Not so long ago, banks operating in the EU were the sole and undisputed owners of their customers’ account data. Now, open banking rules allow clients to get better deals if they agree to have their account data shared by their bank with other companies, who, in turn, can use this data to design and offer their own financial products to account holders.
What is open banking?
Any business can now benefit from real-time financial data provided by banks and translate it into better processes and completely new services. This innovation in the EU payments market has made banking data a valuable commodity. The main risk in the open banking space relates to the handling of customer consent, as any unauthorized access to the process could have a huge impact on the economics and integrity of any individual end-user. This risk is managed by strict guidelines on everything – from internal and external security to transaction monitoring.
This revolutionary approach to financial services is contained in European Directive 2015/2366 (Payment Services Directive 2 – PSD 2) which aims to open up payments markets to new entrants, leading to more competition, greater choice and at better prices for consumers. It has been in force since the beginning of 2016 and Member States had to integrate it into their national legislation at the beginning of 2018.
+++(R)evolution of Open Banking in Central and Eastern Europe: perspectives, trends and players+++
Jump on the opportunity
Two Bosnians living in Sweden, Adnan Sporo and Alen Hasičević, who have been developing payment solutions for the Scandinavian market for a long time, jumped at the opportunity to grab a share of this new market. At the end of 2018, they founded the startup Fin Sharkan open banking infrastructure platform.
“In 2016 we discovered the concept of ‘open banking’ and the new Second Payment Services Directive (PSD2) which requires every bank operating in the EU to share their account data by creating and launching interfaces dedicated application program (API). , software intermediaries that allow two applications to communicate with each other – certain activities of which are carefully scrutinized and authorized by the relevant financial authorities. Although it was clear that the concept of open banking promised huge opportunities in the payments sector, we realized that technical and regulatory complexity would prevent most European businesses from benefiting from it. It is for this reason that we decided to create a platform that would reduce complexity and make open banking accessible to all European businesses,” said Adnan Šporo.
Having already founded and liquidated several companies in the past, Adnan Sporo had no problem attracting investors for Finshark. “What proved difficult was explaining the concept of open banking so early,” he said.
Today, Finshark is owned by its founders, several investors and employees. It has evolved into an open banking platform with a layer of data and payment products currently used in Scandinavian countries, and the plan, according to Adnan Šporo, is to expand its operations to Spain, Italy, France, Germany and the Netherlands. in the third quarter of 2021.
Competition is strong
Finshark operates in a competitive environment, which, according to Adnan Šporo, is a good thing: “The main idea of PSD2 is to enable innovation and bring more diversity to the financial sector. The road to this innovation is paved with challenges that can be overcome by choosing the right financial partner.
At the time of Finshark’s creation, several competing platforms were also being created.
“Some of the bigger ones, like Tink and Plaid, were already in the commercialization phase because they started much earlier as consumer products. These two companies continue to be leaders in open banking infrastructure and products. Mergers and acquisitions are already underway, with Tink also being a leader in this field,” said Adnan Šporo.
Looking to the Future of Open Banking
“However,” he explained, “we need to look beyond PSD2 and see what is possible today. In Scandinavia, for example, the majority of financial tools (such as the banking identifier used for strong customer authentication) are pushing the limits of what is possible almost daily. It is plausible that we will see a few dominant players in the financial market in the future, but this will require much more sophisticated financial products from anyone who wants to take a dominant position in the market. Currently, many are looking to compete with existing solutions with new and improved open banking technology. We believe a better way forward is to completely replace existing solutions with next-generation products based not only on open banking technology, but even more so on the financial tools consumers know and trust.
Recipe for success
For this reason, at the end of 2018, Adnan Šporo and Alen Hasičević founded HiQ Development, a sister company in Sarajevo, Bosnia and Herzegovina. “In order to develop the next generation of financial products, you need talented people to work with you. The pool of talented people is particularly strong in Bosnia and Herzegovina and, as Alen and I were born there, starting a business in Bosnia and Herzegovina and not in another neighboring country was a natural choice. However, the main reason for choosing Bosnia is access to a pool of highly talented people,” said Adnan Sporo.
Tarik Jažić, Head of People Operations at HiQ Development, explained that “a connection between our people in Scandinavia and the national workforce in Bosnia and Herzegovina has proven to be the recipe for business success.” “We have provided a young and professional Bosnian workforce, capable of keeping up with innovations and market demands, because this connection with the diaspora allows them to more easily access not only the international market, but also new trends and innovations.
Slowly take on the challenge
Adnan Sporo believes that the complex political and financial reality of many Western Balkan countries, including Bosnia and Herzegovina, hinders innovation and that, unfortunately, there are so far no signs of adaptation to European regulations in open banking. He stressed, however, that there is reason for optimism, as banks and other financial institutions themselves could lead the way, simply because they need to remain competitive and keep up with what is happening in the rest of the world. Europe.
“While PSD2 imposed a huge burden on banks operating in the EU and many were initially reluctant to fully implement the regulation into their systems, the situation changed over time and most banks have now fully embraced the concept of open banking. This shift happened gradually as more and more banks realized that while they had to open up their data to potential competition, they were also able to consume data from other sources that were previously closed to them. Some banks even go so far as to open systems – via premium APIs – which are not even required by PSD2,” explained Adnan Šporo.
HiQ Development was also recognized by USAID which financially supported the company through its “Diaspora Invest” project. This support was used by HiQ Development to purchase IT equipment which helped pave the way for increasing the number of employees. Today, HiQ Development has 16 employees.
“We are confident that 2021 will bring new growth and opportunities. We also have plans for new projects, but it is too early to talk about them,” said Adnan Sporo.