• Steve Kirsch, CEO and Founder at Token, Inc


• 30.06.2016 09:45 am

Regulations have always been a stumbling point for financial institutions on the road to more effective and innovative banking systems. Indeed, new regulatory changes are having a huge effect on these institutions. Regulators are now adapting to recent market disruptions in an attempt to strike a balance between healthy competition, room for innovation and market transparency. The emerging regulatory change, PSD2, is set to open up new horizons in digital banking and facilitate exciting innovation in payments. Financial IT met with Steve Kirsch, a serial entrepreneur from Silicon Valley and CEO of Token, Inc to discuss how banks can gain a competitive edge in the PSD2 era of banking.

Founded in 2015, Token is a payment system designed specifically for banking in the digital age. Through the monetization of APIs, Token can transform PSD2 from a loss-leader into profit center, representing a huge benefit to banks. In addition to this, the solution offers rich payments functionality combined with the support of real time local and cross border payments. Token works hard to provide advanced security and a frictionless user experience.

“PSD2 is the best thing that’s ever happened to the banking industry from a technology perspective,” starts Kirsch. “My main argument for this is that it opens up a bank’s API for use by third party applications. Previously banks’ connections to the internet were designed for humans. But humans don’t move a lot of money in comparison to computers. It’s now far more important that we open up APIs for computers than for humans. So that’s what we have done with Token. We created a smart token paradigm, giving banks the technology and the ability to manage transactions using smart tokens.”

Kirsch draws a parallel between PSD2 and the Uber phenomenon, as the upcoming regulation is predicted to significantly improve the end user experience.

“If we take Uber as an analogy, what we’ve written is an app that shows you where the cars are, allows you to request the cars and then handle the money transfer at the end. That’s the technology that we bring to banks. It’s like a combination of Uber’s app, plus the independent drivers. Before us, banks were gearing up to write their own APIs. In ‘Uber’ terms, this would have meant that users would be bombarded with different apps, which wouldn’t be able to combine to tell you when your car was coming, which cars you could request and so on. It would be a disaster for everybody. In our secure system, we provide the advanced functionality in a one stop shop, single API for everybody and all developers.”

Compliance with PSD2 usually costs millions of Euros however, payment networks like Token can significantly reduce these expenses and boost performance.

“Most of the banks we have spoken to were planning to spend around 16 million Euros onPSD2 compliance. Our solution to comply with PSD2 requires just six internal APIs and no further actions for the banks. It’s quick, simple and easy for a bank to implement, as well as being inexpensive. We’re saving banks millions of Euros. Take Fidor bank, for example. The only effort they had to make was to give us the appropriate credentials to access their APIs and, like that, they became PSD2 compliant. The bank simply had to answer the phone to connect into the Token system. It’s the fastest, easiest way to get certified with PSD2 and to alleviate the worries about the RTS (Regulatory Technical Standards) from EBA. Moreover, we enable banks to monetize the API calls. That’s why it’s not just the solution for PSD2 compliance; it is actually a revenue generator.”