"The bankS in our phones": Open banking can replace expensive card payments

Open banking turns five years old. When and how did it all begin?

Open Banking is a concept and regulatory framework that allows banks and financial institutions to share data with third parties through secure APIs. The goal is to create new financial services that provide more transparency, better control and personalized solutions for consumers.

This creates a more competitive environment and leads to the development of new products to facilitate payments, manage finances, automate savings and more. In practice, Open Banking in Bulgaria is an opportunity to develop the financial sector in the country as a continuation of the PSD2 directive coming from the European Union. The necessary legal framework in Bulgaria was prepared and entered into force in 2018-2019.

Open banking for the private sector in Bulgaria began on September 17, 2019, when we received a call from the Bulgarian National Bank (BNB) that our company had received approval from the Management Board to issue a payment institution license. We were the first and at that time the only private company with such a license. This meant that we had not only met all the requirements of the regulator but also realized the first step of our dream – to improve the financial environment in Bulgaria! Of course, not everything that lay ahead was covered in roses, we also had our challenges.  

How would you describe open banking in Bulgaria by 2024 and what did the road look like?

In short, to date, we at Iris Solutions process 50 thousand (IBAN) accounts every month. We’ve had more than 5 million euros in payments and more than 6 million (API) calls made through the Open Banking channel (ed. note - based on the business of IRIS Solutions). We currently work with over 250 companies from 5 European countries. We have integrated over 70 financial institutions from the SEE region (issuers of payment accounts), we work with one of the largest utility companies in Bulgaria, and the interest in our Open Banking offers is growing daily.

If we go back to the beginning, however, in September 2019, the majority of financial institutions fulfilled the requirements of the Payment Services Directive (PSD2) formally, with the aim of achieving regulatory compliance. Of course, there was still a lot to be desired in order for the APIs opened by the banks to work smoothly, so that we could create a stable and well-functioning service.

In time, the market went through a phase of intense learning and adaptation, when it was also looking for ways to monetize the significant investments made to implement this revolutionary technology. Today, a stable and working infrastructure for digital payments and exchange of financial data has already been built, which functions in parallel with the traditional card infrastructure. I can say with confidence that the regulator (BNB) deserves the main merit, together with the Open Banking ecosystem participants, who continued to improve and upgrade the infrastructure and processes in the sector.

How is the business sector’s interest in open banking changing?

Open banking (OB) can be used for a number of services and products, but there are two main directions: delivery of account information; and initiating payments. Thus, OB can actually be used to facilitate the work of banks, accountants, non-bank credit institutions and any other business that needs access to their customers' banking information.

Payment Initiation – This is essentially a direct payment facility between a merchant's bank account and that of his customer. We can talk about a new type of payment checkout for websites, a mobile payment application with a QR code or link, a link attached to an online invoice, etc. The uses here are almost endless – from websites to insurance brokers, notaries and others, basically anyone who wants to accept digital payments quickly, cheaply and conveniently.

In the beginning, the main focus of our work was banks and non-bank financial institutions, which best understand the opportunities provided by Open Banking. This is how we managed to develop "multibanking" products for several banks in Bulgaria. Thanks to OB, instead of "The bank in our phones" it is now more correct to say: "The bankS in our phones". With OB, we manage to unite all financial institutions in one place, monitoring their movement and managing them with a few taps on your smartphone. Similar services for account information in Bulgaria are also very well received by accountants, non-bank financial institutions and ERP systems. 

Regarding payments, we are still continuing to educate the market outside the standard banking sector that OB can significantly reduce the cost of digital payments and completely replace expensive card payments. Today we work with some of the biggest online retailers for food, medical devices, gaming, and more. We have also developed a mobile application for convenient payment with QR and links for insurance brokers, notaries, and others.

How easy is it for such OB-based solutions to be scaled, and will your company find an international presence?

It is relatively easy to bring our OB solutions to Europe – with our European license, we can work in all 27 EU member states. In fact, we are already doing it - with our passported license we are already working in several European markets, and our success in Bulgaria has given us the confidence to move forward, into Romania, Croatia and Greece. We believe that we are on the right track, and the opportunities to realize our dreams are really promising.

Translated by Tzvetozar Vincent Iolov