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Interviews

Interview with Dmitrijus Apockinas, PayAlly, on challenges when capitalising on PSD2 opportunities

Monday 19 November 2018 | 09:49 AM CET

Dmitrijus Apockinas, the co-founder of PayAlly, presents the challenges companies face when trying to capitalise on PSD2 opportunities

Can you provide us with a few insights related to your company and PayAlly solution? How do you stand out from hundreds of other PSP and what is your value proposition to the market?

An average SME selling goods or services over internet is using from 5 to 10 different service providers in its operations, for example: a merchant account provider, ecommerce gateway, card provider, fraud and risk management provider, shopping cart CMS, currency exchange house, bank, etc. In many cases, this implies the usage of 5-10 different web portals that are not integrated in any way, and that increases operational overheads and probability of mistakes.

PayAlly platform is set to create an integrated payments ecosystem where we combine our proprietary and market technology to provide payments acceptance, distribution and day-to-day banking in one, fully integrated platform. Coupled with productivity applications such as electronic invoicing, accounting module, supply chain management, VAT module, PayAlly platform will create a product offering for those SMEs that are striving to reduce their cost of business. PayAlly platform will include the Payment Initiation Service that will help to reduce payment acceptance cost to the merchants, and help us acquire significant retail customer base with the introduction of the electronic wallet by 2020.

In your opinion, what is the major impact of PSD2 directive and how does this affect the way we pay?

In retail banking and consumer day-to-day payments, the major PSD2 impact will come through Account Information Services. Newcomer banks and EMIs with their mobile applications will gain new clients from the segments that were less prone to mobile-only banking offering. Incumbent banks that will not innovate are set to lose the customer facing platform layer and, to the lesser extent, the process layer. Such banks will own the balance sheet, safe custody of clients funds, and credit products, while fintechs will own the customer interface, will market and on-board the clients, and facilitate payment processing.

In payment acceptance, specifically in ecommerce, major impact comes from the Payment Initiation Service, which will gradually gain market share from card brands because of the reduction of the number of intermediaries (and therefore costs), and, coupled with the enhanced security and consumer protection under PSD2, it creates a winning formula for the merchants. We can expect that part of the savings derived from switching from card payments to PIS will be passed to the consumer in the form of the cashbacks on purchases via PIS instead of the card.

What are the major challenges a company like PayAlly will be facing trying to capitalise on PSD2 opportunities?

Needless to say, the Payment Initiation Service is our primary focus in medium-term. Unfortunately, the implementation of PIS is not all rosy and straightforward. It is not so difficult to implement PIS on a national level, and long before PSD2 came into force, some countries already have implemented successful Payment Initiation Services.

However, when the merchant is selling mostly outside of his country, but within the EU, cross-border PIS becomes complicated. First of all, different regulators within EU are implementing PSD2 with a different pace.

The second problem is that most banks are using legacy systems, and many of them do not posses an API. Providing the necessary API’s to the third party payment providers might therefore be difficult. The API’s are also an additional security issue for banks to take into consideration as they provide AIS and PIS. On the other hand, payment providers are worried about the access to the accounts since it is vaguely defined in the PSD2 directive and in the European Banking Authority (EBA) guidelines. The EBA is currently in the process of drafting standards and guidelines as to how the directive should be implemented technically. Therefore, cross border PIS may take several years to materialise in any significant volumes.

What is your view on practical usability of cryptocurrencies in payments and ecommerce?

At this time, at PayAlly we are very sceptical about the practical usability of crypto currencies in payments and ecommerce due to several factors: the absence of regulatory controls, CDD, AML and CTF associated risks, price volatility, recurring security issues and the time that is needed for the transaction to settle (which can range from few minutes to hours). You can call me a conservative, but with such parameters, cryptocurrency is a solution to a non-existing problem, at least in a short and medium term.

Contrary to that, blockchain technology is of interest and one of our founders is dedicating time and resources to the research of this subject. However, successful real life application of that technology in payments remains unclear.

Is there any room for payments innovation left? How will PayAlly innovate in this highly competitive market?

Absolutely, and one of the important stumbling blocks in payments are national and regional clearing and settlement systems. In most of the cases, these are connected to the legacy system, which are complex, overlapping and prone to technological and security disruptions.

In many cases, these systems require dedicated security and connectivity hardware that is expensive, slow and prone to breakdowns. Innovation in that space will be market driven and executed by the national, regional governments and central banks. Our innovation in payments will be driven by the integration of the productivity apps that improve operations, controls and reporting, thus reducing operational costs and preventing mistakes for our SME clients.

About Dmitrijus Apockinas

Dmitrijus is a MBA graduate, financial services executive and entrepreneur with over 20 years of banking, asset management, payment processing and fintech experience. He served as a top executive in three different banks and two mutual fund management companies, and before establishing PayAlly, served as COO of Net Element, Inc., NASDAQ listed payment processor.

About PayAlly

Established in early 2017, PayAlly is an FCA authorised payment institution providing payment acceptance and distribution services to the SMEs in Europe. PayAlly payments ecosystem combines card and alternative payment method acceptance with day-to-day transactional banking products in a fully integrated platform.

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