API and EMI in European payments landscape of PSD2

Do you consider there are still significant differences between a payment institution and an e-money institution in the EU? Are they competitors for banks?

I believe there is no material difference between API and EMI licences. The demands for authorised capital are a bit higher for EMI (EUR 350,000 compared to EUR 125,000 for API). As a rule, EMIs are created to issue prepaid cards. In all other respects, these licences are very much alike. I dont think one can see API/EMI as alternatives to traditional banks. Payment companies are their partners, not competitors. We see great potential for partnerships of this kind, especially in the light of the new payment directive PSD2 that will come in force in all EU States before the end of 2018. Many experts believe that the market of banking and payment services will undergo a serious transformation in the near future. Fintech companies will serve as a kind of a front office for banks, while banks will keep the role of back end.

Getting a bank licence rather than to become authorised as payment institution is more difficult. In what business circumstances should a company choose to become authorised as a payment institution?

It is incorrect to contrast banks and payment companies. Both types of structures have a right to exist and should add to each others functionality, as I have already said above. Payment companies, being the partners of banks, a front-end of some kind, are more mobile and flexible and less regulated. They have to considerably change the landscape of the modern payment system.

Do you think PSD2 will transform the relationship between banks and payment /e-money institutions?

I really hope for it. As you know, according to PSD2, all European banks will have to provide open API. Many banks have already done it. Unfortunately, banks are often reluctant to collaborate with PSPs as they see it as an additional source of risk. I do hope that this approach would change, in particular due to a number of legislative norms provided in PSD2.

As of January 2018, the EU member states will implement PSD2 regulation. Could you explain how this major shift in payments ecosystem will affect your business?

First of all, I hope that after PSD2 comes into force, Europe will become even more interested in licenced payments. Moreover, there will be more possibilities for the payment market players allowing to use this instrument even more efficiently. Our company is very closely connected with the payment services market, therefore these changes should be positive for us.

Regarding PSD2 enforcement, does Advapay ?Ü, Canopus IT contemplate the possibility of transforming itself into a TPP?

Yes, right now me and a number of my partners are in the process of founding our own company with the Authorised Payment Institution PayAlly licence. I believe the availability of such a tool will considerably broaden our possibilities.

There is a clear trend lately that Russia is going to innovate more in the field of ecommerce. Could you elaborate on the implications this approach will have on Canopus business model?

Many of our customers have their own banking or payment businesses in Russia. They see the foundation of a European licenced payment company as a tool to expand the possibilities of the existing business infrastructure and its diversification. And we help them do so. Sberbank is a major player in the Russian retail banking services market. However, I am quite sceptical about bold statements and large-scale projects. We are more oriented towards niche players of the payment market.

In your last article at The Paypers, you mentioned that in 2015, Advapay ?Ü had introduced a complex solution for running payment processing business in Europe. Could you explain what are the mechanisms behind it? How does it work?

Our specialty lies in the fact that we offer our customers a comprehensive solution including business consulting, assistance with licencing, establishing relations with partners, banks, other payment systems, IT solutions, etc. Not many companies in the market are able to offer such a range of services. Naturally, we are working in close cooperation with our partners – lawyer firms, business consultants in certain specialised areas, banks. That is how we guarantee our customers high quality of rendered services.

What are the main benefits of this API/EMI solution for the customers who want to adopt it?

The cost of creation and ownership for API/EMI is considerably lower than that for traditional banks. At the same time, such companies may render their customers many of the same financial services as banks: issue and service payment cards, perform Internet-acquiring, make SEPA/SWIFT payments, convert currencies, etc. They are not strictly regulated and in many cases can replace or complement traditional bank structures.

About Maxim B. Ivanchenko

Maxim B. Ivanchenko is the founder and CEO of the Canopus IT and Advapay, a graduate of the Bauman Moscow State Technical University in aerospace engineering. Since his early years at the university Maxim has been involved in information technology and decision theory, including the theory of multicriteria optimisation, fuzzy sets and numbers. He has finished a postgraduate course in Management Studies at the Moscow Institute of Mines. Maxim set up the company in 1992 and has been its CEO ever since.

About Advapay ?Ü

Advapay OÜ is business integrator which together with the partnership net renders services in payment business development, complex turnkey solutions and consulting. Advapay ?Ü is also an informational platform for the companies in the sphere of banking and payment services created for the purpose of experience exchange and the complex solutions promotion in a single space.