INNOPAY Experience Lab helps banks prepare for PSD2 and Open Banking

13 December 2017

Management consulting firm INNOPAY has launched an Experience Lab that supports banks to strategise, design and effectively deliver on their PSD2 and Open Banking ambition. According to the initiators, PSD2 and Open Banking strategies should go hand-in-hand and aim at being compliant while creating (or at least not blocking) growth potential for the business.

PSD2 in a nutshell

With the introduction of the revised Payment Services Directive (PSD2) the European payment landscape has (again) arrived at the advent of transformational change. PSD2 has several objectives, including the goal to achieve further harmonisation of the EU payments landscape, to strengthen consumer protection, to drive competition, and to facilitate innovation by further ‘opening-up’ the payments market. PSD2 must be transposed into national law by each member state by 13 January 2018. Some EU member states have already indicated that this timeline will be difficult to meet, however.

PSD2 introduces three types of services that can be offered by the respective providers: payment initiation services (PIS), account information services (AIS), and confirmation availability of funds (CAF). PSD2 will allow those commonly referred to as ‘third party providers’ (TPPs) to provide a new digital channel to access bank customers’ payment accounts – upon their explicit consent. TPPs refer to a very diverse group of potential players willing and able to adhere to the regulatory requirements, spanning FinTech companies, big merchants and ERP/accounting software providers, as well as incumbent payment players in the form of banks and payment and e-money institutions.

Banks are challenged to offer a communication interface that is compliant with PSD2 and the Regulatory Technical Standard (RTS) on Strong Customer Authentication (SCA) and Common and Secure Communication (CSC)*. Many banks across Europe consider putting a “dedicated interface” or more commonly referred to as “Application Programming Interface (API)” in place to satisfy the requirements. The API is specifically designed to enable TPPs access to payment accounts of the banks’ customers.


PSD2, and API-based access to payment accounts in particular, are accelerating change in payments, innovative banking applications and respective business and operating models. Experts highlight that banking executives should carefully consider the implementation choices they face and the implications these could have for their positioning and future strategic options.

Value add of the INNOPAY Experience Lab

The newly launched INNOPAY Experience Lab is available to customers as a tool for strategy development and strategy validation, explains Ronald Hoeksma, Technology Lead at INNOPAY. “One of the Lab’s capabilities is the MyUros (TPP) app, which we install on the devices of key stakeholders in the strategy development and implementation process. In an interactive session at the start of the cycle, we then discuss experiences and align visions to create a back log for a combined consultancy and development sprint to analyse and show alternative implementations or optimisations. Using this information, simulations of the collaboration with TPP’s, with a specific interaction model, can demonstrate how a TPP might leverage access to payment accounts to offer innovative payment and information services. The process is iterative, and makes the strategy development process and implementation approach more fact based and can be repeated as desired.”

The INNOPAY Experience Lab contains according to Hoeksma realistic models of banks exposing services for ‘access to the account’ (XS2A) through API gateways. Hoeksma: “We’ve worked with providers of top tier tools and software to assure that our model is representative for the real world.” 

Key in the approach is that client situations can be specifically tailored for. “The apps and models can be changed to client specifics to answer ‘what-if’ questions too, as all programming code is under our control”, Hoeksma explains. Further, other parameters, such as API gateways or TPP policies, can be changed on the fly to demonstrate certain management or behavioural changes. Hoeksma: “Our ecosystem provides a unique opportunity to test multi bank scenario’s. It uses a shared test currency and includes clearing and settlement. Testing ideas and services is always a problem based on real services, due to their sensitive nature. Services that are available for testing, usually only cover a part of a system. Our ecosystem is complete and realistic.”

Another area where the INNOPAY Experience Lab can be used is for the validation and refinement phase of an implementation blueprint, adds Mounaim Cortet, Manager PSD2 and Open Banking at INNOPAY. “If a strategy is already more developed, bank decision-makers may want to benefit from a second opinion on their PSD2 compliance design. The Experience Lab can be used to validate the design, to make it tangible from a customer’s point of view and to show potential improvements and alternatives.”

An area where a second opinion may provide highly valuable is in the interaction model utilised. Cortet: “We observe that banks seem to have varying interpretations regarding the interaction model they are required to support to enable XS2A in a compliant manner. Based on the design decisions made by the bank, access can be more seamless.”

Optimising Open Banking business value

While compliance is the key use case of the Experience Lab, say Hoeksma and Cortet, it enables stakeholders to take a more integral approach to the matter, particularly when it comes to harnessing the potential offered by open banking. “PSD2 and Open Banking strategies should go hand-in-hand and aim at being compliant while creating (or at least not blocking) growth potential for your business. However, a suboptimal PSD2 compliance strategy and implementation can result in the opposite by causing structural damage to your Open Banking potential and propositions. You have to get your initial approach and associated offerings right,” states Hoeksma.

One danger that looms on the horizon is that banks risk overachieving on XS2A compliance. In an article published in October this year, Cortet together with Vincent Jansen, a colleague at consulting firm INNOPAY, warned that doing so may put open banking strategies at risk. “Banks need to be mindful of the considerations and trade-off decisions regarding APIs to ensure XS2A compliance. The most relevant areas of decision making are functional scope of access and interaction models,” they wrote. This is where the Experience Lab could come in and play a role in clarifying the trade-offs and best options going forward. Hoeksma: “The Experience Lab is an important tool to provide clarity on PSD2 and Open banking choices, while giving comfort about the feasibility of preferred choices.”

More information about the INNOPAY Experience Lab can be found on the website of the consultancy.

Related: INNOPAY supports Euro Banking Association deliver Open Banking paper.