Must-haves when Choosing Fintech Software

Fintech is the biggest disruptor of financial services that has become more of a necessity in the global business world. With an increase of customers awareness and adoption of fintech services, more and more companies emerge. This is exactly why the question is no longer about fintech changing the financial industry, but where and how to find a reliable fintech software provider.

The key to finding a reliable software provider for your fintech business comes down to five questions. Let’s take a look at everything you need to know to evaluate your potential software partner.


Does your software company provide you with everything you need to launch and manage your fintech business? A modular architecture means that the software not only supports the necessary functionalities, but also your business as a whole. From onboarding and AML/KYC procedures to opening of current accounts and issuing of co-branding cards, money transfers, payment processing, and internet/mobile banking, you are only one step away from a ready-to-use fintech system. Fintech functionality is not only about What, but also Who – who are you connected with? Ready-made gateways with banks, acquirers, card providers, SMS providers, and SWIFT/SEPA are the core of a fintech system.

But how to meet progressing PSD2 demands and embrace Open Banking? It is important that your software company has adopted a flexible architecture and provided you with open API to connect your fintech platform to different banks or third-party providers without a hitch.


Have you ever thought about the future of your fintech platform? Legislation, technologies, the business and fintech environment might change over time. When choosing fintech software, make sure it can support your needs today and in the foreseeable future. Fintech solutions should be modular to expand functionality anywhere and at any time with minimum investment. In other words, it is great if you can stack your fintech platform like Lego blocks and modify the existing interface and your own personal cabinet, following the changes in your business model or technologies.

Your fintech system shouldn’t be a mass-produced solution but customized to meet your specific project and business needs. You should easily be able to make changes in business processes and operations in real time without programming knowledge or complicated installation. The system must be user-friendly and easy to operate. For example, the process of changing customer onboarding and the AML procedure must be just 2-3 clicks away. Otherwise, you will be overwhelmed by a high number of invoices from your software provider.


Security is one of the top priorities in the modern world. This especially goes to the financial industry in the era of the open bank revolution. The PSD2 standard has already came into real force from 14 September, 2019 and an extra layer of security for customer authentication is must-have for financial services powered by companies other than banks.

Your new solution must comply with Payment Services Directives (PSD2) and personal data processing principles (GDPR) to provide stronger and more reliable customer identification. Prior to making a decision, make sure to find out more about the customer authentication solution your software provider uses.


Is your software provider experienced and trustworthy? Before moving on to the next step to receive a license of financial services, the system needs to be approved. In this stage, regulators examine the software partner’s reputation. As it turns out, the company’s experience and flawless reputation is an important factor to start a fintech business. Because you will receive a license only when your system is accepted by regulators.

With so many Fintech software providers on the market, real clients and projects are the best advocates. So, speak with existing customers and make sure that your fintech solution provider is a trusted partner.

Consultancy services

If you are a first starter in this business, you need to find an expert partner to work through some of those fintech offers and identify solutions which suits you the best.

Solutions for small and big Fintech companies differ. For example, companies with a small number of transactions should connect a Software-as-a-Service (SaaS) solution, whereas bigger fintech companies will more likely implement a more complicated in-house platform.

That’s why you need a provider with extensive fintech expertise and business acumen in the fintech arena – the expert, who advises you the best solution that suits your needs. It is not only about the solutions. A fast and pleasant experience is just as important as the solution that will make you to stick around.

EBA calls on EC to boost cross-border banking and payments
Cross-border banking and payment services in the EU are being held back by a lack of regulatory clarity and harmonisation, says the European Banking Authority (EBA).

The rise of digital services should help established and newcomer providers reach more people, including across borders, says the EBA in a report developed under its Fintech Roadmap.

However, concludes the report, the promise is not being fully realised within the EU, in part due to divergences in regulatory requirements and supervisory practices across the Member States.

A major problem for firms is the lack of clear guidance on how to even classify cross-border activity under the freedom to provide services or right of establishment.

A second challenge stems from areas of EU law - such as consumer protection, conduct of business, and AML rules - that are not fully harmonised or are not yet covered.

The EBA is calling on the EC to further harmonise rules and to make it easier to identify cross-border services taking account of the digitisation of the FS industry.


Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT
The Swiss National Bank (SNB) is working with the Bank for International Settlements (BIS) on an innovation hub in Switzerland that will initially focus on research into digital central bank money and distributed ledger technology.

The SNB is working with SIX on the research, embarking on a proof of concept to explore how digital central bank money could be used in the settlement of tokenized assets between market participants.

The project is making use of the SIX Digital Exchange (SDX) platform, which is currently being built and promises to be the world's first end-to-end exchange for digital assets when it launches next year offering listing, trading, settlement and custody service.

The SDX system will be used to explore technical possibilities for integrating digital central bank money into DLT platforms. Options include the connection of the existing Swiss Interbank Clearing System or the issue of digital Swiss franc tokens by the SNB for financial market participants.

Jos Dijsselhof, CEO, SIX, says: "We are pleased to contribute to this initiative and, through SIX Digital Exchange, to explore the technological possibilities with which the SNB could support token-based financial ecosystems in the future by providing digital central bank money for financial market participants."

The new innovation hub will also work on a second research project, looking into the rise in requirements placed on central banks to be able to effectively track and monitor fast-paced, automated electronic markets.

BIS is also planning to open two more hubs, in Hong Kong and Singapore as it looks to foster international collaboration on innovative financial technology, identifying and developing in-depth insights into emerging trends and running experiments in the application of technology to enhance financial regulation.


The Bank of Lithuania invites Fintech’s into the first blockchain-based sandbox

The Bank of Lithuania (Lithuanian central bank and regulator) launches LBChain – first blockchain-based regulatory sandbox for international start-ups as well as financial and Fintech companies. LBChain is a blockchain-based sandbox which combines regulatory and technological infrastructures and allows Fintech companies to test their business solutions in a controlled environment.

The platform was developed through a pre-commercial procurement and is now opening up to international start-ups as well as financial and Fintech companies to test their solutions on the LBChain. The platform will enable Lithuanian and international Fintech companies to gain new knowledge, carry out blockchain-oriented research, test and adapt blockchain-based services and offer state-of-the-art innovations to their clients. According to representatives of the Bank of Lithuania, they strive to create a platform that would not only serve for testing products or services that are already offered on the market, but would also be used to create those that might currently exist only in a financial architect’s mind.

The LBChain project was divided into three stages. To create the LBChain platform, the Bank of Lithuania invoked last year service providers selected through a pre-commercial procurement. After the first design stage, the Bank of Lithuania has selected three service providers: Deloitte (IE), IBM (PL) and Tieto (LT). Together with selected Fintech companies they contributed to creating and testing LBChain platform prototypes and test their developed products based on Hyperleger Fabric and Corda.

After that the Bank of Lithuania has chosen IBM Polska Sp. z.o.o. and Tieto Lietuva, UAB to proceed to the next stage of its endeavour to create LBChain, a blockchain-based technological platform. Now, during the third stage, the Bank of Lithuania is inviting companies for further testing of LBChain platform solutions and will choose the most viable one of them.

Open call for everybody to use the regulatory blockchain and join the sandbox

Bank of Lithuania has launched LBChain platform development project in order to support Fintech’s aiming to introduce their blockchain based financial products into the market. The platform shall also reduce the time product development time, lower regulatory and technology risk, efforts required to develop a proof of concept/MVP and test their innovative products.

Applications are accepted by October 31, 2019. There are no restrictions of geography or use cases, and no fees. Selected Fintech’s shall get regulatory support from Bank of Lithuania, technology platform environments and support are provided by IBM and Tieto. Based on Hyperleger Fabric and Corda, LBChain offers the possibility to test a wide range of financial products and services such as KYC solution for AML compliance, cross-border payment solution, smart contract for factoring process management, payment token, mobile POS and payment card solution, crowdfunding platform and unlisted share trading platform.

Source: banking-as-a-service, fintech investments, and PSD2 compliance. Interview with Maxim Ivanchenko

Maxim Ivanchenko, founder and CEO of Advapay and Canopus IT describes the current state of the financial technology landscape, how Advapay is streamlining BaaS solutions to keep ahead of competition and PSD2 compliance

1. According to figures from KPMG, in 2018, global fintech investment has rocketed to a record USD 111.8 bln. Can you share some insights on the current state of play in the fintech sector, the investments made in the industry and how does Advapay fit in the grand puzzle?

“Make us another Revolut!” — that’s the request we often receive from our clients. Revolut has become a common name, which testifies to actuality of so called neobanks. Today we observe real fintech boom. Within just a few years a number of unicorn companies have emerged — like neobanks Revolut, N26, Monzo etc. Their business model is built on no physical presence: they have no offices, branches, ATMs. Some of them have no web application, just a mobile version. Another segment is represented by blockchain projects. However crypto enthusiasm encounters strong resistance of the traditional banking system. Today, the topic of cryptobanks receded into the background, giving place to less ‘toxic’ and more understandable neobanks, which, on the one hand, can adequately compete with traditional banks, and on the other hand, observe certain ‘rules of the game’. So we help to build a bridge between traditional banking and fintech companies, ensuring comfortable interaction of both parties.

Many entrepreneurs have good ideas for a fintech startup, but not all of them understand what is needed for its launch and reaching break even within a couple of years. And you have to know quite a lot.

First, you have to clearly understand the client niche and competitive advantages in it. Second, launch of any fintech project implies obtaining licenses: you have to know nuances of regulation and be ready to the registration procedure. And, finally, IT solutions. An IT solution has to be not just up-to-date and convenient, it has to be able to quickly adapt to constantly changing market challenges.

However, that is not enough! Fintech infrastructure is quite complex. After a successful start many businesses encounter problems looking for partner banks, providers, in activities of AML department, etc. You can have an excellent engineering solution and all necessary licenses, but you will be unable to service your clients without correspondent banks.

After all, fintech is a revolutionary segment, a very dynamic one. In order to forecast what will be in high demand you have to possess good expertise, constantly monitor and study the market, be inside the processes. We release our clients from all these tasks.

2. What could you name as some operational, financial, regulatory or strategic risks for the most important players in the global fintech investments sector?

Usually operational risks are associated with the problem of AML regulation. The operational model of a fintech bank alone, when clients are identified remotely, poses risks for regulators and partner banks. This means risk of violations of legislation against money laundering. This entails financial risks: at least it results in punitive sanctions, at its worst — in loss of the banking license.

At the same time, banking regulation is on the go, and it is important to follow all the changes. Legislation regulating AML issues – 4AMLD, and the 5th version ready to be adopted – 5AMLD, as well as new requirements related to adoption and entry into force of PSD2 – Open banking, SCA, — all this changes the landscape of the traditional banking and may force the players to reconsider significantly their approach to the business model.

When it comes to strategic risks, they refer mainly to the banks that try to stay on the sidelines of the mainstream. It is the risk of losing the competitive advantage in the market and thus losing clients, preferring more flexible and modern neobanks.

3. As the deadline for PSD2 coming into force has come and passed, with industry bodies such as the European Banking Authority granting an 18-month extension to TPPs in order to ensure regulatory compliance, what are some steps that Advapay is taking to keep up with the ever-evolving market? How are the fintech solutions provided by Advapay meeting the needs of regulated payments service providers, fintechs, or neo-banks?

PSD2 is not just ‘requirements’, but also new opportunities for business. Certainly, in our IT solutions both Open Banking API and stronger authentication of clients in performing financial transactions (SCA). We ensured to all clients a transition to the new version of our platform supporting this function.

However, compliance with the regulator's requirements is a purely technical issue. More importantly, how and why these changes can be used in terms of business. In particular, Open Banking API tool allows to radically change the approach to the interaction between the bank and its partner (TPP) and/or client. A new class of players appears, as well as a new licensed activity — AIS/PIS. And we consider assistance to such new players in building their business as one of our priority tasks.

4. Your fintech software platform EpaySuite is compliant with the Regulatory Technical Standards under PSD2. What were some challenges you faced while obtaining compliance and what is some advice you can offer to fintech solution providers in this sense?

Achieving compliance with requirements PSD2 directive turned out to be a challenging problem. The thing is that the Directive defines the principles of trilateral interaction, however does not provide any clear methods for it. This has resulted in appearance of a number of independent Open API implementations different in the methods of parties’ interaction. Thus, before developing our own solution, we have carried out a wealth of research work. We studied the specifics of building Open API, adopted by regulators and fintech community in various jurisdictions.

Our solution complies with all PSD2 standards and caters for the specifics of private implementations. It allows to expand the feature set available to TPP when performing their tasks, which will contribute to flexible development of the technology in the future. It is safe to say that we designed one more version of Open API solution to offer our clients together with EpaySuite software.

As our wish to financial solution providers we suggest (and are ready to put forward an initiative) to bring the variety of Open API implementations to a certain standard format. It refers to methods of authentication of the parties, including SCA, substantive part of basic transactions for AIS and PIS services. Besides, we believe that there should be a single policy for limits and procedures for setting them. All this makes the process of Open API adaptation faster and more universal.

5. MacrobanX is Advapay’s BaaS proposition. Who is to benefit the most out of it and how does MacrobanX bridge the gap between fintechs and banks?

The standard scenario for the use of BaaS technologies looks as follows: fintech project obtains the financial license, acquires BaaS solution MacrobanX and in 1-2 months (instead of 6-12 months) starts real operation with optimal infrastructure (banking services, AML services, client onboarding, etc.).

BaaS simplifies entry to the market and helps to stay in it. A fintech company obtains not just an up-to-date IT solution that can be quickly and easily adapted to business requirements, but also operational infrastructure based on the partner bank. You do not have to invest in non-core activities and save resources, trusting IT infrastructure development and support to Advapay/MacrobanX. Besides, BaaS is a sort of technological bridge for interaction of traditional banks with fintech companies.

Implementation of BaaS technologies is beneficial for both parties: a traditional partner bank and a fintech company using bank infrastructure and offering its services to the end customer. Most significantly, the end customer will benefit from it by getting convenient, affordable and reliable banking services. Implementation of such solution will allow to attract fintech companies as customers, lowering the risk and cost level.

6. What are some predictions you are able to make at this point for the future of open banking in Europe and what are Advapay’s plans moving forward?

I am sure that Open Banking will change significantly the present-day business models of payments — first of all, towards more integrated and intelligent solutions within the single payment ecosystem. For example, Airbnb, AliPay and other services. The trend is towards cheaper, faster payments invisible for the end customer. Monopolists, such as international payment systems (Visa, MC etc.), will have to move over. Plastic cards will be gradually replaced by tokens and other virtual technologies. Various forms of distance payments will gain ground based on biometrics, artificial intelligence systems, etc. In SME banking segment, payment solutions will gain more and more importance aggregating information on banking / payment accounts and allowing to control it from a single point (single application).

We closely watch the market to not just meet the trends, but to be ahead of them. The IT market is developing rapidly, so we have to keep our eye on it — the most important skill to hold up well.