The acquisition of Danish fintech Aiia is the second sign in the space of a few months that open banking is entering a new phase.
Mastercard’s takeover of Aiia – previously the Nordic API Gateway – for an undisclosed sum is also further confirmation that the Nordic region is blazing a trail in a key segment of the financial technology (fintech) sector.
The agreement came hot on the heels of Visa’s €1.8bn acquisition of Sweden’s open banking fintech Tink in June. Both fintechs are now part of huge global financial services organisations with opportunities to integrate open banking technology into every corner of consumer and business financial activity.
The acquisition will give Aiia, like Tink after the Visa takeover, the resources to take a concept, often shrouded in mystery for consumers and many businesses, to new levels.
Open banking services were made possible by the EU’s Payment Services Directive 2, which came into effect in 2018. PSD2 enables third parties to access the customer data held by banks via application programming interfaces (APIs), if customer consent is granted, and offer services using this information. For example, a company, with your consent, can take a payment directly from your account without you leaving its website. In the UK, the Open Banking Regulation is its equivalent.
Aiia can already connect to 2900 banks across 18 markets to its open banking platform, with 43 bank customers and over 10 million users logins every month. But these numbers could pale into insignificance once the marketing clout of the card giants gets the message out to businesses and consumers.
There is a huge opportunity, which the open banking specialists and card giants understand. Aiia co-founder and CEO Rune Mai said Aiia and Mastercard share a mindset, ”not just on banking, but the world becoming a digital space with more people in the world accessing financial systems”.
Mai added: “The card companies have been executing plans for a while. This is what they call their multi-rail strategy where they are serving up payments in any form, in any market, enabling every human being to be able to pay in some form.”
The financial power of Mastercard and Visa will ensure there is no shortage of investment in open banking technology development going forward, and the marketing clout and reputations of the two card giants might be what is needed to jump open banking into a new orbit.
And businesses, not just consumers, are warming to the concept. A recent survey by Tink found that positivity around open banking across Europe has increased from 55% in 2019 to 71% now. With big brands now behind it, this could become supercharged.
Mai said open banking is undoubtedly entering a new phase. “Following these recent acquisitions, we will see open banking moving to the next stage,” he said. “Next year will be very exciting when these deals are closed, with Mastercard and Visa driving adoption further.
“There are many advantages of being part of Mastercard. For example, its brand is really strong, particularly among consumers, so using that to increase adoption would be great.”
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Mai added: “Combining the power and distribution of a company like Mastercard with the technology we have, for me was a huge opening. We want to grow fast, but we want to scale out in a way that we get a lot of customers that improve our technology.”
This was a view echoed by Tink CEO and co-founder Daniel Kjellén after Visa completed its acquisition of the company earlier this year. “We have built something incredible and – at the same time – we have only scratched the surface,” he said. “Joining Visa, we will be able to move faster and reach further than ever before.”
It is also telling that the global card giants have chosen fintechs from the Nordic region to take their open banking plans forward.
Mai said this is a rubber stamp for the region’s open banking focus. “If you look at the two latest acquisitions in this field, it does show how the Nordic region is leading in open banking,” he said.
One of the reasons for the advancement of open banking in the Nordics is high digital adoption, Mai pointed out. “Here in Denmark, my driving licence is digital, my healthcard is digital, my passport is digital – and everything works on my iPhone,” he said.
“Companies are also highly digital in Denmark and the Nordic region as a whole. People in society are willing to try these things out in the Nordics, so things like open banking are not unnatural for them.”
Aiia has been methodical in its approach to growth, with a strong initial focus on the Nordic region. Until recently, it was known as the Nordic API Gateway and the timing of its name change has raised questions about whether this was related to the Mastercard acquisition. But Mai said this was not the case, with the name Aiia “planned more than 18 months ago”.
He said the company’s original name was designed to help it establish itself: “We chose the name Nordic API Gateway deliberately to depict that we were Nordic. We wanted to build a model for banking in the Nordics and one that would actually be used. We wanted to do it quietly in the Nordics first before expanding to other countries.”
Mai said he expects Germany to be the next hotbed for open banking, as well significant activity in the Netherlands and the Baltic states.
Global expansion is expected following the Mastercard acquisition, but Mai expects Aiia’s significant Danish presence to continue. “Mastercard already has a large presence in Denmark and I see a great future for the company in Denmark,” he said.
Celent analyst Kieran Hines agreed that the Nordic market is a good place to start for fintech initiatives. "The Nordic markets are generally quite advanced when it comes to digital banking services, and payments in particular, which certainly helps to create the conditions for open banking and similar initiatives to develop. Also, and certainly compared to some of the larger European markets, the fact that the banking sectors in the Nordic markets are fairly concentrated means that strategic shifts on the part of even a small number of large banks can reach a large proportion of the market."
"Consolidation was always going to be a natural part of that process, and I would expect to see more deals in the coming year or two," he added. "As API quality and availability improves in mainland Europe we will see greater demand for the kind of value adding services that Tink, Aiia and their peers are offering and this will create a need for scale."