Open Banking pioneer LUXHUB enables new-generation payment services by leveraging its recently acquired PISP license. Jacques Pütz, CEO of LUXHUB, tells us about the advantages of this innovation, on both consumer and corporation sides, while sharing key use-cases that redefine the payment experience.
What are Payment Initiation Services and how are they part of Open Banking?
Open Banking is the concrete result of PSD2 (Payment Services Directive 2), which aims at making payments safer, increasing the consumers’ protection, fostering innovation and competition while ensuring a level playing field for all players, including new ones.
At LUXHUB, we saw compliance as the cornerstone of Open Banking: the very necessary first step which then enables companies, whether they be regulated or not, to integrate actual finance solutions within their own services. With the goal to provide their clients with unique – and more importantly seamless – experiences!
To be able to offer this type of innovative solutions, we have been granted both AISP (Account Information Service Provider) and PISP (Payment Initiation Service Provider) licenses. PISP is all about enabling more frictionless digital payments without the use of a credit card. Customers can easily and rapidly process payments directly through the service they are currently using. Again, the PIS enables seamless experiences and will increase the conversion rates of those providing such services to their clients.
How does it differ from traditional payment methods?
Payment Initiation Services have many advantages compared to the traditional and card-based payment services, that are, by the way, often provided by giants operating from outside of the EU.
It allows the rollout of instant payments, and therefore removes settlement and pay-out lag time. It also respects all security standards, with users being redirected to their banks, and, through SCA (Strong Customer Authentication), enjoying a seamless and secure experience.
Moreover, it gives companies, for instance online merchants, access to a wider pool of customers as no credit card is needed to initiate a payment. In fact, and according to the World Bank Global Financial Inclusion survey, only 46% of over 15, in Europe, own a credit card when over 95% of them have a bank account.
Finally, PIS reduces transaction fees by 40 to 60% compared to card payments. No intermediaries are involved in the process: fees are transparent, low and do not contain any additional costs, i.e. for failed payments.
What companies/industries can already benefit from these new types of digital payments?
The Payment Initiative Services offered by LUXHUB are destined to regulated and non-regulated entities, meaning they can be used by banks and other financial institutions, but also by any company that would like to integrate digital, account-to-account, payment solutions within their websites/apps.
These secure, fast and cheaper payment services, as described earlier, apply to a growing number of use cases, answering to the needs of consumers (looking for flexible solutions and transparency) as well as companies (lower fees and the ability to provide seamless experiences and therefore differentiate themselves from their competitors).
From supplier invoice payments and e-commerce transactions to invoice payment requests, the potential of these innovative services is unmatched: for Open Banking and Payment Initiation Services, sky’s the limit!
Sponsored by LUXHUB — This article was first published in the Silicon Luxembourg magazine. Read the full digital version of the magazine on our website, here. You can also choose to receive a hard copy at the office or at home. Subscribe now.