Possibilities of using the account information service and starting operation in Latvia

In order to understand how PSD2 has facilitated the development of innovations, in this article we will look at the development of account information services and their interaction with the finance technology, or FinTech, sector.

PSD2 entered into force on 25 November 2015 but was introduced in Latvia in July 2018 by the Law on Payment Services and Electronic Money. The main aims of the regulation were to ensure safer payments, improve consumer protection, as well as to facilitate the development of innovations and competition between the traditional players in the field of payments and providers of innovative services, and as a result of which two new types of payment services – the payment initiation service and the account information service – became available to customers.

What is the account information service?

The account information service is an online service. In using it, summarised information about one or more payment accounts of the payment service user opened with another provider of payment services or several payment service providers is provided to the user of the payment service.

Provider of the account information service:

• provides the account information service after the user of the payment service has given explicit consent to receive such service;
• gains access to information about the payment accounts indicated by the user of the payment service, and the related payment transactions;
• does not request sensitive payment data related to payment accounts and does not use, access or store any data for any purposes other than to provide the account information service in accordance with an explicit request by the payer.

Whereas, for the customer the account information service provides the opportunity to easily acquaint him/herself, in a summarised form, with information about the contents of his/her payment accounts held with another bank or payment service provider and available online.

Practical examples in the field of the provision of account information services

Prima facie, it might seem that the scope of application of the account information service is rather narrow, as this service provides summarised information to the customer about the contents of payment accounts with various banks. However, this is not true, and the account information service can be used more widely – it can be an additional element to various business models to ensure a new and easy-to-use service/product based on the customer needs and habits.

The information that is provided by the provider of the account information service can be used in various sectors.

• In crediting – the potential lender, with the customer’s consent, may instantly gain the customer’s bank information in order to analyse the customer’s financial data swiftly and qualitatively. By categorising these data, the crediting company may, within minutes, reply to the potential customer regarding lending possibilities. The main benefit for the potential lender is the quick receipt of a loan. Use of the account information service in crediting allows one to substantially improve the provision, effectiveness and reliability of services.
• In budget planning – there are various budget planning applications available which facilitate financial accounting and planning. In cooperation with providers of account information services, there is a possibility in budget planning applications to carry out the accounting of financial transactions and keep track of the cash flow in accounts with various banks. There are applications which offer the categorisation of this information by making it transparent and easy to process.
• In accounting – with the help of the account information service, accountancy companies can offer high-quality financial advice and services based on the information on the customer’s accounts.

It is important to know that irrespective of the type of use of the account information service, the provider of the account information service will always have to obtain the explicit consent of the customer to obtain data from payment accounts specified by the customer which are held with other payment service providers.

The possibilities of using account information are very wide but are still under development. The growth potential is large, since the customer habits and needs evolve rapidly, and the demand for new technologies and solutions increases. If new market participants start offering to customers services which are easy to use and useful in the FinTech field, the traditional service providers are motivated to introduce new solutions in order to create a positive experience when using the service for customers.

The main challenge for the providers of the account information service is to educate economic operators about how this solution could improve the user experience of their customers and optimise cost items for the economic operator.

Companies that provide and use the account information service

SIA “Nordigen Solutions”

In Latvia and many European countries, account information services are provided to companies by SIA “Nordigen Solutions” (Nordigen), a company established in Latvia to whom the Financial Capital and Market Commission (FCMC) in July 2020 issued a licence for the operation of a payment authority with the right to provide account information services. Nordigen ensures free data access to more than 2 370 banks in Europe. In addition to the account information service, Nordigen also ensures data processing, analysis and categorisation. (For more information about Nordigen, read the company’s experience story.)

Banks

There are several banks in Latvia which provide and offer account information services to their customers, such as, “Citadele banka”, “SEB banka”, “Swedbank”, Luminor Bank Latvia Branch.

“Citadele banka” uses the account information service in the solution of its mobile app “Klix”, which ensures the carrying out of transactions by a telephone call and loan arrangement and issuance within a couple of minutes when a customer makes purchases in an online store.

Foreign experience

The FinTech company Tink AB, a payment institution licensed in Sweden with the right to provide account information and payment initiation services, operates in Europe. Tink AB focuses on open bank application programming interfaces (APIs). By using account information and payment initiation services, Tink AB offers a single API which allows customers to establish a connection to their bank account, access account statements, and initiate payments, as well as ensures additional services, such as budget planning, data categorisation, and solvency assessment. Tink AB provides access to financial data from more than 3 400 European banks and financial institutions.

Possibilities to gain the right to provide the account information service in Latvia

If you also want to provide the account information service in the European Union and participate in the development of the FinTech sector by providing an important share of the infrastructure which is necessary for the development of new applications and services, you are welcome to submit your application to the FCMC’s Innovation Hub.

Before we meet for a consultation, please acquaint yourself with information on why Latvia is the most suitable country for receiving an account information service licence.

• A licence issued by the FCMC will allow you to operate and provide services in all countries of the European Union.
• During the pre-licence evaluation, you will have the possibility to receive useful instructions and recommendations for receiving the licence at the stage of preparation of the necessary documents; this will improve the quality of the documents and expedite the licensing process.
• You will experience a simplified and transparent licensing process.
• As opposed to other types of payment services, there is no capital requirement set for a provider of account information services.
• If innovative services are created and provided by means of the account information service in the field of electronic payments, then a reduced fee can be applied for examination of the documents necessary for receiving the licence, i.e., EUR 450 (the standard fee is EUR 5 000), and, during the first three years of operation, the surveillance fee is only EUR 1 000 per year (the standard fee is EUR 3 000 plus 1.4% (inclusive) of the company’s gross income related to the provision of payment services, but not exceeding EUR 100 000 per year).

Requirements regarding the prevention of laundering of proceeds derived from criminal activity

One of the factors which expedite the licensing process for a provider of the account information service is the fact that, during a licensing process, it is not necessary to submit policies and procedures on anti-money laundering and countering terrorism and proliferation financing (AML/CTPF). However, when starting operation, the AML/CTPF policies and procedures have to be introduced and responsible persons have to be designated.

When providing the account information service, it should be taken into account that customer due diligence measures are to be applied by using a risk-based approach. The initial AML/CTPF risk of services is to be assessed as limited, since the provider of the account information services is not involved in the payment chain and does not hold the customer’s funds. In the majority of cases, the AML/CTPF risk would have to be assessed as low, which means that simplified due diligence measures shall be applicable. At the same time, the company, when providing account information services, must have an effective transaction supervision (screening) system in place, enabling one to detect whether the transaction causes suspicions regarding AML/CTPF, by applying standard or enhanced due diligence measures to customers in cases of increased risk. If you wish to learn more about AML/CTPF requirements in the field of account information services, please consult the FCMC’s Recommendations for the Establishment of the Internal Control System for Anti-Money Laundering and Countering Terrorism and Proliferation Financing and Sanctions Risk Management, and for Customer Due Diligence.

If you wish to learn more about the possibilities of licensing a provider of account information services in Latvia, please fill in an application at the FCMC’s Innovation Hub, and we’ll meet you at the consultation!