms, or any company or government group that handles financial data will need to adhere to the PSD2 framework, and comply with its various components in order for their data to be shared and used with these institutions. PSD2 is notable especially because it addresses both financial institutions as well as consumers with regard to openness and security.

PSD2 will create a shared, common experience for banks and users, and will ensure data protection and privacy for consumers who engage in digital financial transactions. At the heart of PSD2 is account accessibility (XS2A), which requires service providers to offer APIs that enable the sharing of user and account information. With that information, digital payments and transactions can happen and be PSD2-compliant. APIs are the conductor of all these transactions and the work being done by financial institutions right now is to develop and implement APIs that will be secure and marketable. Without the right API architecture that adheres to the constructs of PSD2 and is open to the specifics of individual financial companies; doing business with, or in, Europe will be impossible. If payments cannot be initiated or accepted, if financial services customers cannot be granted necessary access, and if banks are unable to develop innovative and marketable solutions to deliver to customers, they will be essentially cut off from a region that accounts for roughly 24% of the world’s economic activity.

From our perspective, it’s quite clear that the global economy is riding on the backs of APIs. PSD2 is new, but the concepts it is trying to promote are not. For decades all BFSI organizations have been required to constantly adapt to regulatory changes and competitive pressures in the marketplace. But the ease with which financial companies have been able to keep pace is being greatly enhanced as APIs are developed to encourage secure transactions and create opportunities for digital innovation. Where once the emphasis was on bank-to-bank money transfers, now we see customer-driven technologies like PayPal and Venmo that require interaction across multiple banks and users. The outcome remains the same – someone pays while someone else gets paid. But the intricacies of how it gets done, and the ability to do it in more convenient ways with the same data, are all made easier through the APIs that are orchestrating all that data and user involvement.

Based on our experience working with major BFSI companies and in response to PSD2, we are enhancing the Akana Platform to modernize payments, create seamless banking transactions, allow mobile wallet capabilities, enhance omni-channel access to credit, and enable companies to compete through digital product enhancements. The Akana Platform specifically addresses the requirements of PSD2, with a developer portal, and other tools that enable banks and financial services institutions to share data and create an ecosystem of partners, customers and other stakeholders. We use a pre-integrated OAuth security framework that supports different access models for internal apps and third-party providers, such as PISPs, AISPs and Fintechs, along with two-factor authentication, and consent capture and management. Because we layer APIs on the Akana API Platform, we provide financial institutions with the benefits of Akana API management, including API security, API analytics, API monetization, and developer onboarding capabilities.

While PSD2 causes disruption for financial companies, it encourages the right kind of change; the formulation of this new directive creates a mesh of connectedness that will leverage APIs to provide connectivity, sharing, security and the creation of new business models.

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