26.12.2021 - Fintech

Nordigen works with 30% of European banks already

Within a year, the data analytics startup Nordigen has integrated its new bank account information service across 2,100 European banks. Nordigen aims to become the largest open banking solutions platform for fintech startups, competing with big players such as Visa and Mastercard.

Nordigen provides account information services to financial institutions and technology companies in 31 European countries. The startup’s free and paid solutions are used by European banks, lenders, and tech startups. The free account information service provided by Nordigen is regulated by the Financial and Capital Market Commission.

The company helps move data from one bank’s infrastructure to another financial institution’s environment. Nordigen’s business model is to give access to these banking connections free of charge and to offer a variety of paid services that make programmers’ lives easier. For example, these 2,100 banks have hundreds of data formats that Nordigen’s add-on services help to convert into more usable data. Rolands Mesters, the co-founder of the startup, compares it to other well-known services. For example, the Zoom video calling tool is free for everyone, but only for 40 minutes; if you want to use it for longer, you have to pay. He believes that this makes open banking solutions more accessible to fintech startups that want to try to launch new services on the market. He is confident that, with Nordigen’s support, many new innovative solutions will emerge over time.

The company cooperates with major Baltic banks, German financial institutions, etc. “We have built a network of Europe’s largest banking integrations. We can reach tens of millions of people’s accounts with these banks,” says Mesters.

From Accountants to Lenders

“Nordigen has three user groups. One of them is accounting firms. Businesses have to send their bank statements to their accountants every month, who transcribe them into their systems. Often manually, as sometimes the documents are still paper-based. Nordigen’s open banking solution allows accountants to work with this information in a digital format. “We never thought we would be working with accountants,” says Mesters.

The second group is the various budget planners. A person can add their bank account to the planner and thus better manage their finances.

The third group is the different financial institutions that use the analysis of a person’s account statement in their decision to grant a loan. These companies have been Nordigen’s customers from day one.

Breaking Industry Tradition

Nordigen’s first, and for a long time only, service was a bank statement analysis tool. It is used by various financial institutions to make faster decisions on granting a loan to a customer. In December last year, the startup launched an account information service. That is, Nordigen helps any company in Europe that needs to obtain user account information to provide a service. And for free.

Many companies provide similar services, for example, Yodlee was the first to do so back in 1999. Currently, the largest company in this field in Europe is Tink from Sweden. But no one has offered such services for free before.

“We have proven that the future belongs to alternative payment methods, the ability to move data for free and tools that support developers and enable them to create new products,” says Mesters.

The company thought long and hard about such a service, analyzing its technical architecture. The main reason why it used to be expensive and why all the other companies are charging money for it is the expensive infrastructure. Nordigen found a way to offer it for free. Namely, within the framework of the Second Payment Services Directive (PSD2), it is possible to access the public application interfaces of banks. Mesters admits that the company spent a long time calculating the costs of offering such a service. There were also concerns about how the market and competitors would react. But this year has proved that the decision was the right one.

“It’s only a matter of time before others also offer these services for free,” he predicts.

Taking on the Big Players

Since PSD2 came into force, the fintech industry has boomed. The Directive has ensured that there is now a new payment method across Europe: the ability to pay with your own bank account, similar to the Banklink solution currently offered by Latvian banks. Therefore, people can pay directly from their bank account without the merchant having to pay fees for using the infrastructure of the big organizations, Visa and Mastercard.

This regulation introduced two changes: the possibility to pay with your bank account across Europe, as already mentioned, and the possibility for third parties to access your bank account information. Mesters explains that both technologies are driving competition for Visa and Mastercard’s payments business: the ability to pay with a bank account is a direct competitor to card payments. In turn, the possibility for third parties to access account information enables lenders to develop better alternatives to credit cards.

“To ensure that Visa and Mastercard retain control of the new technology, both companies have already bought up a number of companies in Europe and the US that offer both of these new services,” says Mesters. For example, Mastercard bought Finicity in the US and Visa tried to buy Plaid in 2020, but the US regulator did not approve the deal. “Our vision is to develop a solutions platform that will facilitate competition with Visa and Mastercard and allow businesses to reduce the costs associated with payments,” he adds.

Raises 2.1 million euros

In the summer of this year, Nordigen attracted 2.1 million euros in investments from Black Pearls VC, Inventure, Highgoal Capital, ID4 Ventures, Superangel, Calchas Holding. Angel investors, including the co-founder of Printify Artis Kehris, also participated in the investment round, Labs of Latvia wrote. So far, Nordigen has raised a total of 3.5 million euros.

The number of employees at the startup has increased from 20 to more than 50 this year, all of whom the company decided to grant stock options, Labs of Latvia wrote.

“Stock options allow employees to be part of the startup’s success story. This makes the team more motivated and focused on achieving common goals,” says Roberts Bernāns, co-founder of Nordigen.

Source: labsoflatvia.com

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