Bank API: are banks too afraid of digital transformation?

This article will explain the past and current issues faced by bank API developers in Europe using Kontomatik Banking API as an example.

Compared to the US, the European fintech industry is less developed and this happens due to various reasons: for example, smaller fundings, fewer experts or language barriers are among the most important ones. However, I feel the most crucial reason is the number of local regulators and the ways they comprehend technological penetration into the financial industry. There is an open banking API standard in Germany known as FinTS (formerly HBCI). Spain also remains quite open towards digital transformation with such a banking API developer as eurobits, that is financed by the largest Spanish banks. However, not every EU country welcomes the technology that can change the way banks understand their clients.

The Polish case

As it may often happen, after competitive products are introduced in the multi-billion industry by a few companies, its competitors would either consider introducing alike products or banning the technologies behind these competitive products. This is why a few years after the introduction of the bank API, Polish Financial Supervisory Authority issued a memo to the Kontomatik-enabled banks, recommending them to stop using its technology. This was, probably, done with some pressure from the largest banks operating in Poland.

Kontomatik bank clients had to follow the recommendation of the regulator, as it is quite powerful in Poland and any supervised company would do whatever it takes to stay out of trouble. This is how Kontomatik has lost all its banking clients in Poland.

Did this mean the end of the banking API era?

Even though this may sound like a horrible situation for Kontomatik, by the time banks stopped using API in Poland, the demand for such technologies already came through other sectors - startups and online lenders. As such, companies are not supervised by the regulator and there was nothing holding them back from delivering their services in a faster, better and safer way. Next to this, Kontomatik has started to expand globally to Czech Republic, Slovakia, Spain, Russia, Brazil and Mexico, as the regulatory environment is more welcoming in these countries.

What is about to happen?

Even though new markets and different client types can keep the business growing, it is still quite sad to face a lack of development in the Polish banking sector due to the lobbying from the major banking players. As PSD2 directive is progressing now, Kontomatik and other European Banking API developers are hoping that this directive will provide local regulators in Europe with detailed guidelines for the bank API. In other words, while some European API developers have to currently look for the most suitable market to operate, all of them still hope that soon it will be possible to push banking API technology in Europe without any border restriction.

How has it all begun?

Starting as a personal finance management application, Kontomierz.pl needed to develop a banking API to assure a flawless performance and ease of access. After the connection between the application and most of the Polish banks was enabled, the management noticed that there are far more companies that could benefit from the Bank API than just Kontomierz.pl. This is how Kontomatik Banking API was born. Even though the company had its own app and quite an extensive network in the country, it took nearly 3 years to obtain the first banking client. Why is that? It is rather simple.

Financial industry progresses quite fast, yet its banking sector remains very conservative and resistant to digital transformation. Kontomatik needed to find the organizations that are currently working in the banking sector, yet are open-minded and change-oriented. After a few years since the introduction of Kontomatik Banking API at Kontomierz.pl, a company received its first banking client - Alior Bank. This bank managed to design an award-winning PFM app and also introduced a great solution for online loans with the help of this Banking API. Next to Alior Bank, one of its competitors, IdeaBank started to use Kontomatik Banking API in order to speed up the process of client identification and improve its credit scoring at its online lending service.

Summing it all up

While consumers of financial products in some European countries can enjoy the benefits derived from the banking API technology, most of the EU member states are still quite reluctant towards digital transformation. This determines European Banking API developers to focus their development in areas outside of EU, where the attitude towards financial technology is a bit more open. Nevertheless, many unregulated financial organisations can benefit from the technology and I truly hope that their use cases would be a strong basis for the European Parliament to take a positive decision on PSD2.

About Konstantin Rabin

Konstantin has taken part in various projects in the European financial industry for the last 4 years. Currently Konstantin is heading marketing at Kontomatik - a European developer of bank API. In addition to this, Konstantin often publishes articles on finance and technology on key websites.

About Kontomatik

Kontomatik is a provider of Banking APIs. The service supplied by Kontomatik is mostly aimed for banks with competitive products, online lenders that are looking to optimise loan-issuing processes and start-ups that want to build their app around supreme technology. Online credit scoring, instant KYC and contextual financial offers are the key benefits supplied by Kontomatik, yet the main service is the provision of a tool that lets an organisation become a true innovator in the financial industry.