Fintech 2.0. What is driving the massive evolution in global financial technology?
What is fintech 2:0 and where has it come from? Industry experts outline the factors behind its massive growth.
There are lots of different terms to contend with when it comes to making online payments, and acronyms are often freely used without any context. Here we will unpack three of the most common types of financial institution.
An API is an organization that is authorized to make payments. This spans multiple areas of finance: credit card processors, payment account operators, remittance operators, foreign exchange businesses, and payment initiation businesses are all examples of APIs.
These institutions must be authorized by the regulatory body in the relevant country, like the Financial Conduct Authority in the UK. A licensed API will satisfy all of the regulator’s requirements, meaning that customers can have confidence in their chosen provider. Here at Inpay, our cross-border payments solutions are regulated by the Danish FSA. We are also an authorized payment institution in the EU.
An EMI is a type of API that is authorized to handle electronic money (e-money), which can be defined as the monetary value stored in digital form. This is a digital alternative to cash, as opposed to cash held on a bank card or in an online bank account — these are simply electronic ways to access real money held by the bank. It can be difficult to identify whether an asset is classed as e-money or not but this guidance from the European Central Bank should be able to help.
Again, EMIs can be authorized to operate in numerous areas of finance such as payment services, cash withdrawal and deposit services, remittance services, and direct debit or credit transfers. It’s very important for customers to check what an institution is authorized as if they want a provider to handle their e-money. APIs can only issue and hold electronic money once they have been licensed as EMIs.
A payment service provider (PSP) is a third-party financial institution that carries out payment services. APIs and EMIs are simply two different kinds of PSP.
Any financial institution offering payment services is classed as a PSP, regardless of whether it is an API or an EMI. PSPs include big names such as Paypal, Stripe, Square and Klarna, as well as Amazon, Apple and Google Pay. There are also numerous smaller fintechs offering payment services, either in collaboration with banks or directly with businesses.
PSPs can offer a variety of financial services. For example, a PSP can help businesses accept credit and debit payments by working with banks and acting as a bridge to the broader financial world. Providers may also offer transaction reporting features and higher levels of security.
Another common service offered by PSPs is cross-border payments, which is exactly what we do here at Inpay by processing multiple currencies. Our cutting-edge technology and direct access to domestic clearing channels enable us to process payments to 100+ countries in a fraction of the time, and for the fraction of the price of a traditional international bank transfer.
There are lots of good reasons to work with a PSP. Firstly, partnering with a PSP means all payments are taken care of, enabling businesses to focus on running the company. It may also allow a business to accept more payment methods, which means it can accept as many new customers as possible. What’s more, PSPs usually offer greater flexibility compared to their traditional counterparts, and can also help a business improve its services and become more competitive.
For example, here at Inpay, we work with financial institutions, corporations and other organizations to improve their cross-border payments. Our services give our customers an edge over their competitors as our technology enables them to offer cheap, fast, secure international money transfers through a choice of connection methods. On average, payments are received in just 30 minutes and cost 80% less.
Contact us to find out why we’re the PSP to transform your business’s cross-border payment capabilities.