kevin., a fintech startup based in Lithuania, has launched the first ever PSD2 payments solution for mobile payments from pre-linked bank accounts, and has raised €1.5 million in seed funding to scale into new markets.
kevin.’s solution, which enables merchants to accept payments directly from bank accounts via an API for services like parking, taxis, car-sharing, deliveries and insurance, is the first time PSD2 has been used to directly compete with card networks for this type of payment.
PSD2, the EU’s flagship open banking regulation, has enjoyed some success in enabling fintechs to compete with card networks on one-time e-commerce payments. However, it has so far failed to move beyond e-commerce to areas of traditional card network dominance, such as mobile payments for services like parking, deliveries or mobility.
Payment initiation using PSD2 still requires several authentication steps, but thanks to kevin.’s infrastructure consumers can expect payments for these services to be handled in the same convenient way as cards.
“Requiring authentication every time a customer makes a €2 parking payment is not competitive, so service providers stick to cards, but there’s a downside. With a typical flat charge per payment of €0.07, plus an additional charge of around 1%, companies providing low-priced services like parking can end up paying up to 10% to card networks per payment,” said Tadas Tamošiūnas, Co-Founder and CEO at kevin..
kevin.’s PSD2-based solution enables companies to receive mobile app payments directly from pre-linked bank accounts. “kevin. lets users and merchants treat bank accounts like credit cards. Our new solution enables seamless, instant transactions that don’t need to be authorised every time a service, like getting a ride on a ride-hailing app, is ordered,” continued Tadas Tamošiūnas.
Customers link their account to a service provider’s app once, and after that there is no need for authentication for every transaction. This is achieved through an API that works on kevin.’s secure, licensed infrastructure. This infrastructure operates in the background just like a card network, and the end user experience is the same as that of using a payment card.
Pavel Sokolovas, Co-Founder and COO at kevin. said: “This is the first time PSD2 has been used in the same way as a payment card for these kinds of transactions. Our focus from the very beginning was to build infrastructure using open banking to take on the card networks where they are traditionally strong. This is a first step, and shows that it is possible to use PSD2 not just for online payments, but also in sectors that currently depend on expensive acquiring methods. While we are taking on the card networks, we are also gaining their recognition – we recently won the Mastercard Lighthouse program in the Baltics.”
Using kevin.’s API, the cost per transaction for companies is now up to 10 times lower than with card networks. The biggest parking operator in the Baltics, UniPark, has been one of the first companies to integrate kevin. in its app. On average, UniPark pays 80% less for acquiring services per transaction than with a card network. As opposed to paying an interchange fee, they now pay a very small fee per API call.
kevin. has raised €1.5 million in seed funding from a number of European business angels from the finance and insurance industries. This funding will enable kevin. to bring its solution to new sectors and markets in Europe. The fintech startup currently operates across the Baltics, Poland, the Netherlands and Portugal. In 2021, it plans to enter 15 more European markets and is targeting enough bank connections to cover 80% of customers in the EEA in 2022.
Some of its new funding will also be invested into further product development, with a POS solution in the pipeline. Pavel Sokolovas said: “In a few months, we plan to launch more products and to take even more of the card scheme pie. We will be targeting areas where card networks are traditionally strongest, including point of sale payments in physical stores.”