AUKA Market Report, Q1 2018 · Auka was named as the fastest growing fintech company by Deloitte...

AUKA Market Report, Q1 2018

PSD2: Turning compliance into opportunity

AUKA Market Report, Q1 2018


PSD2:Turning compliance

into opportunity

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Who is Auka?

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What is PSD2

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European banker perception:an overview of key findings

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Compliance --> Opportunity

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The window of opportunity

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The cost of innovation

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Get connected

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Get in touch

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Market Report, Q1 2018


3 _ Contents

Contents

Founded in 2010, Auka are mobile payments pioneers. They are the technology

company behind mCASH, the first mobile payments platform to launch in Norway.

Since then, the Nordics have enjoyed the highest rates of mobile payment

adoption in the world.

Denmark

sweden

norway



4 _ Who is Auka?

Whois Auka?

Auka was named as the fastest growing fintech company by Deloitte Fast 500

EMEA and was cited as one of the hottest 16 Nordic fintech startups by Business

Insider. It was also named mobile payments platform of the year by CFI

magazine and was included in the European Fintech Awards top 100 in 2017.

In February 2014, Auka went direct

to consumers, launching mCash in

the Norwegian market and quickly

amassed hundreds of thousands of

users. In October 2015, the Sparebank 1

collective in Norway acquired the

licensing rights for the mCASH product

and name.



5 _ Who is Auka?

In April 2016, Auka pivoted their model. It launched its services and products on a B2B white-label platform, enabling banks to benefit from both the Auka technology and the know-how accumulated over several years as a digital channel pioneer.

Auka’s white-label mobile payments and digital channel products support banks’

customer acquisition and revenue generation efforts. These products are delivered

using the Software-as-a-Service (SaaS) model. Auka has an e-money license, is

PCI compliant and is fully FSA approved. They were also the first licensed financial

services company to run entirely on the Google Cloud Platform, later followed

by tier 1 bank, HSBC.


Auka specialises in mobile payment services that allow users to pay with their smartphone, using their preferred source

of funding in any payment scenario.

6 _ Who is Auka? Market Report, Q1 2018

Auka’s mobile payments platform has

been integrated by 18 Scandinavian

banks. It was one of the core

technologies in the establishment of

the mobile payments cooperation

initiative of 107 banks in Norway in

August 2017. Auka specialises in mobile

payment services that allow users to

pay with their smartphone using their

preferred source of funding in any

payment scenario, agnostic to either

the payment device or the bank.

Its Peer-to-Peer (P2P) mobile payments

platform can be configured to allow

individuals to make fast, personal

payments using a number of different

identifiers including mobile phone

numbers, bank account numbers or

social media profiles.

Auka’s Peer-to-Merchant (P2M) mobile

payments platform enables retailers

and SMEs to offer customers the option

to pay for goods and services using

their mobile phone.

Delivered as flexible components via a software development kit (SDK) or Auka

white-labelled product interfaces.


7 _ Who is Auka?

Productmodules

P2P (PERSON TO PERSON)

identity

credit and lending

p2m - preorder payments

p2m - digital cash

p2m - integrated payments


Auka’s core platform provides an API catalogue for banks needing to meet PSD2

requirements. They also get the benefit of becoming a PISP (payment initiation

service provider) and an AISP (account information service provider).


8 _ Who is Auka?

Auka enables banks to use its features to make their own channels better. When PSD2 APIs open up, Auka will aggregate and integrate them into its customers’ channels.


The second payment services directive (PSD2) regulations, which must be

enshrined in law by all EU member states by 13 January 2018, require financial

institutions and PSPs (payment service providers) to make a number of changes.

The most significant of these changes is that those operating in these markets are

compelled to expose compliant, open APIs.


9 _ What is PSD2?

What isPSD2?



10 _ What is PSD2?

PSD2 API | API MGMT

PSD2 COMPLIANCE

Check compliance box.Account / payments APIs ready.

WINEYEBALLS

Mobile Payments | PFM

CHANNEL

Build user base and frequency of use in new powerful channel.Combine own TTP and new services in a compelling user proposition.

Aggregation

AGGREGATE IN CHANNEL

Enhance channel by aggregating.Become PISP / AISP.

Marketplace | TPP portal | Extended API Catalogue

OPEN BANKING

Seek help from would-be-competitiors.Pick, curate and connect with trusted TPPs.

White-label or co-brand services at own discretion.


This new directive is undoubtedly the largest shake-up the payments industry has

faced in many years. Put it this way, for 99% of bankers at the top of their game

today: this is the biggest change they’ll face in their entire careers. Yes, even

bigger than internet banking.


11 _ What is PSD2?

PSD2 aims to bring banking into the age of “right here,right now” by increasing competition and thus, innovation.This is a directive for the people as it means a greater slew

of choice, better services and enhanced securityand protection measures.


Auka recently commissioned independent research where they asked 1,500

senior bankers from across 15 EU regions a series of questions about their PSD2

knowledge, concerns and strategies.

While an average of 82% had a plan in place for PSD2 compliance, more than

two in five (42%) said they felt worried about the possible effects of PSD2 on their

banking organisation.

With PSD2 heralding the greatest payments shake-up basically all banks have

ever faced, it would be safe to assume that there’d be a certain acceptance of the

need for organisational change. Right?

Well, surprisingly, two-thirds of all bankers surveyed said that they did not believe

their workplace would have to adapt or shift its model significantly in order to

stay relevant, post-PSD2.


12 _ European banker perception (and why it needs to change)

European bankerperception

Further, a whopping three quarters(in fact, a little more: 76%), of those surveyed said they didn’t

think their roles would have to change at all.

(and why it needs to change)



13 _ European banker perception (and why it needs to change)

PSD2 Research*

Keyfindings

76% 32% 42%still researching

how to become PSD2 compliant

worried about PSD2effect on theirorganisation

are awareof the PSD2 and RTS

timelines

26%worried that outside

threats will take the role of the bank within

five years

76%don’t believe their

individual roles will need to change

35%expect a fundamental

shift in bankingover the next

five years

66%see as positive

to become PSD2compliant ASAP

*LM Research & Marketing Consultancy

66%don’t think bank

will have to adaptin order to stay

relevant


In the last section, the threat of disruption should a bank choose to simply comply

alone with PSD2 was spelled out.

Look at compliance like this: simply ticking the right boxes and ensuring their

APIs are exposed puts a bank on the same footing as every other bank. Any

licensed third-party (including other banks) can exploit the newly opened APIs

to their own advantage. At the start, it won’t matter as the customers still have

their accounts and their money with the bank. But in time, the bank starts to miss

out on any associated payment revenue and thus the daily interactions with their

customers. Not just this, but gone too are the opportunities to market and upsell

to that customer at the most opportune times. The data will be better than ever

before but it will be generated and utilised in the interfaces operated by others.

The customer is using third-party apps for everything. They have no reason to

go into their mobile banking app. The saying “out of sight, out of mind” couldn’t

be truer in this circumstance.


14 _ Compliance --> Opportunity

Compliance--> Opportunity

If it looked gloomy, never fear - there is good news ahead.

So, what can a bank do about this?Well, firstly, don’t panic.


Banks have an 18-month advantage (detailed in the next section) and can create

channels that their customers need, want and will love prior to having to hand

over the keys.

Built and launched correctly, it means that when the time comes, the customer

(and all the new customers acquired through these competitive new channels)

don’t feel as strong of a pull to use a competing product from a third-party they

don’t trust as much. Saturation of the market is key.

Although this is a huge part of it, it’s not simply about retaining relevance and

existing customer attention. The largest opportunity banks in Europe have right

now is to grow their customer share and make money from new digital channels,

before the PSD2 regulatory technical standards (RTS) deadline of September 2019.

Those waiting to enter the market know the monetary potential of a post-PSD2

world. Facebook has messenger payments, Google’s already launched a P2P

mobile wallet in India and Apple will use the iMessage functionality as its core

P2P payments platform. Why would these tech giants be investing so heavily in

channels to take payments away from the banks and the card companies if there

wasn’t any financial benefit?


These channels include mobile payments built around the ability to pay and get paid by anyone in any circumstance.

Market Report, Q1 201815 _ Compliance --> Opportunity

No bank-issued mobile payment solutions apart from those deployed in

Scandinavia, have ever produced any revenue for the bank. An NFC solution

simply replicates existing payment methods. Further, it does not give merchants or

banks any insights into consumer behaviour/purchase patterns. Mobile payments

done right give banks an unparalleled insight into what consumers are spending,

how and when. They can see like never before how merchants are performing.

There are multiple cross-sell opportunities for both everyday members of the

public and merchants using the mobile payments channel. When the solution is

available to all members of the public regardless of which bank they ordinarily

use, the bank also has the opportunity to expand its customer base.


Mobile payments done right give banksan unparalleled insight into

what consumers are spending, how and when.



Mobile payments are an enabler for multiple new revenue streams

Secure newrevenue channels

Expand commercial territory and monetise value-added services

Up-sellother

financialservices

Expandpaymentoffering

Transaction revenue from

day one

Merchantservices

Personto

Person

Personto

Merchant

PreOrder payments

Credit&

lending

Loyaltyprograms

Invoicepayments

Savings

Customerinsight

& marketanalysis

Recurringpayments

Investments

Customerengagement

Onlinepayments

POSpayments

Financialadvice

In-appoffers


Once a bank has built and controlled a payments channel for millions of

customers – individuals, small merchants and larger retailers, they have the best

and cheapest sales channel at their disposal. If they decide to sell traditional

bank products and offer interesting real-time credit options, that’s up to them,

but the customer acquisition cost in this circumstance cannot be beaten. That is

exactly why the technology and media giants are building their proposition,

even if they believe payments will become commoditised and ultimately free.

The window of opportunity has been cranked open for banks. For now. Read on.


We know that the eyeballs(the attention and use of a product)

of customers = revenue.

Own the channel and the eyeballsand you can monetise it even when the channel itself

was initially expensive to build and run.


This gives banks 18-months before they have to expose PSD2 interfaces to

third-parties. Google, Facebook and Apple have already launched payment

solutions that can be introduced to the European market once they have API

access. What this means, in a nutshell, is that banks in Europe have an 18-month

head start on the tech giants wanting to re-direct the public’s attention to their

own digital channels.

PSD2 comes into effect 13th January 2018. Banks don’t have to comply with the

regulatory technical standards (RTS) on strong customer authentication (SCA)

and common communication by then, though. They have 18 months after the

finalisation of RTS (which is estimated to be around September 2019) to comply.


19 _ The window of opportunity

The windowof opportunity


Many bankers we speak to cite prohibitive-costs as a barrier for change. Innovation

doesn’t have to cost the earth and the longer-term revenue benefits will far

outweigh initial outlay.


20 _ The cost of innovation

The costof innovation

Typically, the project lead doesn’t even need to ask fora budget. Auka offers proof of concept (PoC) solutions,

tailored to your requirements, at minimal cost.Test fast at a low cost.

Most vendors have no first-hand experiencein launching a mobile payment solution to market.

Auka has.


As a startup with limited budget, Auka successfully launched a mobile payments

solution direct to market and quickly gained a lot of traction. This was in a market

where mobile payments were a brand new concept. The product was such a success

that Norway’s largest bank, DNB, quickly followed up by launching their own

solution backed by an unprecedented marketing budget.

We have the experience and know how under our belt, combined with

a comprehensive understanding of the market. Spending a lot of time on learning,

developing and forming a marketing strategy isn’t required. We have the blueprint

based on previous success for the bank to take, adapt and run with.


We have done it before and can provide a step-by-steptoolbox for launching in your region,

including a breakdown of anticipated costsand revenues.

21 _ The cost of innovation Market Report, Q1 2018

The thought of building individual PSD2 connections to all competitors can be

overwhelming. Auka has the license and technology in place to deliver both

account aggregation and payment initiation as an “all in one” service. So when

the APIs of other banks become available, we can plug them into your channel,

giving your customers the experience they expect.

22 _ Get connected

Getconnected

42% of surveyed bankers (1,500 bankers across 15 European regions) say they’re worried about the effect PSD2

will have on their organisation.



23 _ Get connected


paying friendswith phone numbers

f l e x i b l es p e n d i n g

Bank accountdirect debit with balance

f l e x i b l ef u n d i n g

paying merchants with merchant number

payment cardcard from any issuer

paying merchants online and with qr codes

post paidcredit account

paying merchants inside popular apps

installmentscredit agreement

shopping from merchants browsing the marketplace

pre-paidstored value account

What is the magical mobile payment recipe that has transformed markets?

Why does it workfor everyone?


Getin touch

_

Do you want to know more about how Auka could help your bank get ready for PSD2? Get in touch

Email: [email protected]

Web: auka.io/contact-us

Phone: +47 21 99 94 59

http://info.auka.io/talktoanexpert

AUKA Market Report, Q1 2018 · Auka was named as the fastest growing fintech company by Deloitte...

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Transcript of AUKA Market Report, Q1 2018 · Auka was named as the fastest growing fintech company by Deloitte...