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Tink: Banks’ poor-quality APIs threaten success of PSD2

With the regulatory technical standards (RTS) deadline of Europe’s new Payment Services Directive (PSD2) fast-approaching on September 14, European banks have failed to provide the proper technology environment for third party providers (TPPs) to access payments data as required by the new law, claim Swedish open banking platform Tink.

European banks were mandated to make their production application programming interfaces (APIs) available by June 14 - three months before the final RTS deadline. Tink’s analysis shows that while 69% of the production APIs were available by that date, not a single API was found to be of sufficient quality to have met the required regulatory standards for integration.

Tink reports that banks are welcoming feedback on the quality of their APIs and show willingness to improve. However, the lack of the expected seamless transition from the sandbox environment from pre-June 14 “risks derailing the vision of PSD2 – and compromising the experience of millions of consumers who rely on innovative money management services that they have come to enjoy in a pre-PSD2 era.

“In order to ensure a continued service to end users from September – and in the absence of quality production APIs – TPPs will now need to rely on contingency methods (fallback) stipulated by PSD2.”

However, Tink believes there is a risk that banks could be “let off the hook” from providing these contingency methods – and provided an exemption simply on the basis of having made their APIs available, regardless of the quality. This would see TPPs forced to operate in a poor-quality working environment.

More time needed

Commenting on his company’s findings, Tomas Prochazka, vice president of product at Tink, said: “With less than three months to go until every financial institution in Europe is required to be fully compliant with PSD2’s RTS, this is concerning news.

“While efforts from both sides are being made to make the deadline work, TPPs all over Europe are being left in the dark. Unanswered questions - such as who will be granted an exemption from providing a fallback method and when these exemptions will be issued - mean they are faced with a suboptimal working environment.

“It’s in everyone’s interest to make sure that end users are able to continue enjoying the services they have become accustomed to after September 14 – and to ensure PSD2 and the open banking movement are successful.

“Therefore Tink is calling for an extended transition period during which TPPs will be allowed to access financial data through the PSD2-required contingency methods, while giving the banks sufficient time to produce APIs that meet the required standard.

“We’re seeing a positive response from banks wanting to get their production APIs up to standard, and we will work together to make this happen. But as an industry, we must recognise reality and accept that unless we put in place contingency plans, the fantastic opportunity presented by open banking is in peril.”

Tink says that its analysis is based on attempts to integrate 84 APIs representing 2,500 banks across 12 of Europe’s main markets in Europe. Collectively, these banks cover 90% of the population in each market surveyed.

The Swedish fintech announced last month that it has secured strategic investment of US$11.2 million from PayPal, which plans to leverage Tink’s account aggregation technology so that its European customers can connect their bank accounts to their PayPal accounts.

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